1 - Introduction to Operations Management

Operations Management

The management of systems or processes that create goods and/or provide services

Core function

OM is a _ _ of every business

Supply chain

A sequence of organizatIons-their facilities, functions, and activities- that are involved in producing and delivering a product or service

Suppliers - Inputs - Process - Output - Consumer

Flow of supply chain (SIPOC)

Operations

Part of the business responsible for management

Add value

The essence of the operations function is to _ _ during the transformation process.

Value-added

is the term used to describe the difference between the cost of

inputs and the value or price of outputs.

Inputs - Transformation - Outputs

System Value of OM

Transformation

Manufacturing or service operations

systems

The operations function involves _ for converting inputs into outputs

link

OM is a _ in the supply chain

Procurement - production - distribution

OM in the supply chain involves

Industrial Revolution

Scientific Management (Frederick Taylor)

Human Relations Movement

Lean Production

Modern ERP & IT Systems

Historical Evolution of OM

Planning, Organizing, Controlling, involving processes, decision making (strategic, tactical, operational)

Operations Manager’s role

Globalization

Sustainability

Technology (AI, automation, analytics)

Quality focus (Six sigma, TQM)

Supply chain resilience

Trends in OM

Six Sigma

A process for reducing costs, improving quality, and increasing customer satisfaction.

Managing Uncertainty

Ethical considerations

Rapid technological changes

Environmental concerns

Challenges for OM Today

Customers

Determining what products and/or services customers want

Forecasting

Predicting the quantity and timing of customer demand

Design

Incorporating customers, wants, manufacturability, and time to market

Capacity planning

Matching supply and demand

Goods

Physical items produced by business organizations.

Services

Activities that provide some combination of time, location, form, and psychological value

to achieve an economic match of supply and demand.

The ideal situation for a business organization

Operations and supply chains

Key functions on the supply side

Sales and marketing

Key functions on the demand side

Finance

responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations.

Marketing

responsible for assessing consumer wants and needs, and selling and promoting the organization’s goods or services.

Operations

responsible for producing the goods or providing the services offered by the organization.

sequential

The chain illustrates both the _ nature of a supply chain and the interconnectedness of the elements of the supply chain

product packages

Because there are relatively few pure goods or pure services, companies usually sell _, which are a combination of goods and services.

customer involvement

The greater the degree of _ _, the more challenging it can be to design and manage the operation.

tangible output

Production of goods results in a _ _, such as an automobile, eyeglasses, a golfball, a refrigerator—anything that we can see or touch.

what; how

Manufacturing and service are often different in terms of (1) is done but quite similar in terms of (2) it is done.

high degree of contact

Many services involve a _, although services such as Internet providers, utilities, and mail service do not. When there is a _, the interaction between server and customer becomes a “moment of truth” that will be judged by the customer every time the service occurs.

Labor content of jobs

Services often have a higher degree of labor content than manufacturing jobs do, although automated services are an exception.

Uniformity of inputs

Service operations are often subject to a higher degree of variability of inputs. Each client, patient, customer, repair job, and so on presents a somewhat unique situation that requires assessment and flexibility. Conversely, manufacturing operations often have a greater ability to control the variability of inputs, which leads to more-uniform job requirements.

collaboration

exchange of information

cooperative decision making

In practice, there is significant interfacing and (1) among the various functional areas, involving (2) and (3).

Operations, Finance, Marketing and sales

Three major functions of business organizations

Budgeting

Economic analysis of investment proposals

Provision of funds

Finance and operations management personnel cooperate by exchanging information and expertise in such activities as

Lead time

The time between ordering a good or service and receiving it.

Legal

The _ department must be consulted on contracts with employees, customers, suppliers, and transporters, as well as on liability and environmental issues.

Accounting

_ supplies information to management on costs of labor, materials, and overhead, and may provide reports on items such as scrap, downtime, and inventories.

Management information systems (MIS)

is concerned with providing management with the information it needs to effectively manage. This occurs mainly through designing systems to capture relevant information and designing reports. is also important for managing the control and decision-making tools used in operations management.

personnel or human resources

The _ department is concerned with recruitment and training of personnel, labor relations, contract negotiations, wage and salary administration, assisting in manpower projections, and ensuring the health and safety of employees.

Public relations

responsible for building and maintaining a positive public image of the organization. Good _ _ provides many potential benefits. An obvious one is in the marketplace. Other potential benefits include public awareness of the organization as a good place to work (labor supply), improved chances of approval of zoning change requests, community acceptance of expansion plans, and instilling a positive attitude among employees.

process

A _ consists of one or more actions that transform inputs into outputs.

Upper-management processes

Operational processes

Supporting processes

Three categories of business processes

Upper-management processes

These govern the operation of the entire organization. Examples include organizational governance and organizational strategy.

Operational processes

These are the core processes that make up the value stream.

Examples include purchasing, production and/or service, marketing, and sales.

Supporting processes

These support the core processes. Examples include accounting,

human resources, and IT (information technology).

process design

process execution

process monitoring

Business process management (BPM) activities include

Managing processes to meet demand

Dealing with process variability

Two basic aspects of BPM for operations and supply chain

management are

The variety of goods or services being offered.

Structural variation in demand.

Random variation.

Assignable variation.

4 basic sources of variation

variation

The greater the variety of goods and services, the greater the _ in production or service requirements.

structural variation in demand

These variations, which include trends and seasonal variations, are generally predictable. They are particularly important for capacity

planning.

Random variation

This natural variability is present to some extent in all processes, as well as in demand for services and products, and it cannot generally be influenced by managers.

Assignable variation

These variations are caused by defective inputs, incorrect work methods, out-of-adjustment equipment, and so on. This type of variation can be reduced or eliminated by analysis and corrective action.

mean and standard deviation

Two widely used metrics in dealing with variations

Forecasting

Capacity planning

Locating facilities

Scheduling

Managing inventories

Assuring quality

Motivating and training employees

Scope of operations management

System design; strategic

(1) involves decisions that relate to system capacity, the geographic location of facilities, arrangement of departments and placement of equipment within physical structures, product and service planning, and acquisition of equipment. These decisions usually, but not always, require long-term commitments. Moreover, they are typically (2) decisions.

system operation; tactical and operational

(1) involves management of personnel, inventory planning and control, scheduling, project management, and quality assurance. These are generally (2) decisions.

Purchasing, industrial engineering, distribution, and maintenance

A number of other areas are part of, or support, the operations function. These includes

Purchasing

has responsibility for procurement of materials, supplies, and equipment. Close contact with operations is necessary to ensure correct quantities and timing of purchases. The purchasing department is often called on to evaluate vendors for quality,

reliability, service, price, and ability to adjust to changing demand.

Industrial engineering

often concerned with scheduling, performance standards, work methods, quality control, and material handling

Distribution

involves the shipping of goods to warehouses, retail outlets, or final customers.

Maintenance

responsible for general upkeep and repair of equipment, buildings and grounds, heating and air-conditioning; removing toxic wastes; parking; and perhaps security.

Operations manager

Key figure in the system

Model

An abstraction of reality; a simplified representation of something.

Physical models

look like their real-life counterparts. Examples include miniature cars, trucks, airplanes, toy animals and trains, and scale-model buildings. The advantage of these models is their visual correspondence with reality.

Schematic models

are more abstract than their physical counterparts; that is, they have less resemblance to the physical reality. Examples include graphs and charts, blueprints, pictures, and drawings. The advantage of these models is that they are often relatively simple to construct and change. Moreover, they have some degree of visual correspondence.

Mathematical models

are the most abstract: They do not look at all like their real-life counterparts. Examples include numbers, formulas, and symbols. These models are usually the easiest to manipulate, and they are important forms of inputs for computers and calculators.

Quantitative approaches

to decision making in operations management (and in other functional business areas) have been accepted because of calculators and computers capable of handling the required calculations.

Analysis of Trade-offs

Decision makers sometimes deal with these decisions by listing the advantages and disadvantages—the pros and cons—of a course of action to better understand the consequences of the decisions they must make.

Degree of customization

has important implications for process selection and job requirements. The impact goes beyond operations and supply chains. It affects marketing, sales, accounting, finance, and information systems.

system

set of interrelated parts that must work together.

systems approach

essential whenever something is being designed, redesigned, implemented, improved, or otherwise changed.

Pareto phenomenon

A few factors account for a high percentage of the occurrence of some event(s).

Craft production

System in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods.

Frederick Winslow Taylor

Father of scientific management

Frank Gilbreth

was an industrial engineer who is often referred to as the father of motion study. He developed principles of motion economy that could be applied to incredibly small portions of a task.

Henry Gantt

recognized the value of nonmonetary rewards to motivate workers, and developed a widely used system for scheduling, called Gantt charts.

Harrington Emerson

applied Taylor’s ideas to organization structure and encouraged the use of experts to improve organizational efficiency. He testified in a congressional hearing that railroads could save a million dollars a day by applying principles of scientific management.

Henry Ford

the great industrialist, employed scientific management techniques in his factories.

Mass production

System in which low-skilled workers use specialized machinery to produce high volumes of standardized goods.

Interchangeable parts

Parts of a product made to such precision that they do not have to be custom fitted

Division of labor

The breaking up of a production process into small tasks, so that each worker performs a small portion of the overall job.

Human Relations Movement

Whereas the scientific management movement heavily emphasized the technical aspects of work design, the _ _ _emphasized the importance of the human element in job design.

E-business

The use of electronic technology to facilitate business transactions.

E-commerce

Consumer-to-business transactions

Technology

The application of scientific knowledge to the development and improvement of products and services and operations processes.

Product and service technology

refers to the discovery and development of new products and services. This is done mainly by researchers and engineers, who use the scientific approach to develop new knowledge and translate that into commercial applications.

Process technology

refers to methods, procedures, and equipment used to produce goods and provide services. They include not only processes within an organization but also supply chain processes.

Information technology

refers to the science and use of computers and other electronic equipment to store, process, and send information. is heavily ingrained in today’s business operations. This includes electronic data processing, the use of bar codes to identify and track goods, obtaining point-of-sale information, data transmission, the Internet, e-commerce, e-mail, and more.

Management of technology

is high on the list of major trends, and it promises to be high well into the future.

Agility

The ability of an organization to respond quickly to demands or opportunities.

Lean system

System that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety.

Economic conditions

Innovating

Quality problems

Risk management

Cyber-security

Competing in a global economy

KEY ISSUES FOR TODAY’S BUSINESS OPERATIONS (6)

Sustainability

Using resources in ways that do not harm ecological systems that support human existence.

Ethics

A standard of behaviormthat guides how one should act in various situations.