Introduction to Operations Management

Operations

the part of an organization that is responsible for producing goods and/or services

Operations Management (OM)

- management of systems and processes that create goods and provide services

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

Goods

physical items inclusive of raw materials, parts, sub-assemblies, and final products

Services

activities that provide a combination of time, location, form, and psychological value

Basic Functional Areas on Organization

- securing financial resources at reasonable prices

- assessing consumer needs and wants

- producing goods and providing services

Role of Operations Management

transform inputs into outputs

Inputs

- raw materials

- man power

- money

Outputs

products (goods) and services

OM's Transformation Role

increase product value at each stage

Value Added

the difference between the cost of inputs and the value of price of output

Efficiency

performing activities well for least possible cost

Manufacturers

- tangible product

- product is inventoried

- low customer contact

- longer response time

- capital intensive

- consistent output

- high mechanization generates more product

Services

- intangible product

- product cannot be inventoried

- high customer contact

- short response time

- labor intensive

- greater variability of inputs

- slow and awkward input

Similarities for Service vs Manufacturers

- use technology

- have quality, productivity, and response issues

- must forecast demand

- can have capacity, layout, and location issues

- have customers, suppliers, scheduling, and staffing issues

Scope of OM

1. product and service design

2. process selection

3. selection and management technology

4. design of work system

5. location planning

6. facilities planning

7. quality improvement of the goods and services of the organization

System Design

involves decisions that relate to

- system capacity

- geographic location

- facilities arrangement of departments

- placement of equipment within physical structures

- product and service planning

- acquisition of equipment

System Operation

involves management of

- personnel

- inventory planning and control

- scheduling

- project management

- quality assurance

strategic decisions

System design are typically ...

tactical and operational decisions

Systems operation are generally ...

Strategic Decision Making

process of charting a coursed base on long term goals and long-term vision

Tactical decisions

medium term, less complex decisions made by middle managers focuse on specific day-to-day issues

Purchasing

Procurement of stocks

Industrial Engineering

scheduling, performance standards, work methods, quality control, and material handling

Distribution

Shipping of goods to warehouses, retail outlet, or customers

Maintenance

Responsible for upkeep and repair of equipment

Models

an abstraction of reality, a simplified representation of something, a key tool used by all decision makers

Models are sometimes classified as

- physical

- mathematical

- schematic

Physical

look like their real-life counterparts

Schematic

more abstract than their physical counterparts, have less resemblance to the physical reality

(pictures, drawings, blueprint, graphs, charts)

Mathematical

- most abstract, do not look at all like the real counterparts

- considered as most important models for calculators and computers

(diagrams, scatter plots, numbers, formulas, symbols)

Quantitative Approach

an attempt to obtain a mathematically optimal solution to managerial problems

Performance Metrics

used to manage and control the operation

Analysis of Trade Offs

trade off decisions

System Approach

emphasize interrelationship among the subsystem

System

a set of interrelated parts that must work together

Ethics

managers must consider how their decisions affect the stakeholders of the organization

Industrial revolution

began in 1770's in England to spread to the rest of Europe and US during 19th century

Craft production

- earliest day of manufacturing

- highly skilled workers using simple and flexible tools

Scientific Management

- began in 1990

- based on observation, measurement, analysis, and improvement of work methods and economic incentives

Frederick Winslow Taylor

- Father of Scientific Management

- methods emphasizing maximizing output

Frank Gilbreth

industrial engineer who developed principles of motion economy that applied to incredibly small portion of the task

Henry Gantt

recognized the value of non-monetary rewards to motivate workers

Gantt Chart

a widely used system for scheduling developed by Henry Gantt

Harrington Emerson

applied Taylor's ideas organization structure and encouraged the use of experts to improve organizational efficiency

Henry Ford

great industrialist employed scientific management techniques in his factories

Ford's Contributions

- mass production

- interchangeable parts

- division of labor

Mass Production

low skilled wokers used 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 Labor

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

Human Relations Movement

- began in 1930s

- emphasized importance of human element in job design

Lilian Gilbreth

- psychologist and Frank Gilbreth's wife

- focused on human factor in work