[POM-TQM] Finals - (1) Introduction to Operations Management

Operations

The part of a business organization that is responsible for producing goods or services

Operations Management

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

Operations Management

A management function and an organizations core function

Operations Management

The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company

Goods

These are physical items that include raw materials, parts, subassemblies, and final products

Services

These are activities that provide some combination of time, location, form or psychological value

Supply Chain

It is a sequence of activities and organizations involved in producing and delivering a good or service

The Transformation Process

Feedback

Measurements taken at various points in the transformation process

Control

The comparison of feedback against previously established standards to determine if corrective action is needed

Goods-Service Continuum

Products are typically neither purely service- or purely goods-based

Basic Functions of the Business Organization

Finance and Operations

• Budgeting

• Economic analysis of investment proposals

• Provision of funds

Marketing and Operations

• Demand data

• Product and service design

• Competitor analysis

• Lead time data

Process

This consists of one or more actions that transform inputs into outputs

Three Categories of Business Processes

• Upper-management processes

• Operational processes

• Supporting processes

Upper-management Processes

These govern the operation of the entire organization

Operational Processes

These are core processes that make up the value stream

Supporting Processes

These support the core processes

Supply and Demand

Four Sources of Variation

• Variety of goods or services being offered

• Structural variation in demand

• Random variation

• Assignable variation

Variety of Goods or Services Being Offered

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

Structural Variation in Demand

These are generally predictable. They are important for capacity planning.

Random Variation

Natural variation that is present in all processes. Generally, it cannot be influenced by managers.

Assignable Variation

Variation that has identifiable sources. This type of variation can be reduced, or eliminated, by analysis and corrective action.

Scope of Operations Management

• Forecasting

• Capacity planning

• Locating facilities

• Facilities and layout

• Scheduling

• Managing inventories

• Assuring quality

• Motivating employees

• And more . . .

Operations Function

This consists of all activities directly related to producing goods or providing services

Role of the Operations Manager

To guide the system by decision making.

• System design decisions

• System operation decisions

System Design

These are typically strategic decision that usually require a long-term commitment of resources to determine the parameters of system operation

• Capacity

• Facility location

• Facility layout

• Product and service planning

• Acquisition and placement of equipment

System Operations

These are generally tactical and operational decisions.

• Management of personnel

• Inventory management and control

• Scheduling

• Project management

• Quality assurance

Keys to successfully using a model in decision making

• What is its purpose?

• How is it used to generate results?

• How are the results interpreted and used?

• What are the model’s assumptions and limitations?

Benefits of Models

1. Generally easier to use and less expensive than dealing with the real system

2. Require users to organize and sometimes quantify information

3. Increase understanding of the problem

4. Enable managers to analyze “What if?” questions

5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem

6. Enable users to bring the power of mathematics to bear on a problem

Quantitative Approaches

A decision-making approach that frequently seeks to obtain a mathematically optimal solution

• Supported by computer calculations

• Often work together with qualitative approaches

System

It is a set of interrelated parts that must work together

• The business organization is a system composed of subsystems

• Marketing subsystem

• Operations subsystem

• Finance subsystem

Systems Perspective

• Emphasizes interrelationships among subsystems

• Main theme is that the whole is greater than the sum of its parts

• The output and objectives of the organization take precedence over those of any one subsystem

Pareto Phenomenon

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

• The critical few factors should receive the highest priority

• This is a concept that is appropriately applied to all areas and levels of management (80/20 rule)

Industrial Revolution

A major change occurred that gave the Industrial Revolution a boost: the development of standard gauging systems; steam engine

• Scientific management

• Human relations movement

• Decision models and management science

• Influence of Japanese manufacturers

Craft Production

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

Industrial Revolution

Began in England in the 1770s

Division of Labor

Adam Smith, 1780s

Application of the “rotative” steam engine

1780s

Cotton gin and interchangeable parts

Eli Whitney, 1792

Scientific Management

Movement was led by efficiency engineer, Frederick Winslow Taylor

Scientific Management

• Believed in a “science of management” based on observation, measurement, analysis and improvement of work methods, and economic incentives

• Management is responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperation between management and workers, and separating management activities from work activities

• Emphasis was on maximizing output brought widespread changes to the management of factories.

Franck Gilbert

Pioneers contributed to the movement who is often referred to as the father of motion study

Henry Gantt

He recognized the value of nonmonetary rewards to motivate worker and developed the widely used system for scheduling, called Gantt charts

Henry Ford

The great industrialist, employed scientific management techniques in his factories, & introduced the moving assembly line, which had a tremendous impact in the production methods in many industries

• He also introduced the mass production to automotive industry; division of labor which paves the way for human relations movement

Human Relations Movement

This emphasized the importance of the human element in job design

Lillian Gilberth

Applications of Psychology

Elton Mayo

He conducted studies in Hawthorn on worker motivation, 1930

Abrahan Maslow

Motivation theory, 1940s; Hierarchy of needs, 1954

Fredrick Hertzberg

Two factor theory, 1959

Douglas McGregor

Theory X and Theory Y, 1960s - represented the two ends of the spectrum of how employees view work

William Ouchi

Theory Z, combined Japanese approach and the traditional approach, 1981

FW Harris

Mathematical model for inventory management, 1915

Dodge, Romig, and Shewart

Statistical procedures for sampling and quality control, 1930s

Tippett

Statistical sampling theory, 1935

Operations Research (OR) Groups

OR applications in warfare

George Dantzig

Linear programming, 1947

Influence of Japanese Manufacturers

Refined and developed management practices that increased productivity

• Credited with fueling the “quality revolution”

• Just-in-Time production

Key Issues for Operations Managers Today

• Economic conditions

• Innovating

• Quality problems

• Risk management

• Cyber-security

• Competing in a global economy

Sustainability

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

Sustainability Measures

Sustainability measures often go beyond traditional environmental and economic measures to include measures that incorporate social criteria in decision making