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1-1
Operations
Management
Introduction
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Sylabus
Wk1 : Introduction
Wk2: Operation Strategy
Wk3: Basic Knowledge on Product and ProcessDesign
Wk4: Basic Knowledge on Layout, and Flow
Wk5: The Nature of Planning and Control Wk6: Capacity Planning and Control (inc. Forecasting)
Wk7: Aggregate Planning
Wk8 : Mid Test
1-2
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Sylabus (contd)
Wk9: Scheduling
Wk10: Inventory Planning and Control
Wk11: Supply Chain Planning and Control
Wk12: Material Requirement Planning
Wk13: Project Planning and Control
Wk14: Quality Control
Wk15: Production Improvement Wk16 : Final Test
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1-4
Outline
What is Operations Management?
Why Study OM?
Production vs. Service Organizations.
Operations Management Decisions.
Operations processes have differentcharacteristics
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What Is Operations Management?
Book definition (not as good): The set of activities
that creates goods and services by transforming
inputs into outputs.
Operations managementis about how to
organize the systems that produce goods and
provide services.
It includes planning, designing and operatingsystems to achieve goals of the organization.
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Transforming Inputs to Outputs
Production or Service
System
Land,
Labor,Capital,
Materials,
Equipment,
Management
Products
and
Services
Inputs Process Outputs
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They are all
operat ions
Retail
operation
Back office
operation
in a bank
Take-out /
restaurant
operation
Kitchen unit
manufacturing
operation
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ENVIRONMENT
ENVIRONMENT
INPUT OUTPUTPRODUCTS
AND
SERVICES
TRANSFORMED
RESOURCES
MATERIALS
INFORMATION
CUSTOMERS
FACILITIESSTAFF
TRANSFORMING
RESOURCES
TRANSFORMATION
PROCESS
Operations Management is About Managing
Processes - transformation processes
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Transformed resourcesresources that are treated,
transformed or converted in the process. They are a mixture
of
Materials
Information
Customers
Transforming resourcesthese are the resources which act
upon the transformed resources. They are two types: Facilities
Staff
Inputs to the Process
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Materials processingtransforms materials physical
properties, location, possession or materials are stored.
Information processingtransforms information properties,
possession, location or information is stored.
Customer processingtransforms customers physical
properties, location, physiological state, psychological stateor store (accommodate) customers.
Within the Process
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Outputs from process can be differentiate between products
and service based organizationtangibility of products and
intangibility of services
Most operations produce both products and services
Services and products are mergingall operations are
service providers who may produce products as a means ofserving customers.
Outputs from the Process
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Characteristics of Products
Tangible product.
Consistent inputs and
outputs.
Production separate from
consumption.
Can be inventoried and
transported
Low customer interaction.
Quality is evidence
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Characteristics of Service
Intangible product.
Variable inputs and outputs
(people!).
Production and consumption
at same place and time.
No inventories.
High customer interaction.
Quality is difficult to judged
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Examples
Auto factories
(assembly plants)
Job shops (printing)
Fast food restaurants
Hospitals
Airlines
Movie theaters
Grocery stores
Production Service
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The output from most types of operation is a
mixture of goods and services
Crudeoilproduction Pure goods Tangible
Can be storedProduction
precedesconsumption
Low customercontact
Can be transportedQuality is evident
IntangibleCannot be stored
Production andconsumption aresimultaneousHigh customer contactCannot be transportedQuality difficult to judge
Pure services
Aluminiumsmelting
Specialistmachinetool
manufac
turer
Restaurant
Com
putersystems
services
Mana
gement
cons
ultancy
Psychotherap
yclinic
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Why Study OM?
OM is one of three major functions of any
organization (Marketing, Finance, and
Operations).
We should know how goods and services are
produced.
OM is such a costly part of an organization.Jobs!
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Organizational Functions
Marketing.
Generates demand.
Operations. Creates product or service.
Finance/Accounting. Obtains funds &
tracks money.
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Table 1.1 The activities of core functions in some organization
Core functional
activities
Internet service
provider
Fastfood chain Furniture
manufacturerMarketing and
sales
- Promotes service
to users and get
registration
- Sell advertising
space
- Advertise on TV
- Device
promotional
materials
- Advertise in
magazines
- Determine pricing
policy
-Sell to stores
Product/service
development
- Device new
services and
commission new
information content
- Design
hamburgers, pizzas,
etc.
- Design dcor for
restaurants
- Design new
furniture
- Coordinate with
fashionable colours
Operations - Maintain hardware,software and content
- Make burgers,
pizzas, etc.
- Serve customers
- Maintain
equipments
- Make components
- Assemble furniture
- Deliver furniture
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OM Jobs
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Operations Management - Bank
OperationsFinance/
AccountingMarketing
Check
Clearing
Teller
Scheduling
Transactions
ProcessingSecurity
Commercial Bank 1984-1994
T/Maker Co.
Operations Management for an
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Operations Management for an
Airline
OperationsFinance/
AccountingMarketing
Ground
Support
Flight
Operations
Facility
MaintenanceCatering
Operations Management for a
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Operations Management for a
Manufacturer
OperationsFinance/
AccountingMarketing
Production
ControlManufacturing
Quality
ControlPurchasing
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OM Across the Organization
Marketing is not fully capable of meeting customer needs ifthey do not understand what operations can produce
Finance cannot judge the need for capital investments if
they do not understand operations concepts and needs Information systems enables the information flow
throughout the organization
Human resources must understand job requirements andworker skills
Accounting needs to consider inventory management,capacity information, and labor standards
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OMs Transformation Role
To add value
Increase product value at each stage
Value added is the net increase between output product value
and input material value
Provide an efficient transformation Efficiencyperform activities well at lowest possible cost
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Manufacturing Cycle
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Cost + Profit = Selling Pricethere is no need for improvement
there is no competing procedure
consumer may have no choice
Profit = Selling PriceCostthe price is determined by the market profit is what remains after subtracting
cost from pricemaximizing profit means that cost is to
be minimized
Cost = PriceProfitsetting a target costthe price is determined by the
marketprofit required is determined by
the company
The Cost Substraction Formula
Operations Management is
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Operations management can
Reduce costs of producing products and service by being
efficient. Increase revenue by increasing customer satisfaction
through good quality and service.
Reduce need for investment by increasing the effective
capacity of the operation and by being innovative in how ituses its physical resources
Enhance innovation by building a solid base of operations
skills and knowledge within the business.
Operations Management is
Important
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Changing in Business Management are
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Changing in Business Management are
prompting operations responses
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New Challenges in OM
Local or national focus
Batch shipments
Low bid purchasing
Lengthy product
development
Standard products
Job specialization
Global focus
Just-in-time
Supply chain
partnering
Rapid product
development,
alliances Mass customization
Empowered
employees, teams
From To
Changing Challenges for the
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Changing Challenges for theOperations Manager
Past Causes FutureLocal ornationalfocus
Low-cost, reliable worldwidecommunication andtransportation networks
Global Focus
Batch (large)
shipments
Cost of capital puts pressure on
reducing investment ininventory
Just-in-time
shipments
Low-bidpurchasing
Quality emphasis requires thatsuppliers be engaged in productimprovement
Supply-chainpartners
Lengthyproductdevelopment
Shorter life cycles, rapidinternational communication,computer-aided design, andinternational collaboration
Rapid productdevelopment,alliances,collaborativedesigns
Changing Challenges for the
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Changing Challenges for theOperations Manager
Past Causes FutureStandardizedproducts
Affluence and worldwide markets;increasingly flexible productionprocesses
Masscustomization
Jobspecialization
Changing sociocultural milieu.Increasingly a knowledge andinformation society.
Empoweredemployees,teams, and leanproduction
Low costfocus
Environmental issues, ISO 14000,increasing disposal costs
Environmentallysensitive
production,Greenmanufacturing,recycledmaterials,remanufacturing
Operations Processes
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The Volumeof their output
The Varietyof their output
The Variation in the demand for theiroutput
The degree of Visibilitywhich customers
have of the production of their output
Operations Processes
Characteristic
Operations Processes
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Thevolume dimension
High volume means high repeatabilitypeople can
specialize
High volume leads to systemization of workSOP High volume gives lower unit costs
The variety dimension
High variety of products and services offered High variety increases cost of goods and services
High variety operations must be flexible
Standardization minimizes cost
Operations Processes
Characteristic
Operations Processes
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The variationdimension
Demand for goods and services can change depending on
the external environmentseasonal factor
Creates change in resources needed Activities must be planned effectivelyforecasting
Variation in demand can increase cost
The visibilitydimension Visibility means process exposure
Customers in a high visibility operation may judge the
operation by their perceptionscustomer contact skill is
important
Operations Processes
Characteristic
A Typology of Operations
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A Typology of Operations
IMPLICATIONS IMPLICATIONS
High LowVisibility
High LowVariation in demand
High LowVariety
Low HighVolume
Time lag betweenproduction andconsumption
Standardized
Low contact skills
High staff utilization
Centralization
Low unit costs
Short waiting tolerance
Satisfaction governed bycustomer perception
Customer contact skillsneeded
Received variety is high
High unit cost
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit cost
Flexible
Complex
Match customerneeds
High unit cost
Low repetition
Each staff member
performs more of jobLess systemization
High unit costs
Stable
Routine
Predictable
High utilization
Low unit costs
Well defined
Routine
Standardized
Regular
Low unit costs
High repeatability
Specialization
SystemizationCapital intensive
Low unit cost
A Q ti
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Any Questions
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