Module 1

Hard Rock Cafe

This business opened in 1971 and now has 129 restaurants over 40 countries. They create value in the form of good food and entertainment

Operations Management

This is the set of activities that create value in the form of goods and services by transforming inputs into outputs

Production

This is the creation of goods and services through the combination of resources such as labor, materials, and technology.

Marketing

This part of the business generates demand

Production/Operations

This part of the business creates the product

Finance/Accounting

This part of the business tracks how well the organization is doing, pays bills, collects the money

• study how people organize themselves for productive enterprise

• know how goods and services are produced

• understand what operations managers do

• a costly part of an organization

These are the reasons why to study Operations Management

• Planning:  production levels, resource allocation, and project scheduling.

• Organizing: production processes, the layout of facilities, and the roles and responsibilities of employees.

• Staffing: workforce planning, job design, and employee motivation

• Leading: providing guidance and direction to production teams, resolving conflicts, and fostering a positive work environment.

• Controlling: quality control, inventory management, and cost control

These are the basic management functions of an Operations Manager

Managing Quality

• How do we define quality?: This involves establishing quality standards and metrics.

• Who is responsible for quality?: This involves assigning responsibility for quality assurance and control.

Process and Capacity Design

• What process and what capacity will these products require?: This involves selecting the appropriate production processes and determining the capacity needed to meet demand.

• What equipment and technology is necessary for these processes?: This involves decisions about technology investment and process automation.

Location Strategy

• Where should we put the facility?: This involves decisions about facility location, considering factors such as cost, proximity to markets, and availability of resources.

• On what criteria should we base the location decision?: This involves evaluating different location options based on specific criteria.

Layout Strategy

• How should we arrange the facility?: This involves decisions about the physical layout of the facility to optimize workflow and efficiency.

• How large must the facility be to meet our plan?: This involves determining the appropriate size of the facility to accommodate production needs.

Human Resources and Job Design

• How do we provide a reasonable work environment?: This involves decisions about workplace safety, ergonomics, and employee well-being.

• How much can we expect our employees to produce?: This involves setting performance standards and expectations for employees.

Supply Chain Management

• Should we make or buy this component?: This involves decisions about outsourcing and vertical integration.

• Who should be our suppliers and how can we integrate them into our strategy?: This involves supplier selection, relationship management, and supply chain coordination.

Inventory, material requirements planning, and JIT

• How much inventory of each item should we have?: This involves decisions about inventory levels and inventory control systems.

• When do we re-order?: This involves decisions about inventory replenishment and timing.

Intermediate and short-term scheduling

• Are we better off keeping people on the payroll during slowdowns?: This involves decisions about workforce planning and scheduling during periods of fluctuating demand.

• Which jobs do we perform next?: This involves prioritizing and sequencing jobs to optimize production flow.

Maintenance

• How do we build reliability into our processes?: This involves decisions about preventive maintenance and equipment reliability.

• Who is responsible for maintenance?: This involves assigning responsibility for maintenance activities.

American Production and Inventory Control Society (APICS)

This certification provides in-depth knowledge and practical skills in specific areas of supply chain management

American Society of Quality (ASQ)

This certification focuses on quality management principles and practices.

Cost Focus

1. Early Concepts (1776-1880)

2. Scientific Management Era (1890-1910)

3. Mass Production Era (1910-1980)

Quality Focus

Lean Production Era ((1980-1995)

Customization Focus

Mass Customization Era (1995-2015)

Adam Smith

His concept of division of labor, where tasks are broken down into smaller, specialized activities, is a foundational principle in operations. Charles Babbage further expanded on this concept.

Eli Whitney

His development of interchangeable or standardized parts revolutionized manufacturing by enabling mass production and easier repairs. He received a government contract to make 10,000 muskets.

Frederick Taylor

• Known as ‘father of scientific management’ 

• 1881, as chief engineer for Midvale Steel, studied how tasks were done 

• Began first motion and time studies 

• Created efficiency principles

Taylor’s Efficiency Principles

• Matching employees to right job

• Providing the proper training 

• Providing proper work methods and tools 

• Establishing legitimate incentives for work to be accomplished

Frank & Lillian Gilbreth

• Husband-and-wife engineering team 

• Further developed work measurement methods 

• Applied efficiency methods to their home and 12 children! 

• Book & Movie: “Cheaper by the Dozen,” “Bells on Their Toes

• Motion Studies

Henry Ford

• Born 1863; died 1947 

• In 1903, created Ford Motor Company 

• In 1913, first used moving assembly line to make Model T

• Unfinished product moved by conveyor past work station 

• Paid workers very well for 1911 ($5/day!) 

W. Edwards Deming

• Engineer and physicist 

• Credited with teaching Japan quality control methods in post WW2 

• Used statistics to analyze process 

• His methods involve workers in decisions

Characteristics of Good

• Tangible product: Goods are physical items that can be touched and seen.

• Consistent product definition: Goods tend to have standardized specifications and characteristics.

• Production usually separate from consumption: Goods are typically produced in one location and then shipped to customers for consumption.

• Can be inventoried: Goods can be produced and stored before they are sold.

• Low customer interaction: The production of goods often involves minimal direct contact with customers

Characteristics of Service

• Intangible product: Services are actions or processes that are performed for customers, and they lack a physical form.

• Produced and consumed at the same time: Services are often delivered and used simultaneously.

• Often unique: Services can be highly variable and customized to individual customer needs.

• High customer interaction: Service delivery often involves significant interaction between the service provider and the customer.

• Inconsistent product definition: Services can be difficult to standardize and define consistently.

• Often knowledge-based: Many services rely heavily on specialized knowledge and expertise.

• Frequently dispersed: Services can be delivered in various locations, often directly to the customer.

New Trends in OM

• Ethics

• Global focus

• Environmentally sensitive production

• Rapid product development

• Mass customization

• Empowered employees

• Supply-chain partnering

• Just-in-time performance 

Productivity

• defined as the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)

•  is a measure of process improvement.

Productivity Formula

Units Produced/Inputs Used

Single-Factor Productivity

A measure of productivity that evaluates output relative to a single input factor, typically labor or capital.

Ex: Units produced/Labor-hours used

Multi-Factor Productivity

• It notes that this is also known as "total factor productivity."

• It clarifies that output and inputs are often expressed in dollars.

• It distinguishes multifactor productivity (multiple resource inputs) from single-factor productivity (one resource input).

• Ex: Output / (Labor + Material + Energy + Capital + Miscellaneous)

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

1. Basic education appropriate for the labor force.

2. Diet of the labor force.

3. Social overhead that makes labor available.