Professional Documents
Culture Documents
Module 1 Introduction
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Rock music memorabilia Creates value in the form of good food and entertainment 3,500+ custom meals per day in Orlando How does an item get on the menu? Role of the Operations Manager
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Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs
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Business Education
Operations Management
Career Opportunities
Cross-Functional Applications
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Why OM?
For long-run success companies must place much importance on their operations
The 1950-1960 era was the U.S. golden era where primary opportunities were marketing
The 1970-1980 U.S. companies experienced a large decline in productivity growth international firms began to challenge in many markets The 1970-1980 era saw U. S. firms lagging behind in methods and processes The resurgence of American business in the 1990s capitalized on improved operations
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What is a Transformation Process? Defined A transformation process is defined as a user of resources to transform inputs into some desired outputs OM Transforms inputs to outputs
Inputs are resources such as
People, Material, and Money
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Transformations
Physical--manufacturing Locational--transportation Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications
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Organizational Charts
Commercial Bank
Operations
Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security
Finance
Investments Security Real estate Accounting
Marketing
Loans Commercial Industrial Financial Personal Mortgage Trust Department
Auditing
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Organizational Charts
Airline Operations
Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science
Finance/ accounting
Accounting Payables Receivables General Ledger Finance Cash control International exchange
Marketing
Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising
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Organizational Charts
Manufacturing Operations
Facilities
Construction; maintenance
Finance/ accounting
Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall
Marketing
Sales promotion Advertising Sales Market research
Design
Product development and design Detailed product specifications
Industrial engineering
Efficient use of machines, space, and personnel
Process analysis
Development and installation of production tools and equipment
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Current
Sales MU.100,000 Cost of Goods 80,000 Gross Margin 20,000 Finance Costs 6,000 Subtotal 14,000 Taxes at 25% 3,500 Contribution MU 10,500
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Organizing
Staffing
Leading
Controlling
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Organizing
Degree of centralization Process selection
Staffing
Hiring/laying off Use of Overtime
Leading/Directing
Incentive plans Controlling/Improving Issuance of work orders Inventory Job assignments Quality Costs Productivity
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When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
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OM Decisions
All organizations are based on decisions Decisions follow a similar path
First decisions very broad Strategic decisions
Strategic Decisions set the direction for the entire company; they are broad in scope and long-term in nature
OM Decisions
Tactical decisions focus on
Specific day-to-day issues (sometimes called Operational Decisions)
Resource needs, schedules, & quantities to produce
OM Decisions
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Critical Decisions
Decision Areas Service and product design Quality management Process and capacity design Location Layout design Human resources, job design Supply-chain management Inventory management Scheduling Maintenance
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Quality management
How do we define quality? Who is responsible for quality?
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Location
Where should we put the facility? On what criteria should we base the location decision?
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Maintenance
Who is responsible for maintenance?
When do we do maintenance?
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The Heritage of OM
Division of labor (Adam Smith 1776; Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Coordinated assembly line (Ford/ Sorenson/Avery 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950)
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The Heritage of OM
Computer (Atanasoff 1938) CPM/PERT (DuPont 1957) Material requirements planning (Orlicky 1960) Computer aided design (CAD 1970) Flexible manufacturing system (FMS 1975)
Internet (1995)
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Historical Development of OM
Industrial revolution Late 1700s Scientific management Early 1900s Human relations movement 1930s to 1960s Management science Mid-1900s Computer age 1970s Environmental Issues 1970s
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Historical Development of OM
Just-in-Time Systems (JIT) 1980s Total quality management (TQM) 1980s Reengineering Global competition 1990s 1980s
Flexibility
1990s
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Historical Development of OM
Time-Based Competition
Supply chain Management
1990s
1990s
Electronic Commerce
Outsourcing and flattening of the world
2000s
2000s
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Eli Whitney
Born 1765; died 1825
In 1798, received government contract to make 10,000 muskets
Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket
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Frederick W. Taylor
Born 1856; died 1915
Taylors Principles
Management Should Take More Responsibility for:
Matching employees to right job Providing the proper training
Henry Ford
Born 1863; died 1947
In 1903, created Ford Motor Company In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station
W. Edwards Deming
Born 1900; died 1993
Contributions From
OM is contributed significantly from other disciplines
Human factors
Industrial engineering
Management science Biological science Physical sciences Information science
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New Challenges in OM
From
Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization
To
Global focus
Just-in-time Supply chain partnering Rapid product development, alliances
Mass customization
Empowered employees, teams
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Global
Information/Knowledge Mass Customization
Network Alliances
Hours of Supply Days
Real time
Months Perfection
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Causes
Low-cost, reliable worldwide communication and transportation networks Short product life cycles and cost of capital put pressure on reducing inventory Quality emphasis requires that suppliers be engaged in product improvement
Future
Global focus
Just-in-time shipments
Low-bid purchasing
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Causes
Shorter life cycles, Internet, rapid international communication, computeraided design, and international collaboration Affluence and worldwide markets; increasingly flexible production processes
Future
Rapid product development, alliances, collaborative designs Mass customization with added emphasis on quality Empowered employees, teams, and lean production
Job specialization
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New Trends in OM
Past
Low-cost focus
Causes
Environmental issues, ISO 14000, increasing disposal costs
Future
Environmentally sensitive production, green manufacturing, recycled materials, remanufacturing
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Operations
Marketing
Finance
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Operations Interfaces
Industrial Engineering
Distribution
Maintenance
Purchasing
Operations
Public Relations
Legal
Personnel
Accounting MIS
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Steel production Home remodeling Auto Repair Maid Service Teaching Automobile fabrication Retail sales Appliance repair Manual car wash Lawn mowing
High percentage goods Low percentage service Low percentage goods High percentage service
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Food Processor
Inputs
Raw Vegetables Metal Sheets Water Energy Labour Building Equipment
Processing Outputs
Cleaning Making cans Cutting Cooking Packing Labeling Canned vegetables
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Hospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy Hospital Surgery patients Medical Supplies Monitoring Equipment Medication Laboratories Therapy
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Characteristics of Goods
Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction Long response time Capital Intensive
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Characteristics of Service
Intangible product
Frequently dispersed
Short response time Labour Intensive
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Manufacturers:
Tangible product Product can be inventoried
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Similarities-Service/Manufacturers
All use technology
Both have quality, productivity, & response issues
Service - Manufacturing
Manufacturing often provides services
QM characteristics include
Low customer contact and Capital Intensive
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Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Product is transportable
Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product
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25
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0
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25
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50
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75
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100%
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20.6 7.1
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Example
Snelling and Snelling, Waste Management, Pitney-Bowes Citicorp, American Express, Prudential, Aetna, Trammel Crow McDonalds, Hard Rock Caf, Motel 6, Hilton Hotels, Walt Disney, Paramount Pictures
% of all Jobs
6.9
6.7
5.4
Public Administration
4.5
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Example
General Electric, Ford, U.S. Steel, Intel
% of all Jobs
13.3
Construction Agriculture
Mining
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0.4
Sector
Service Manufacturing
Todays OM Environment
Customers demand better quality, greater speed, and lower costs Companies implementing lean systems concepts a total systems approach to efficient operations Recognized need to better manage information using ERP and CRM systems Increased cross-functional decision making
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Trends in OM
Service sector growing to 50-80% of non-farm Global competitiveness Demands for higher quality Huge technology changes
Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
The objective is to improve this measure of efficiency
Important Note! Production is a measure of output only and not a measure of efficiency
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Right Quantity
Produce products in right numbers If produced more, then excess inventory and if produced less, then shortage of products
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funds
For Output
Social impact
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Productivity
Units produced Productivity = Input used
Work-force changes
Affect productivity due to labour turnovers Innovations and technology
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Describes the organization culture, and the extent to which it motivates and satisfies employees
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Productivity Calculations
Labor Productivity
Productivity = Units produced Labour-hours used 1,000 250
= 4 units/labour-hour
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Multi-Factor Productivity
Productivity =
Also known as total factor productivity Output and inputs are often expressed in Monetary Units (MU).
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Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
External elements may cause an increase or decrease in productivity
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Productivity Variables
Labour - contributes about 10% of the annual increase
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Service Productivity
Typically labour intensive
Frequently focused on unique individual attributes or desires
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Time horizon
Long-term viability is important than short-term profits
Production systems
Use automated systems
Employment relations
Long-term employment of loyal workers
Financing
Make more use of debt capital and less of equity capital
Training
Employees must be thoroughly trained Employees are rotated to learn a variety of skills
Worker participation
Workers learn a variety of productivity improvement techniques through suggestions, quality circles
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OM in Practice
OM has the most diverse organizational function
Manages the transformation process
All business functions need information from OM in order to perform their tasks
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Module 1 Highlights
OM is the business function that is responsible for managing and coordinating the resources needed to produce a companys products and services while adding value. The role of OM is to transform organizational inputs into companys products or services outputs OM is responsible for a wide range of decisions, ranging from strategic to tactical. Organizations can be divided into manufacturing and service organizations, which differ in the tangibility of the product or service
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Sample Questions
1. Define Operations Management. Explain the key concepts of Operations Management with schematic diagram. 2. Distinguish between manufacturing and service operation with example. 3. Briefly explain how service producers differ from goods producers in important aspects of their operations. 4. Explain, how the considerations of environmental assessment and organizational position provide a modeling framework for strategic planning of operations. 5. State the important objectives of operation management.
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Sample Questions
6. Operations Strategy a key element in corporate strategy. Briefly explain. 7. Explain the historical evolution of production function till the 21st century. 8. What are the various decisions and their applications made by the operations manager in a POM system. 9. Briefly explain the importance of operations management in corporate management. 10. Explain the concept of productivity. Discuss the factors affecting productivity in any enterprise. Suggest some measures improving labour productivity.
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