Stevenson5ce_PPT_Ch01
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Chapter
Slides prepared byLaurel DonaldsonDouglas College
Slides prepared byLaurel DonaldsonDouglas College
Introduction to Operations Management
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Learning ObjectivesDefine the term operations management and identify
operations management jobs.Identify the three major functional areas of
organizations and describe how they interrelate.Describe the scope of operations management,
differentiate between design and planning/control decisions.
Compare goods and services.Discuss the operations manager’s job.Describe key aspects of operations mgmt decision
making.Briefly describe the historical evolution of operations
mgmt.Identify major trends that affect operations
management.
LO6
LO1
LO2
LO3
LO4
LO5
LO7
LO8
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Chapter Outline What is operations management
(OM)? Three basic functions within
organizations The scope of operations
management Differentiating goods and services Operations manager’s job Operations managers and decision
making The historical evolution of operations
management Major trends
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4LO 1
OM is the
management of activities and resources
that create goods and/or provide services.
What is Operations Management?
Companies use OM to improve:efficiency (minimize cost and time) andeffectiveness (achieving intended goals: quality &
timeliness)
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5LO 1
OM Activities Airline company (services)
Bicycle factory (goods)
ForecastingCapacity planningSchedulingManaging inventories
Assuring qualityMotivating employees
Where to locate facilities
Detail the following OM activities for each company
What is Operations Management?
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6LO 1
Why study Operations Management?
1. A large percentage of a company’s expenses occur in OM area (improvements = more profits)
2. A large number of all jobs are in OM area (purchasing, quality, planning, scheduling, inventory, etc)
3. Activities in all other areas( finance, marketing) are interrelated with OM activities
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7LO 2
Three Basic Functions1. Operations: create goods and services2. Finance: provide funds and the economic analysis
of investment proposals3. Marketing: assess customer wants and needs and
communicate them to others
OperationsFinance/
AccountingMarketing
GroundSupport
FlightOperations
FacilityMaintenance Catering
Airline Company
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8LO 2
Three Basic Functions Is OM function adding value during the
transformations process? Is there any overlapping between the main
functions?
FinanceMarketing
Operations
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9LO 2
Inputs:BuildingsLabourMachinesMaterialsInformation
Transformation/conversion
Process
Outputs:GoodsServices
Control
Feedback
FeedbackFeedback
Value Added
Operations function
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10LO 2
Stage of Production Value Added
Value of Product
Farmer produces and harvests wheat $0.15 $0.15Wheat transported to mill $0.08 $0.23Mill produces flour $0.15 $0.38Flour transported to baker $0.08 $0.46Baker produces bread $0.54 $1.00Bread transported to grocery store $0.08 $1.08Grocery store displays and sells bread $0.21 $1.29Total Value-Added $1.29
What is added value?
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11LO 2
Types of Operations Operations ExamplesGoods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mailservice, moving, taxis, buses,hotels, airlines
Exchange Retailing, wholesaling, banking,renting, leasing, library, loans
Entertainment Films, radio and television,concerts, recordingCommunication Newspapers, radio and televisionnewscasts, telephone, satellites
Services
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12LO 2
Inputs Process OutputRaw VegetablesMetal SheetsWaterEnergyLabourBuildingEquipment
CleaningMaking cansCuttingCookingPackingLabelling
Canned vegetables
Transformation Process at a Food Processor
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13LO 2
Inputs Process OutputDoctorsNursesBuildingMedical suppliesEquipmentLabs
ExaminationSurgeryMonitoringMedicationTherapy
Healthy patients
Transformation Process at a Hospital
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14LO 2
Logistics
Accounting
Product Design
Operations
Maintenance
PersonnelPurchasing
ManufacturingEngineering
MIS
Operations Interfaces
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15LO 3
The Scope of Operations Management
• capacity, • location, • equipment
Designing Decisions
• personnel• inventory• scheduling• quality assurance
Planning/Control
Decisions
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16LO 3
Decision area Basic question Chapter
Forecasting What will the demand be? 3
Product/ service design What customers want? How to improve products/services? 4
Capacity How much capacity will be needed? 5
Process What processes should be used? 6
Layout What is the best arrangement for the departments? 6
Design of Work Systems How to improve work methods? 7
Quality How to define quality? How to improve it? 9
Supply Chain Management Which supplier to choose? 11
Inventory How much to order? 12
Aggregate planning How much capacity will be needed over the medium term? 13
JIT systems How to coordinate production and purchasing? 15
Scheduling How to schedule jobs, staff? 16
Which decision is design type and which is planning/control type?
The Scope of Operations Management
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17LO 4
Differences Goods(Produce a car)
Services (Teach a class)
Output Tangible Intangible
Customer contact Low High
Uniformity of input High LowLabour content Low HighUniformity of output
High Low
Measurement of productivity
Easy Difficult
Quality assurance Easy Difficult
Goods vs. Services
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18LO 4
Goods or Service?
Tangible Act
Most systems are a blend of both good & service. Service sector accounts for > 78% of jobs in Canada.
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19LO 5
Management Process
Field of responsibility
Planning Capacity, Location, Mix of products and Services, Make or buy, Projects
Organizing Degree of Centralization, Specialization, Subcontracting, Staffing, Suppliers
Controlling Inventory, Quality, Motivation, Cost, Productivity
Directing Scheduling, Incentive Plans, Work Orders, Job Assignments
The Operations Manager’s Job
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20LO 5
Level of Job Satisfaction
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21LO 6
Operations Managers and Decision Making
Models
Quantitative techniques
Analysis of trade-offs
Systems approach
Establishing Priorities
Ethics
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22LO 6
A model is an abstraction of reality.
Physical
Schematic
Mathematical
Models
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23LO 6
Quantitative Approaches
• Linear programming• Queuing techniques• Inventory techniques• Project techniques• Statistical techniques
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24LO 6
Analysis of Trade-OffsDecision on amount of inventory to
stock Increased cost of holding inventory
vs.Level of customer service
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25LO 6
Establishing PrioritiesPareto Phenomenon• A few factors account for a high
percentage of the occurrence of some event(s).
• 80/20 Rule - 80% of problems are caused by 20% of the activities.
How do we identify the vital few?
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26LO 6
Ethical IssuesFinancial
statementsWorker safety
Product safety
QualityEnvironment
Community
Hiring/firing
workers
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27LO 7
The Historical Evolution of OMEarliest
daysCraft
production (no
economies of
scale),
Mercant-ilism
Industrial revolutio
nInterchangeable Parts (Eli
Whitney, 1700)
Division of Labour
(Adam Smith, 1776)
Scientific Management
(1920s, Frederick
Taylor, Frank and Lillian Gilbreth,
Henry Gantt, Henry Ford)
Human relations Moveme
nt Improve
Productivity (Elton Mayo,
1930)Motivational
Theories (Abraham Maslow),
1940sEmployee Problem Solving (William Ouchi), 1970s
Decision Models
and Comput
er (1960+)
Manage-ment
Science,
EDI,
ERP
Japanese
Manufacturers
(1980+)TQM
revolution
lean productio
n
World Class Mftg
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28LO 8
Trends in BusinessThe Internet and e-commerce
Management technology
Globalization
Management of supply chains
Sustainability
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29LO 8
Supply Chain Supply Chain: A sequence of activities and
organizations involved in producing and delivering a good or service
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Operations management is responsible for planning and coordinating the use of the organization’s resources to convert inputs into outputs.
The operations function is one of three primary functions of organizations; the other two are marketing and finance.
Operations decisions involve design decisions and planning/control decisions. Design decisions relate to capacity planning, product design, processes design, layout of facilities, and selecting locations for facilities. Planning/control decisions relate to quality assurance, production planning, scheduling and control, inventory management, and project management.
Service differs from goods production in customer contact and labour content, lack of inventories, variation in inputs and outputs, and difficulties in productivity measurement and quality assurance.
Chapter SummaryLO1
LO2
LO3
LO4
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Operations managers plan, organize, control, and direct.
They use models, trade-off analysis, systems approach, priorities, and ethics in decision making.
Operations management evolved through craft, mass, and lean production systems.
Major trends currently are e-commerce, technology, globalization, supply chains, and sustainability.
Chapter Summary (Cont’d)LO5
LO6
LO7
LO8
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32
Learning Checklist Define the term operations management and
describe what an operation manager might do. Identify the three major functional areas of
organizations and describe how they interrelate. Differentiate between design and operations
decisions. Compare goods versus services. Describe key aspects of operations management
decision making. Briefly describe the historical evolution of
operations management. Identify current trends that affect operations
management.