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Learning objectives: -define operations management -define the role and function of operations management -list components of operations management -describe past/current/future challenges of operations management
Organizational Model
Operations management is only one function of any Sales organization. The overall success of an organization depends on the Marketing integration of its various functions. Many times Engineering OM issues overlap with HR, finance, marketing issues, etc.
Finance
HRM
OM R&D
MIS
Accounting
Setting broad policies and plans for using the recourses of a firm to best support its long-term competitive strategy
Facilities Production & Inventory ontrol Quality Assurance & Control Procurement Engineering Design Industrial Engineering Process Engineering
The Industrial Revolution Post-Civil War Period Scientific Management Human Relations and Behaviorism Operations Research The Service Revolution The service revolution
changed approaches to OM
Global Competition U.S. Quality, Customer Service, and Cost Challenges Computers and Advanced Production Technology Growth of U.S. Service Sector http://www.census.gov/econ/www/servmenu.html Scarcity of Production Resources
Cost
Flexibility
Quality
Delivery
Partnering Learning systems Adaptability and speed of change Environmental sustainability Globalization Knowledge focus Customization and differentiation Shifting demographics
Partnering Experience Frank Galliers Ltd defines "partnering" as working collaboratively with clients and suppliers bringing together all requisite expertise in order to fulfil the contract requirements achieving best value for money against the Key Performance Indicators: Cost - achieving or improving budgeted contract costs Timing - meeting the contract programme on time Quality - meeting or improving pre-determined client quality standards Defects - achieving zero defects at 12 months
Components of OM
Procurement Product Design
Location
Inventory
There is continuing pressure to reduce direct costs (of producing and selling) and overhead costs. Cost-cutting measures being used include: see next Moving production to low-labor-cost countries slides for Negotiating lower labor rates with union/workers Automating processes to reduce the amount of labor needed more Reducing health care and retirement benefits
Washington, D.C. (AHN) - Soaring fuel price, the weak greenback and inflation are cutting the China price of U.S. manufacturers that had outsourced their production to Asia. The price advantage was 40 to 50 percent off. China and other Asian countries' export model, which worked for over 30 years, may no longer be viable if fuel prices continue to soar as cost of shipping finished product made in Asia eats up profit, according to Morgan Stanley. Because the Chinese model was premised on an oil price of $20 per barrel, some U.S. companies which outsourced production in China are mulling transferring operations to Mexico, while others are planning to return to the U.S. As a result steel exports from China to the U.S. dipped 38 percent from January to July, while production of steel in the U.S. went up 10 percent. Other sectors which had returned to the U.S. include furniture, electronic appliances and textiles. One of the most prominent is Thomasville Furniture, which announced in June it was bringing back the production of upholstered and wood furniture to the U.S. and in the process create 100 jobs in North Carolina. But not everyone will return to the U.S. Notwithstanding the high shipping bill, raw material and labor is considerably cheaper in China than in the U.S.
Computer-aided design (CAD) - allows engineers to design products directly on computer terminals Computer-aided manufacturing (CAM) - translates CAD information into machinery instructions Flexible manufacturing systems (FMS) - clusters of automated machinery produce a variety of products Automated storage & retrieval systems (ASRS) - computercontrolled warehouses Automatic identification systems (AIS) - data is read into computers using bar coding and the like
Raw materials like titanium, nickel, coal, natural gas, water, and petroleum products are periodically unavailable or in short supply.
Southwest has locked in 80 percent of its fuel costs, equivalent to $24 per barrel for all of 2004. The remaining 20 percent will be bought at market value. Ray Neidl, an analyst at Manhattan-based Blaylock & Partners, said Southwest is in a good position by hedging its fuel costs, unlike most other airlines that are now paying market prices for fuel.
http://www.allbusiness.com/marketing-advertising/strategic-marketing/1053930-1.html
Operations strategy is a long-range game plan for the production of a companys products/services, and provides a road map for the production function in helping to achieve the business strategy.
1. The organizational unit of analysis is an operating unit (e.g., a factory, a company, or a division/business unit within a company). 2. Operations management is concerned primarily with stable, well-specified "products" and "processes." 3. A major concern of operations managers is reducing the variable cost of production. 4. Your competitors are your enemies, and the key to prevailing against them lies in differentiation (e.g., through lower cost, superior performance, etc.).
Project management is at least as important as process management Critical mass versus process efficiency The "network effect
these last two slides show approaches to OM today and the foundations of OM decisions these can be used in the analysis/decisions for applications/cases/examples throughout the course