Operations Management Intro Powerpoint

7/28/2019 Operations Management Intro Powerpoint

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Chapter 1: Operations and Productivity

What is OM? How to organize to produce Goods and Services?

Why study OM? Where are the OM jobs? What OM managers do?

How is this Book Organized (10 decisions)?

History, Heritage of OM

OM in the Service Sector: Differences between Goods and Services,Growth of Services, Service Pay

New trends in OM

The Productivity Challenge: Productivity Measurement, ProductivityVariables, Productivity and the Service Sector

Ethics and Social Responsibility (clean environment, safe workplace,

ethical behavior)


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Utility is the value that comesfrom satisfying human needs

Form

Service(task)

Possession

Place

Time

Utility

Motorbike with air conditioningLeft handed pencil

Ejector seat for a helicopter

Wooden barbecue grill

Why do firms exist? Firms exist to provide utility.

What are firms offering? MMWhat is a Marketing Mix? 4P (Product, Price, Place, Promotion)What is Competitive Advantage? In Mk in OM.What is Customer Value?

Background Information


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Background Information (from Marketing)

Marketing Mix (MM):

Competitive Advantagefor MARKETING = a firmhas a MM that the target

market sees as betterthan a competitor's mix.

2.Price

4.Promotion

3.Place

1.Product

Customer

Customer Value is the difference

between the benefits a customersees from a market offering

(product or service) and the cost of

obtaining those benefits

CBCV


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What Is Production? What is OM?Production is the creation of goods and services

Operations management is the set of activities thatcreates value in the form of goods and services bytransforming inputs into outputs

Organizing to Produce Goods and Services

Essential functions:

Finance/accounting

tracks organizational

performance, pays bills,collects money

Operations creates the

product

Marketing understands

customer needs,

generates demand


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Why Study OM?

OM is one of three major functions of an organization.

We want (and need) to know how goods and services are

produced in order to be able to produce them better, we want tounderstand what Operations Managers do, OM is such a costlypart of any organization (see the contribution example).

Options for Increasing Contribution

Marketing

Option

Finance and

Accounting Option

OM Option

Current Increase Sales

by 50%

Decrease finance

costs by 50%

Decrease production

costs by 20%

Sales 100,000 150,000 100,000 100,000

COGS -80,000 -120,000 -80,000 -54,000

Gross Margin 20,000 30,000 20,000 46,000

Finance Costs -6,000 -6,000 -3,000 -6,000

Net Margin 14,000 24,000 17,000 40,000

Taxes at 25% -3,500 -6,000 -4,250 -10,000

Contribution 10,500 18,000 12,750 30,000


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What Operations Managers Do?

OM has contributions from:

Human factors

Industrial engineering

Computer technology (automation)

Management science (modeling)

Biological sciences

Physical sciences

Information sciences

One of the mostimportant

characteristics of

OM is the ability of

OperationsManager to work

with or within

multiple disciplines


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10 Critical Decisions

1 Service,

product design

Ch. 5 What product or service should we offer? How to design these

products and services?

2 Qualitymanagement

Ch. 6, 6S Who is responsible for quality? How do we define quality?

3 Process,

capacity design

Ch. 7, 7S What processes will these products require and in what

order? What equipment and technology is necessary?

4 Location Ch. 8 Where should we put the facility? On what criteria should we

base this decision?

5 Layout Ch. 9 How should we arrange the facility? How large a facility is

required?

6 HR, job design Ch. 10,10S

How do we provide a reasonable work environment?

How much can we expect our employees to produce?

7 Supply-chain

management

Ch.11,11s

Should we make or buy this item? Who are our good suppliers

and how many should we have? How to integrate suppliers?8 Inventory

management

Ch. 12,14, 16

How much inventory of each item should we have? When do

we re-order?

9 Scheduling Ch. 3, 13,15

Is subcontracting production a good idea? Are we better off

keeping people on the payroll during slowdowns? Which job

do we perform next?

10 Maintenance Ch. 17 Who is responsible for maintenance? When do we domaintenance?


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The Heritage of Operations Management

Division of labor (Adam Smith 1776) Standardized parts (1800): Eli Whitney received a government contract to make

10,000 muskets. He showed that machine tools could make standardized partsto exact specifications and parts could be used in any musket.

Scientific Management (Taylor 1881): Management should take moreresponsibility for: matching employees to right job, providing the proper training,

proper work methods and tools and establishing legitimate incentives for workto be accomplished. Coordinated assembly line: In 1903, Henry Ford created Ford Motor Company

(first assembly line used to make Model T, unfinished product moved byconveyor, fixed work station, workers paid very well for 1911 - $5/day!)

Gantt charts (1916), Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924), CPM/PERT (DuPont 1957), Material

requirements planning (Orlicky 1960), Computer aided design (1970), Flexiblemanufacturing system (FMS 1975), Computer integrated manufacturing (1990),Globalization(1992), Internet (1995)


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Characteristics of Goods Characteristics of Services

Tangible product Intangible product

Consistent product definition Inconsistent product definitionProduction usually separate from consumption Produced & consumed at same time

Seldom unique Often unique, knowledge-based

Low customer interaction High customer interaction

Can be inventoried Can not be inventoried

Produced on one location Frequently dispersed

Can be resold and inventoried Reselling unusual, difficult to inventory

Some aspects of quality measurable Quality difficult to measure

Selling is distinct from production Selling is part of service

Product is transportable Provider, not product is transportable

Site of facility important for cost Site of facility important for customer contact

Often easy to automate Often difficult to automate

Revenue generated primarily from tangible product Revenue generated primarily from intangible

service

Goods and Services


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Goods Contain Services / Services Contain Goods

0 25 50 75 100255075100

AutomobileComputerInstalled Carpeting

Fast-food Meal

Restaurant MealAuto RepairHospital Care

Advertising AgencyInvestment Management

Consulting ServiceCounseling

Percent of Product that is a Good Percent of Product that is a Service


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Changing Challenges for the Operations Manager

Past Causes Future

Local or

national focus

Low-cost, reliable worldwide communication

and transportation networks

Global Focus

Batch (large)

shipments

Cost of capital puts pressure on reducing

investment in inventory

Just-in-time shipments

Low-bid

purchasing

Quality emphasis requires that suppliers be

engaged in product improvement

Supply-chain partners

Lengthy

product

development

Shorter life cycles, rapid international

communication, computer-aided design, and

international collaboration

Rapid product development,

alliances, collaborative

designs

Standardized

products

Affluence and worldwide markets;

increasingly flexible production processes

Mass customization

Jobspecialization

Changing socio cultural environment.Increasingly a knowledge and information

society.

Empowered employees,teams, and lean production

Low cost focus Environmental issues, ISO 14000, increasing

disposal costs

Environmentally sensitive

production, recycled materials,

remanufacturing


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The Economic System Transforms Inputs toOutputs

The economic system

transforms inputs to

outputs at about an

annual 2.5% increase in

productivity

Land, Labor,

Capital,Management

Goods and

Services

Feedback loop

Inputs Process Outputs


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Measure of process improvement

Represents output relative to input Only through productivity increases can our standard of living

improve

Productivity

Input Used

ProducedUnitstyProductivi

ousMiscellaneEnergyMaterialLabour

ProducedUnitstyProductiviFactorMulti

dLabour Use

ProducedUnitstyProductiviLabour

Input UsedofTypeOne

ProducedUnitstyProductiviFactorSingle


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Measurement Problems

Qualitymay change while the quantity of inputs and outputs

remains constant. External elements may cause an increase or decrease in

productivity.

Precise units of measure may be lacking.

Service Productivity is difficult to improve

Typically labor intensive

Frequently individually processed Often an intellectual task performed by professionals

Often difficult to mechanize

Often difficult to evaluate for quality


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Productivity Variables

Labor- contributes about 10% of the annual increase

Capital- contributes about 38% of the annual increase

Management- contributes about 52% of the annual increase

Key Variables for Improved Labor Productivity

Basic education appropriate for the labor force (low tuition).

Social overhead that makes labor available.

Maintaining and enhancing skills in the midst of rapidly changingtechnology and knowledge.

Ethics and Social Responsibility

Increasing emphasis on business and social responsibility(increase productivitybut at what price?); Produce Safe, Quality

Products, Clean environment, Safe workplace, Ethical behaviour

Operations Management Intro Powerpoint

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