OPERATIONS and LOGISTICS

MANAGEMENT

Introduction
Importance
Scope
Trends
Careers
Course Overview

Applied Management Science for Decision Making, 1e 2012 Pearson Prentice-Hall, Inc.

Philip A. Vaccaro, PhD

Operations Management
DEFINITION

The competent and adept management

of complex systems in the service, nonprofit, manufacturing, and government
sectors via the effective and efficient
utilization of time, labor, money, and
materials in the generation of goods
and/or services.

Overview
Operations Management plans for, and creates the
competitive advantages that all businesses need
for fueling profitable growth. As a result, OM is
the most critical of the business functions.
Studying OM means studying modern planning,
decision-making and management methods in all
functional areas of an organization, including
strategic and tactical planning, products and services
development, product and project management,
process and supply chain management, and more.

Why Study OM?

I. Operations Management is one of the three
major functions of any organizationand
they are integrally related.
All firms market (sell) , finance (account), and produce (operate)
MARKETING

The
Strategic
THE
Triad
STRATEGIC
PRODUCTION

TRIAD

FINANCE

Why Study OM?

II. Operations Management shows

us how goods and services are
generated. Consequently, it is
the

foundation of all business!

Why Study OM?

III. Operations Management shows us what

OM managers do. This enables us to learn
the skills, techniques, and models needed
to practice 21st century management, and
to also explore the lucrative career opportunities in OM.

Why Study OM?

IV. Operations Management represents as
much as 70% of the operating budget
of most firms due to:
Manufacturing activity
Warehousing
Distribution
Inventories
Research and Development

Maintenance
Facilities and Equipment
Worker training
Cost and Quality Control
Planning and Scheduling

Why Study OM?

V. Operations Management, by virtue of its
huge collective budget, provides a major
opportunity for the firm to improve its
profitability.
In fact, OM has become the last resort
for most firms that have exhausted the
potential of marketing, finance, and
general management.

Why Study OM?

VI. About 40% of all jobs in the United States
are in Operations Management.
Exposure to the following disciplines will
enhance ones job prospects:

Operations research
Statistics
Information systems
Economics
Logistics / Transportation

Mathematics
Accounting / Finance
Computer science
Engineering
Manufacturing

What OM Managers Do

Supervise skilled trade

workers & technicians.
Manage the production
and technical operations.
Integrate new technology
into manufacturing and
service processes.

What OM Managers Do

Develop, monitor, and

update measures of
efficiency.
Develop, monitor, and
change operating plans
and schedules.
Control costs and quality.

What OM Managers Do

Evaluate and improve the

existing operating system
in terms of productivity and
customer responsiveness.
Translate improved operating
systems into competitive advantage in the marketplace.

OM Necessary Skills

Keen understanding of people and processes.

Ability to solve problems in multi-disciplinary
teams.
Strong leadership/coordinating ability.
Strong analytical and problem-solving skills.
Strong interpersonal communication skills.
Strong background in mathematics.
Strong background in computer programming.
Proficiency in one or more foreign languages.
Graduate degree in the field or a related field.

Exciting New Trends in OM

CAUSES

FUTURE

Low cost, reliable

global
communication
and transport
networks

Global Focus

Cost of capital
puts pressure
on the reduction
of inventory
investment

Just-in-Time
Shipments

Exciting New Trends in OM

CAUSES

Quality emphasis
requires that
suppliers be
engaged in
product
improvement

Shorter product life

cycles, computer-aided
design, international
collaboration and
rapid communication

FUTURE

Supply Chain
Partners

Rapid Product
Development

Exciting New Trends in OM

CAUSES

FUTURE

Affluence and worldwide

markets.
Increasingly flexible
production processes.

Mass
Customization

Changing socio-culture
milieu.
An increasingly
knowledge and
information based
society.

Empowered
Employees,
Teams, and Lean
Production

Career Possibilities
Business Executive
Blue-Collar Supervisor
Construction Manager
Production Manager
Operations Manager
Information System
Manager
Materials Manager
Project Manager
Customer Service Mgr
Defense Analyst

Purchasing Agent
Inventory Analyst
Cost Estimator
Systems Analyst
Industrial Engineer
Quality Control Mgr
Time & Motion Analyst
Operations Scheduler
Operations Planner
Process Improvement
Manager

Career Possibilities
In corporations, OM managers are responsible for developing
new products and services, the strategic and tactical plans,
and the execution of, and realization of the plans.
Demand for OM concentrators is particularly high in
financial services, IT, manufacturing, non-profit,
government, education, and health care.
Entrepreneurs will find OM knowledge pivotal.
The advancement opportunities are superior and may lead
all the way to the organizations senior leadership.

The Ten Critical Decisions

OPERATIONS MANAGEMENT

1. SERVICE AND PRODUCT DESIGN

What goods or services should we offer?
How should we design these products?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

2. QUALITY MANAGEMENT
Who is responsible for quality?
How do we define the quality we want
in our services and products?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

3. PROCESS AND CAPACITY DESIGN

What processes will these products require
and in what order?
What equipment and technology is necessary
for these processes?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

4. LOCATION
Where should we put the facility?
On what criteria should we base the
location decision?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

5. LAYOUT DESIGN
How should we arrange the facility?
How large must the facility be to meet
our plan?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

6. HUMAN RESOURCES & JOB DESIGN

How do we provide a reasonable work
environment?
How much can we expect our employees
to produce?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

7. SUPPLY CHAIN MANAGEMENT

Should we manufacture or buy a particular
component or product?
Who are our good suppliers and how many
should we have?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

8. INVENTORY CONTROL AND

JUST-in-TIME ( JIT )
How much inventory of each item should
we have?
When do we reorder or manufacture?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

9. INTERMEDIATE, SHORT-TERM, AND

PROJECT SCHEDULING
Is subcontracting or outsourcing production
a good idea?
Are we better off keeping people on the payroll
during slowdowns?
Which job do we perform next?

The Ten Critical Decisions

OPERATIONS MANAGEMENT

10. MAINTENANCE
Who is responsible for maintenance?
When do we perform maintenance?
What are the effects of a maintenance
program on productivity and efficiency?

WHY AACSB ACCREDITORS

STRENGTHENED OM GUIDELINES

To sustain a career in business for

many years, a business graduate
needs an understanding of the
analytical foundations and tools
that are important for managerial
decision-making.

WHY AACSB ACCREDITORS

STRENGTHENED OM GUIDELINES

The explosive growth of information

technology applications is being driven by
management science-based models such as
decision analysis, scenario generation,
simulation, and optimization . *

OPERATIONS MANAGEMENT

WHY AACSB ACCREDITORS

STRENGTHENED OM GUIDELINES

Since management science techniques

are driving operations, supply chains,
and e-commerce, they constitute a
major driver of the entire economy.

OPERATIONS
MANAGEMENT
A Brief History

Applied Management Science for Decision Making, 1e 2012 Pearson Prentice-Hall, Inc.

Philip A. Vaccaro, PhD

1776

Adam Smith develops the concept

of specialization of labor wherein
the production process is broken
down into discrete stages allowing
specially-designed machines or
narrowly-trained workers to perform
each step with the least material
waste and the maximum productivity.

1900

A Philadelphia engineer named

Frederick W. Taylor publishes

The Principles of Scientific

Management , a guide to
increasing the efficiency of
factory workers.
His methods, known as
Taylorism, dominate industrial
work through much of the 20th
century, from automobile
plants to McDonalds.

1900

Frederick Taylor believed there were

natural laws governing production systems.
Once these laws were identified through
experimentation and observation, the best
way to perform any job or to produce any
product could be found.
He also called for separation of responsibilities
between floor workers and managers.
The latter would develop processes, jobs, work
methods, and select, train, plan, coordinate,
and control.

1940

Researchers in Britain and the

United States build mathematical
models of North American shipping
lanes. Their goal: to find an optimized
approach for getting convoys safely
past Nazi submarines.
The result is operations research, a
mathematics discipline that now runs
the logistics and operations of the
modern world.

1950s

W. Edwards Deming begins teaching statistical

management in Japan. His thesis: Meticulous

Control of Quality also leads to lower costs.

His methods contribute to startling advances
in Japanese manufacturing which later spread
throughout the world.

1980s

W. Edward Deming and J.M. Juran stressed that..

Everyone is responsible for quality not just inspectors.
Product should be made right the first time to avoid rework.
Reliance on workers to make suggestionsnot experts.
Elimination of any activity or material that does not add
value to the product.

1970s

Manufacturing becomes
the second major
functional area of business
to utilize the computer.
Applications include
machine movement
control, equipment &
material monitoring,
and the continuous
adjustment of settings
and flow rates.

Early 21st Century

Database systems and all manufacturing equipment

and subsystems are integrated into a single system.
In theory, this computer-integrated manufacturing
system (CIM) would control and coordinate every
phase of production from initial customer order, to
custom-product design, inventory purchase orders,
tooling requirements, production schedules, tracking,
quality control monitoring, assembly of information
on productivity, profitability, and tool wear, as well
as shipping and billing.

Mission / Strategy Relationship

Corporate Mission and Goals
Corporate Strategy
External Factors

Product and Service Selections

Market Segment Selections
Competitive Advantage Factors
Policy Constraints

Internal Factors

Functional Strategies
Operations,
Marketing, Finance

Strategy Implementation
and
Performance Measurement

Data Input
and
Feedback

Functional Strategies

Corporate strategy dictates the individual

strategies of the firms three functional
units: marketing, finance, and operations.
The operations functional strategy should
identify tasks related to the planning, design, and operation of the production conversion system.

Operations Functional Strategy

It must delineate the tasks that the operations

function must do well in order to support and
achieve the corporate strategy.
Almost any operations task can be used to support a firms strategy but most firms can compete
very effectively by emphasizing one or two.
The operations functional strategy should be consistent with the marketing and finance strategies,
as well.

Operations Functional Strategy

The ten critical decisions of operations management

developed in chapter one provide an excellent checklist for identifying the particular tasks that an operations functional strategy must perform in supporting
and achieving the firms corporate strategy.

Operations Functional Strategy

Checklist

1. QUALITY
- customer expectations
- quality systems design
- quality measures and standards

2. PRODUCT
- customized
- standardized

Operations Functional Strategy

Checklist

3. SUPPLY CHAIN
- sole or multiple vendors
- type of distribution system

4. LABOR
- specialized skills
- multiple skills

Operations Functional Strategy

Checklist

5. MAINTENANCE
- as needed
- preventitive

6. LAYOUT
- assembly line
- work cells
- project

Operations Functional Strategy

Checklist
7. INVENTORY
- ordering policy
- stockage levels
- type of system

8. PROCESS
- scale of operation
- choice of technology
- in-house production
- outsourcing

Operations Functional Strategy

Checklist

9. SCHEDULING
- stable
- variable

10. LOCATION
- near supplier
- near customer

The Dynamics of Strategy

Strategies change over time due to two reasons:

1. changes within the organization.
2. changes in the environment.

FOR EXAMPLE, CHANGES IN TECHNOLOGY, PRODUCT, OR PROCESS AFFECT

A FIRMS STRENGTHS AND WEAKNESSES, AND THEREFORE ITS STRATEGY.

The Dynamics of Strategy

Sales + Revenues

Birth

Growth

Maturity
THE PRODUCT LIFE CYCLE

Decline

Change in Corporate & OM

Functional Strategies
STAGE

CORPORATE
STRATEGY

OPERATIONS
STRATEGY

Birth

INCREASE MARKET
SHARE, R+D, ENGRG

FREQUENT PRODUCT
AND PROCESS DESIGN
CHANGES, QUALITY
FOCUS, SHORT
PRODUCTION RUNS

Growth

STRENGTHEN HOLD ON
MARKET SEGMENT VIA
PRICING AND QUALITY
IMAGE

MORE PRODUCT OPTIONS

PRODUCT AND PROCESS
RELIABILITY
ENHANCE DISTRIBUTION
INCREASE CAPACITY

Maturity

DEFEND MARKET SHARE

CUT COSTS

PRODUCT STANDARDIZATION
MINOR PRODUCT CHANGES
LONG PRODUCTION RUNS
INCREASE PROCESS STABILITY

Decline

COST CONTROL EVEN

MORE CRITICAL

REDUCE CAPACITY
ELIMINATE POOR PROFIT MAKES + MODELS
COST MINIMIZATION
LITTLE PRODUCT DIFFERENTIATION

INTRODUCTION TO
OPERATIONS MANAGEMENT

Applied Management Science for Decision Making, 1e 2012 Pearson Prentice-Hall, Inc.

Philip A. Vaccaro , PhD

OPERATIONS and LOGISTICS

MANAGEMENT

EPILOGUE
Applied Management Science for Decision Making, 1e 2012 Pearson Prentice-Hall, Inc.

Philip A. Vaccaro , PhD

What You Have Seen

Decision Theory
Basic Simulation
Queuing Theory
Manufacturing Processes

What You Have Seen

Service Processes

Transportation Algorithm
Line Balancing
Work Measurement
Time Standards

What You Have Seen

Learning Curve
Just-in-Time Systems
Inventory Control
Short-term Scheduling

What You Have Seen

Assignment Algorithm
Project Management
Linear Programming

What You Have Not Seen

Decoupling Theory
Outsourcing / Offshoring
Telecommunications
Yield Management

What You Have Not Seen

Data Envelopment Analysis

Data Mining
Internet Service Design
Environmental Management

What You Have Not Seen

Process Opportunities
Experiential Blueprinting
Sensitivity Analysis

What You Have Not Seen

Minimal Spanning Trees

Maximal Flow Technique
Shortest Route Technique
Stochastic Inventory Control

What You Have Not Seen

Advanced Transportation Theory

Reliability Theory
Product Development / Design
Artificial Intelligence
Agile Manufacturing

What You Have Not Seen

Data Base Management

Quality Control
Game Theory
Markov Processes
Project Budgeting

What You Have Not Seen

Project Crashing
Resource Leveling
Duality
Goal Programming
Integer Programming

What You Have Not Seen

Dynamic Programming
Optimization Theory
Quantitative EXCEL programming

What You Have Not Seen

Survey Information
Utility Theory
Complex Simulation
Service Systems Theory

What You Have Not Seen

Global Operations
Logistics
Supply Chain Management
E-commerce

What You Have Not Seen

Maintenance & Reliability Theory

Mathematical Modeling
Materials Requirements Planning

What You Have Not Seen

Decision Support Systems ( DSS )

Forecasting Methods and Models
Capacitated Transhipment Models

What You Have Not Seen

Traveling Salesman Network

Enterprise Resource Systems
Ergonomics
.and so on, and so on !

Solutions to the Dilemma

APPLY YOUR
DEGREE CREDITS
TOWARD A
2nd DEGREE
IN
ODS or MIS

Solutions to the Dilemma

Earn an MBA or MS
in:
- Decision Sciences
- Operations Research

- Materials Management
- Transportation
- Management Science

- Operations Management
- Decision Support Systems
- Logistics
- Industrial engineering

Solutions to the Dilemma

Earn a certificate or certification in:

Supply chain management

Quality control
Integrated resource management
Manufacturing management
..and many more !

Operations and Logistics

Management
Thank you !
Come again !

Applied Management Science for Decision Making, 1e 2012 Pearson Prentice-Hall, Inc.

Philip A. Vaccaro , PhD