Professional Documents
Culture Documents
Chapter 1
1
Introduction to Operations
Management
Introduction
Operations management is the management of an
organizations productive resources or its production
system.
A production system takes inputs and converts them
into outputs.
The conversion process is the predominant activity of
a production system.
The primary concern of an operations manager is the
activities of the conversion process.
Organizational Model
Finance
Sales
HRM
OM
QA
Marketing
Engineering
MIS
Accounting
Studying Operations
Management
Operations as a System
Decision Making in OM
Operations as a System
Production System
Inputs
Conversion
Subsystem
Control
Subsystem
Outputs
Customer
Desires,
Primary Resources
Materials, Personnel, Capital, Utilities
Product
Conversion Subsystem
Physical (Manufacturing)
Locational Services (Transportation)
Exchange Services (Retailing)
Storage Services (Warehousing)
Other Private Services (Insurance)
Government Services (Federal)
Manufacturing
Tangible product
Services
Intangible product
Product cannot be
inventoried
Capital intensive
Labor intensive
Inputs
Conversion
Output
(desired)
Hospital
Patients
MDs, Nurses
Medical Supplies
Equipment
Health Care
Healthy
Individuals
Restaurant
Hungry Customers
Food, Chef
Servers
Atmosphere
Prepare Food
Serve Food
Satisfied
Customers
Automobile
Plant
Sheet Steel
Engine Parts
Tools, Equipment
Workers
Fabrication
and Assembly
of Cars
High Quality
Automobiles
University
Transferring
of Knowledge
and Skills
Educated
Individuals
Decision Making in OM
Strategic Decisions
Operating Decisions
Control Decisions
Strategic Decisions
These decisions are of strategic importance and
have long-term significance for the organization.
Examples include deciding:
the design for a new products production
process
where to locate a new factory
whether to launch a new-product development
plan
Operating Decisions
These decisions are necessary if the ongoing
production of goods and services is to satisfy
market demands and provide profits.
Examples include deciding:
how much finished-goods inventory to carry
the amount of overtime to use next week
the details for purchasing raw material next
month
Control Decisions
These decisions concern the day-to-day activities
of workers, quality of products and services,
production and overhead costs, and machine
maintenance.
Examples include deciding:
labor cost standards for a new product
frequency of preventive maintenance
new quality control acceptance criteria
Design of
Operations
Operational Control of
Operations
Forecasting
Production Planning and Control
Supply Chain Management
Maintenance Management
Continuous improvement of operations
Operations
OperationsStrategies
Strategies
Corporate Mission
Business Strategy
Product/Service Plans
Competitive Priorities
Operations Strategy
Distinctive
Competencies
or
Weaknesses
Corporate
Corporate Mission
Mission
A corporate mission is a set of long-range
goals and including statements about:
the kind of business the company wants to
be in
who its customers are
its basic beliefs about business
its goals of survival, growth, and profitability
Business Strategy
Business strategy is a long-range game plan of
an organization and provides a road map of
how to achieve the corporate mission.
Inputs to the business strategy are
Assessment of global business conditions social, economic, political, technological,
competitive
Distinctive competencies or weaknesses workers, sales force, R&D, technology,
management
Competitive Priorities
Low Production Costs
Definition
Unit cost (labor, material, and overhead) of each
product/service
Some Ways of Creating
Redesign of product/service
New technology
Increase in production rates
Reduction of scrap/waste
Reduction of inventory
Competitive Priorities
Delivery Performance
Definition
a) Fast delivery b) On-time delivery
Some Ways of Creating
afaster production rates) larger finished-goods
inventory
a) quicker shipping methods
b) more-realistic promises
c) better control of production of orders
d) better information systems
Competitive Priorities
High-Quality Products/Services
Definition
Customers perception of degree of excellence
exhibited by products/services
Some Ways of Creating
Improve product/services
Appearance
Performance and function
Wear, endurance ability
After-sales service
Competitive Priorities
Customer Service and Flexibility
Definition
Ability to quickly change production to other
products/services. Customer responsiveness.
Some Ways of Creating
Change in type of processes used
Use of advanced technologies
Reduction in WIP through lean manufacturing
Increase in capacity
Operations Strategy
Operations strategy is a long-range game plan
for
the
production
of
a
companys
products/services, and provides a road map
for the production function in helping to
achieve the business strategy.
Product/Service Plans
As a product is designed, all the detailed
characteristics of the product are established.
Each product characteristic directly
affects how the product can be made.
How the product is made determines
the design of the production system.
Dot-Matrix
Printer
Video Recorder
Internet Radio
Introduction
Color Copier
Growth
CD Player
Maturity
B&W TV
Decline
Outsourcing Plans
Outsourcing refers to hiring out or subcontracting
some of the work that a company needs to do.
This strategy is being used more and more as
companies strive to operate more efficiently.
Companies try to determine the best level of outsourcing to achieve their operations & business goals.
Outsourcing
has
disadvantages.
many
advantages
and
Outsourcing Plans
A company might outsource any of the following
manufacturing related functions:
Designing the product
Purchasing the basic raw materials
Processing the subcomponents, subassemblies,
major assemblies, and finished product
Distributing the product
Facility Plans
How to provide the long-range capacity to produce
the firms products/services is a critical strategic
decision.
The location of a new facility may need to be
decided.
The internal arrangement (layout) of workers,
equipment, and functional areas within a facility
affects the ability to provide the desired volume,
quality, and cost of products/services.
for
simultaneously
to
intangible
to
back-
Forming
Forming Operations
Operations Strategies
Strategies
Support the product plans and competitive
priorities defined in the business strategy.
Adjust to the evolving positioning strategies.
Link to the marketing strategies.
Look at alternative operations strategies.
Evolution of Positioning
Strategies
The characteristics of production systems tend to
evolve as products move through their product life
cycles.
Operations strategies must include plan for modifying
production systems to a changing set of competitive
priorities as products mature.
The capital and production technology required to
support these changes must be provided.
Life
Stage
Evolution of Positioning
Strategies
Early
Late
Intro.
Growth
Slightly
Standard
Growth
Standard
Maturity
Highly
Standard
Very
High
Product
Custom
Volume
Very
Low
Low
High
Focus
Process
Process
Product
Product
Fin.Gds.
To-Order
To-Order
To-Stock
To-Stock
Batch
Size
Very
Small
Small
Large
Very
Large
Competitiveness
Competitiveness:
How effectively an organization meets the wants
and needs of customers relative to others that
offer similar goods or services
Organizations compete through some combination
of their marketing and operations functions
What do customers want?
How can these customer needs best be
satisfied?
2-48
Time-Based Competition
Strategies
Time-based strategies
Strategies that focus on the reduction of
time needed to accomplish tasks
It is believed that by reducing time, costs
are lower, quality is higher, productivity is
higher, time-to-market is faster, and
customer service is improved
Time-Based Competition
Strategies
Areas where
reductions:
organizations
have
Planning time
Product/service design time
Processing time
Changeover time
Delivery time
Response time for complaints
achieved
time