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Introduction to Operations Management
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Introduction to Operations Management
CHAPTER
1
Operations Management
Introduction to Operations Management
William J. Stevenson
8 th edition Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserv ed.
McGraw-Hill/Ir win
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Introduction to Operations Management
Operations M anagement
Figure 1.1
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Introduction to Operations Management
Value--Added Value
Figure 1.2
The difference between the cost of inputs and the value or price of outputs.
The management of systems or processes that create goods and/or provide services
Value added Organization
Finance
Operations
Inputs Land Labor Capital
Outputs Goods Services
Transformation/ Conversion process
Marketing
Feedback
Control Feedback
Feedback Table 1.1
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Introduction to Operations Management
Figure 11-8
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Introduction to Operations Management
Goods--service Continuum Goods
Figure 1.3 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 goods
Low percentage service
High percentage service
Tangible product
Service Action
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Introduction to Operations Management
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Introduction to Operations Management
Key Differences Product vs. Service
Production of Goods vs. Delivery of Services •
1.
•
2.
Production of goods – tangible output Delivery of services – an act • Service job categories
3.
•
Government • Wholesale/retail • Financial services • Healthcare • Personal services • Business services • Education
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4. 5. 6. 7. 8.
Introduction to Operations Management
Customer contact: high or low? Uniformity of input: uniform or variable? Labor content of jobs Uniformity of output Measurement of productivity Production and delivery Quality assurance Amount of inventory
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Manufacturing vs Service
U.S. Manufacturing vs. Service Employment 100
As Productivity increases, # manufacturing jobs decrease?
Manufacturing Service
Output
Tangible
Customer contact
Low
High
Uniformity of input
High
Low
Labor content
Low
High
Uniformity of output
High
Low
Measurement of productivity
Easy
Difficult
Opportunity to correct quality problems
High
Low
Intangible
P erc en t
80
Characteristic
60 40
Does productivity affect standard of living?
20 0 45
50 55
60 65 70 75 80 85
Figure 1.4
90
95 00
Ye ar
Hg ih
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Diversity of Operations M anagement
Table 1.4
Operations Goods Producing Storage/Transportation
Exchange Entertainment Communication
Examples Farming, mining, construction, manufacturing, power generation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Retailing, wholesaling, banking, renting, leasing, library, loans Films, radio and television, concerts, recording Newspapers, radio and television newscasts, telephone, satellites
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Scope of Operations M anagement
•
Operations Management includes: •
Forecasting Capacity planning • Scheduling • Managing inventories • Assuring quality • Motivating employees • Deciding where to locate facilities • And more . . . •
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Responsibilities of Operations Management
Key Decisions of Operations Managers
Table 1.6
Planning – – – – – – –
Organizing
Capacity Location Products & services Make or buy Layout Projects Scheduling
– Degree of centralization – Process selection
Staffing – Hiring/laying off – Use of Overtime
What
•
When
What resources/what amounts Needed/scheduled/ordered •
Where
•
How
•
Who
Directing – Incentive plans – Issuance of work orders – Job assignments
Controlling/Improving – – – –
•
Inventory Quality Costs Productivity
Work to be done Designed To do the work
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Decision M aking
System operation personnel inventory scheduling project management – quality assurance – – – –
System Design
– – – – –
•Forecasting •Capacity •Process selection •Work System layout location arrangement of departments product and service planning acquisition and placement of equipment
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Decision Making
•
Models • Quantitative approaches • Analysis of trade-offs • Systems approach
Table 1.5 page 10
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Models
Models Are Beneficial
A model is an abstraction of reality (e.g. a miniature airplane used in wind tunnel testing. Types of models include: – Physical – Schematic – Mathematical
Tradeoffs: cost vs. reality
What are the pros and cons of models?
•
Easy to use, less expensive • Require users to organize • Systematic approach to problem solving • Increase understanding of the problem • Enable “what if” questions • Specific objectives • Consistent tool • Power of mathematics • Standardized format
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Quantitative Approaches
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Systems Approach
• Linear programming
“The whole is greater than the sum of the parts.” (e.g. holistic vs. atomistic)
• Queuing Techniques • Inventory models • Project models
SubSuboptimization
• Statistical models
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Business Operations Overlap
Pareto Phenomenon
Figure 1.5
• A few factors account for a high percentage of the occurrence of some event(s).
Operations
• A pervasive & important concept for establishing priorities
• 80/20 Rule - 80% of output problems are caused by 20% of the input factors.
Marketing
Finance
How do we identify the vital few?
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Operations Interfaces
Homework
Industrial Engineering
• M aintenance
Distribution
Go to Stevenson web site (you can get there from my home page) •
Go to Chapter 1 resources Do first Multiple Choice quiz (5 questions) • Email it to me (
[email protected]) •
Purchasing
Operations
Public Relations
Legal
• Personnel
Accounting
M IS
Due before class next Wednesday 5 Sep 06
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Activity
•
Break up into small groups ~3 people •
Discuss (5 minutes) the following • •
Jobs worked Best job / Worst job (and why) •
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Historical Evolution of Operations Management Table 1.7 •
Industrial revolution (1770’s)
•
Scientific management (1911)
• •
Service or Production?
•
• •
Think of a question you have about me Pick a representative from the group to “present” results
Trends in Business
Mass production / Interchangeable parts /Division of labor Gilbreth’s time-motion studies
•
Human relations movement (1920-60)
•
Decision models (1915, 1960-70’s)
•
Influence of Japanese manufacturers (Taguchi)
• • •
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Craft production Æ standardization & economies of scale
Æ worker motivation Operations Research, Linear Programming, QC Robust design Æ quality Æ social benefit
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Simple Product Supply Chain
Figure 1.7 •
Major trends •
The Internet, e-commerce, e-business Management technology • Globalization • Management of supply chains • Agility •
•
Lean Production (highly skilled workforce and flexible machines to quickly produce high quantity/quality with little excess inventory)
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Figure 11-8
Suppliers’ Suppliers
Direct Suppliers
Producer
Final Consumer
Distributor
Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service
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A Supply Chain for Bread Value Added
Value of Product
Farmer produces and harvests wheat
$0.15
$0.15
Wheat transported to mill
$0.08
$0.23
Mill produces flour
$0.15
$0.38
Flour transported to baker
$0.08
$0.46
Baker produces bread
$0.54
$1.00
Bread transported to grocery store
$0.08
$1.08
Grocery store displays and sells bread
$0.21
$1.29
Total Value-Added
$1.29
Stage of Production
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Other Important Trends
•
Ethical behavior Operations strategy • Working with fewer resources • Cost control and productivity • Quality and process improvement • Increased regulation and product liability • Lean production •
