introduction

Introduction to operations managementFerdous Sarwar, PhD2LectureTopicQuiz1Production Operations System2Forecasting (Quantitative & Qualitative)3Capacity PlanningQ14Location and Facility Layout Planning5Work Design and MeasurementQ26Management of QualityMidterm7Operations Scheduling (PERT/CPM)8Inventory Control9Materials Requirement PlanningQ310Just-in-time & Lean Management11Supply Chain Management12SchedulingQ4FinalWHAT IS OPERATIONS MANAGEMENT?Operations Management is an area of management concerned with overseeing, designing, and controlling the process of production and redesigning business operations in the production of goods and/or services. Operations Management is the set of activities that creates goods and services by transforming inputs into outputsFocuses on carefully managing the processes to produce and distribute products and services.

3Transformation Process(components)Inputs(customersand/ormaterials)Outputs(goodsandservices)WHY STUDY OM?OperationsManagementBusiness Education/Career OpportunitiesSystematic Approachto Org. ProcessesIncrease Competitive Advantage/SurvivalCross-FunctionalApplications4IntroductionSystematic approach to Org. Processes:An Organized way of Looking at work.

Career Opportunities: Direct Plant Manager, Production SupervisorIndirect Material Manager, Consulting

Cross-Functional Applications: Everyone needs to plan & control their work.

Business Education:New ideas such as SCM, ERP, Reengineering, and six sigma3WHY STUDY OM?OM is one of three major functions (marketing, finance, and operations) of an organizationOM often includes substantial measurement and analysis of internal processes, because a great deal of focus is on efficiency and effectiveness of processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization.

5Historical Development of OMPrior to 1900Cottage industry produced custom-made goods.Watts steam engine in 1785.Whitneys standardized gun parts in 1801.Industrial Revolution began at mid-century.6Historical Development of OM (cont.)Scientific Management (Frederick W. Taylor)Systematic approach to increasing worker productivity through time study, standardization of work, and incentives.Viewed workers as an interchangeable asset.Other Management PioneersFrank and Lillian GilbrethMotion study and industrial psychologyHenry L. GanttScheduling and the Gantt chart7Historical Development of OM (cont.)Moving Assembly Line (1913)Labor specialization reduced assembly time.Hawthorne StudiesYielded unexpected results in the productivity of Western Electric plant workers after changes in their production environment.Led to recognition of the importance of work design and employee motivation.8Historical Development of OM (cont.)Operations Research (Management Science)Outgrowth of WWII needs for logistics control and weapons-systems design.Seeks to obtain mathematically optimal (quantitative) solutions to complex problems.OM Emerges as a Field19501960, OM moved beyond industrial engineering and operations research to the view of the production operation as a system.9Historical Development of OM (cont.)OM Emerges as a Field19501960, OM moved beyond industrial engineering and operations research to the view of the production operation as a system.The Marriage of OM and ITIntegrated solutions approachesBusiness process reengineeringSupply chain managementSystems integration (SAP)10Historical Development of OM (cont.)Operations Management in ServicesOM concepts can apply to both manufacturing and service operations.Integration of Manufacturing and ServicesConducting world class operations requires compatible manufacturing and service operations.11Managerial Issues12Shift in balance of power to consumersGlobalization of business and marketsE-commerceAchieving higher levels of productivityCreating higher quality productsDelivering better customer serviceAchieving shorter delivery timesReducing labor and material costs

Top-down Approach to OM StrategyOperations Strategy DecisionsStrategic (long-range)Needs of customers(capacity planning)Tactical (medium-range)Efficient scheduling of resourcesOperational planning and control (short-range)Immediate tasks and activities

13An Operational-Level OM PerspectiveOMs function focuses on adding value through the transformation process (technical core) of converting inputs into outputs.Physical: manufacturingLocational: transportationExchange:retailingStorage: warehousingPhysiological: health careInformational: telecommunications14Factors of ProductionLandLaborCapitalEnterprise15The Transformation Process within OM

16Productive Use of ResourcesInput=Output + WasteInput/Input=Output/Input + Waste/Input1=Productivity + WastivityProductivity=Output/Input

17Operations Decision MakingPeoplePlantsPartsProcessesPlanning and ControlMaterials &CustomersProducts &ServicesInputOutputOperations ManagementMarketing StrategyFinance StrategyMarketplace Corporate StrategyOperations StrategyThe Transformation Process (value adding)18IntroductionLong Range Decisions:PlantsLocationsProductsMedium Range Decisions:# employees# shifts or hoursShort Range DecisionsScheduling of productsInputs:MaterialsSuppliesLaborCapitalOutput:ProductsGoodsServicesProcess:Conversion Planning and control4Value ChainConversion/Transformation ProcessProcess primarily adds value to inputs to provide outputs to the customerCustomer (requirements on suppliers)Input from SuppliersCustomer RequirementsOutput to CustomerRequirements on managementEffective and efficient use of all factors of conversion/transformation 19The Value Chain and Its Support Functions

20Key OM ConceptsEfficiency - Doing something at the lowest possible costEffectiveness - Doing the right things to create the most value for the organizationValue - Quality divided by price 21Introduction8Input-Transformation-Output Relationships for Typical Systems

22OMs Contributions to SocietyHigher Standard of LivingAbility to increase productivityLower cost of goods and servicesBetter Quality Goods and ServicesCompetition increases qualityConcern for the EnvironmentRecycling and concern for air and water qualityImproved Working ConditionsBetter job design and employee participation23Services as a Percent of Gross Domestic Product (GDP) for Different Countries

24 Differences Between Goods and ServicesGoodsTangibleCan be inventoriedNo interaction between customer and processServicesIntangibleCannot be inventoriedDirect interaction between customer and process

25Most Products Are a Bundle of Goods and Services

26An Expanded Definition of QualityQuality is important in all functional areas of an organization.Quality is now much more than the technical requirements for manufactured goods.Service quality (customer relationships) is equally important.27A New Paradigm for OMPost-War U.S. Dominance in ManufacturingAvailable capacity built to support the war effortPent-up demand for consumer goodsDestruction of overseas production capabilitiesProactive Operations FunctionAdd value to products, increase profit margins.Compete on dimensions other than costs:QualitySpeed of deliveryProcess flexibility

28The Ever-Changing World of OMIncreased Global CompetitionTransformation into a global economyPressure to excel on multiple competitive dimensionsIncreased emphasis on logisticsAdvances in TechnologyInformation technology (IT)Internet and e-commerce (B2B)Automation and robotics29Ford Escort 201330

Fords Global Network to Support the Manufacturing of the Escort

31Linking OM to Customers and SuppliersBenefits of Buffering the Transformation ProcessThe process was not disturbed by environmental interaction.The process was often more efficient than input and distribution processes.Productivity was maximized when processes operated at continuous rates.Process management skills were different from those of other functional activities.32Linking OM to Customers and SuppliersDisadvantages of Buffering the Transformation ProcessInformation lag in interaction with other functional activities.Lack of communication between customers and the shop floor for problem solving.Value ChainSteps an organization requires to produce a good or a service regardless of where they are performed.33Line and Staff Jobs in OM

34Inputs Provided by OM to Other Functional Areas

35WHAT OPERATIONS MANAGERS DO?PlanOrganizeStaffLeadControl

36Planning37The process of deciding what to do. Planning is forward looking. When planning is operational, the planning horizon is shorter and the level of detail within is greater.When strategic, the planning horizon is long and done in less detail.

Planning(contd.)Effective planning seeks to answer questions such as:What should the firm do? The output of this process are goals and objectives.When must the firm achieve these goals? The output is a schedule defining milestones and due dates.Who is responsible for doing it? The outputs are assigned responsibilities.How should this be done? The outputs may be directions or plans of action.How should performance be measured? The output includes standards of performance.

38ANALYSINGThe process of making sense of data that is often: poorly structured, incomplete, inconsistent, inaccurate, and/or available in overwhelming quantities.Analysis supports the planning process byproviding the facts in useful formats that can then be used to evaluate business alternatives. Analyzing also supports managements control activity by providing the basis for corrective actions.

39ORGANIZINGThe process of building organization structures and interrelated task coordination teams. In the past, organizing dealt mostly with humans, but increasingly it involves data-gathering.A good organizer seeks for The right person The right information In the right form At the right time

40DIRECTING/IMPLEMENTINGAn action-oriented process that carries out the outputs of the first three management activities. This is where money is made and lost (!). In this process, management expends resources to perform the tasks defined by the planning process.

41CONTROLLINGThe process of measuring the results of the other four management activities.Were the plans any good? Did the analysis provide meaningful information to the other processes?How well did we organize our resources to get the job done? How well did we do it?

4210 CRITICAL DECISIONSService, product designQuality managementProcess, capacity designLocationLayout designHuman resources, job design.Supply-chain managementInventory management SchedulingMaintenance

43ENVIRONMENTAL CONCERNSSolid WasteLiquid WasteAtmospheric PollutionNoise Pollution44SECTION OF OMProcurement (Purchasing) Practicesreviews guidelines for buying various materials from suppliers and vendors - materials, including computers, services from lawyers, insurance, etc.Management Control and Coordinating Functionincludes a broad range of activities to ensure that organizational goals are consistently being met in an effective and efficient fashion

45SECTION OF OMProduct and Service Managementthe major activities involved in product and service management are similar to those in operations management. However, operations management is focused on the operations of the entire organization, rather than managing a product or service.Quality Managementis crucial to effective operations management, particularly continuous improvement. More recent advancements in quality, such as benchmarking and Total Quality Management, have resulted in advancements to operations management as well.

46SECTION OF OMInventory ManagementCosts can be substantial to store and move inventory. Innovative methods, such as Just-in-Time inventory control, can save costs and move products and services to customers more quickly.Logistics and Transportation ManagementFocused on the flow of materials and goods from suppliers, through the organization and to the customers, with priority on efficiency and cost effectiveness.

47SECTION OF OMFacilities ManagementDepnds a great deal on effective management of facilities, such as buildings, computer systems, signage, lighting, etc. Configuration ManagementIt's important to track the various versions of products and services. Consider the various versions of software that continually are produced, each with its own version number. Distribution ChannelsThe means of distribution depend very much on the nature of the product or service.

48WHERE ARE THE OM JOBS?Technology/methodsFacilities/space utilizationStrategic issuesResponse timePeople/team developmentCustomer serviceQualityCost reductionInventory reductionProductivity improvement

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