Subject:

Operations Management

Chapter I: Overview of Operations Management and Productivity

Overview and Concepts of Operations Management, Heritage of Operations Management. Operations in Service Sector, Concept of Productivity and Variables and its measurement. Objectives of production / operation management

 Production
Creation of goods and services

Operations Management

Operations management
Set of Activities that create value in the form of goods & services through the transformation of

inputs to outputs
Operations Management is:
The management of systems or processess that create goods and /or provide services

Operations Management Affects,

Companies ability to compete Nations ability to compete internationally

Organizations
Three basic functions

Operations

Finance

Marketing

Transformation
Value Added
INPUT
Land Labor Capital Information

OUTPUT
TRANSFORMATION Goods Services

Feedback
Control

Feedback

Feedback

Operations Interfaces
Industrial Engineering

Maintenance

MIS

Distribution

Operations

Public Relations

Purchasing

Personnel

Accounting

Transformations in different forms

Physical -- manufacturing Location- - transportation

Exchange -- retailing
Storage -- warehousing Physiological -- health care Informational -- telecommunications

Operation Functions in a Bank

Commercial Bank

Operations
Teller Scheduling Check Clearing Collection Transaction Processing Facilities design/layout Vault operation Maintenance Security

Finance
Investment Securities Real Estate

Marketing
Loans
Commercial Industrial Financial Personal Mortgage

Accounting
Auditing

Trust Department

Operations Functions in a Airline

Airline

Operations
Ground Support Equipment Maintenance Ground Operations Facility maintenance Catering Flight operations Crew Scheduling Flying Communications Dispatching

Finance/Accounting
Accounting Accounts payable Accounts Receivable General Ledger Finance Cash Control International exchange

Marketing
Traffic Administration
Reservation Schedules Tariffs(pricing) Sales Advertising

Manufacturing
Operations
Facility construction & maintenance Production & Inventory Control Scheduling, material control Quality assurance & control Supply-chain management Manufacturing Tooling, fabrication, assembly design. Product development & design Detailed product specifications Industrial engineering Efficient use of machines, space and personal Process Analysis Development & installation of production tools and equipment

Finance/Accounting
Disbursement/Credits Accounts payable Accounts Receivable General Ledger Fund Management Money Market International exchange Capital requirements Stock issue Bond issue & recall

Marketing
Sales Promotion
Sales Advertising Market Research

Input Process - Output

What do Operations Managers do?

What are operations jobs? and Where?

Heritage of Operations Management

Heritage of Operations Management Contd

Division of labor (Adam Smith 1776 and Charles Babbage 1852) Standardized parts (Whitney 1800)

Scientific Management (Taylor 1881)

Coordinated assembly line (Ford/Sorenson/Avery 1913)

Gantt charts (Gantt 1916)

Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950) Computer (Atanasoff 1938) CPM/PERT (DuPont 1957) Eli Whitney Frank and Lillian Gillbreth

F. W. Taylor

1995 Corel Corp.

The Heritage of Operations Management Contd

Material requirements planning (Orlicky 1960)

Computer aided design (CAD 1970)

Flexible manufacturing system (FMS 1975) Baldrige Quality Awards (1980)

Computer integrated manufacturing (1990)

Globalization(1992) Internet (1995)
Make them all alike! Edward Deming

1995 Corel Corp.

Henry Ford

Types of Operations
Operations
Goods Producing Storage/Transportation

Examples
Farming, mining, construction, manufacturing, power generation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Retailing, wholesaling, banking, renting, leasing, library, loans Films, radio and television, concerts, recording Newspapers, radio and television newscasts, telephone, satellites

Exchange

Entertainment
Communication

Definitions of Services
Services are deeds, processes, and performances - Valarie A. Zeithaml and Mary Jo Bitner A service is an activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between customer and service employees and / or physical resources or goods and / or systems of the service provider, which are provided as solutions to customer problems. - Christian Gronroos

Definition of Service Firms

Service enterprises are organizations that facilitate the production and distribution of goods, support other firms in meeting their goals, and add value to our personal lives. - James Fitzsimmons

Characteristics of Services

Intangibility

Heterogeneity

Simultaneous Production and Consumption

Perishability

Differences between Goods & Services

Usually Intangible Produced and consumed simultaneously Unique Customer interaction Inconsistent product definition Knowledge based Dispersed

Differences between Goods & Services

Attribute of Goods (Tangible)
Product can be resold Inventoried Measurable Quality Distinction Production, Selling Transportable Site of facility Easy to automate Revenue from tangible product

Attributes of Services (Intangible)

Reselling is Unusual Most can not be Extremely difficult Selling is part of service Provider Customer contact Difficult Revenue from intangible product

Goods
Automobile

Services

Computer
Installed Carpet Fast food meal Restaurant meal/ Auto repair Hospital care Advertising agency/Investment management

Teaching/Consulting Services
Counseling

100

75

50

25

25

50

75

100

Goods and Services

Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counseling
100%
|

75
|

50
|

25
|

0
|

25
|

50
|

75
|

100%
|

Percent of Product that is a Good

Percent of Product that is a Service

Emerging Challenges in OM
From
Local or National focus Batch shipments

To
Global Focus Just in Time

Low bid purchasing

Lengthy product development Standard products Job specialization

Supply chain partnering

Rapid product development Mass customization Empowered employees, Teams

Concept of Productivity
Productivity is the ratio of outputs (goods or services) divided by the inputs (resources, such as labor and capital) Operations Managers job is to enhance this ration of outputs to inputs.
Reducing inputs while keeping output constant
OR

Increasing output while keeping inputs constant

Thank You