Operations

Management
Operations and Productivity
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Principles of Operations Management, 5e, and Operations
Management, 7e

1-1

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

What Is Operations Management?

Production is the creation of goods and

services
Operations management is the set of
activities that creates value in the form
of goods and services by transforming
inputs into outputs

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Organizing to Produce Goods and

Services

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Organizing to Produce Goods and

Services
Essential functions:
Marketing generates demand
Operations creates the product
Finance/accounting tracks organizational
performance, pays bills, collects money

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Organizational Functions
Marketing

Gets customers

Operations

creates product or service

Finance/Accounting
Obtains funds
Tracks money

1995 Corel Corp.

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Principles of Operations Management, 5e, and Operations
Management, 7e

1-5

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Functions - Bank
Commercial Bank
1984-1994
T/Maker Co.

Marketing

Teller
Scheduling

Finance/
Accounting

Operations

Transactions

Check
Clearing

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Principles of Operations Management, 5e, and Operations
Management, 7e

Processing

1-6

Security

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Functions - Airline

Airline

Marketing

Flight
Operations

1984-1994 T/Maker Co.

Finance/
Accounting

Operations

Ground
Support

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Principles of Operations Management, 5e, and Operations
Management, 7e

Facility
Maintenance
1-7

Catering

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Functions - Manufacturer

Manufacturing

Marketing

Manufacturing

Finance/
Accounting

Operations

Production
Control

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Principles of Operations Management, 5e, and Operations
Management, 7e

Quality
Control
1-8

Purchasing

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Why Study OM?

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Why Study OM?

OM is one of three major functions
(marketing, finance, and operations) of any
organization.
We want (and need) to know how goods and
services are produced.
We want to understand what operations
managers do.
OM is such a costly part of an organization.
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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

What Operations Managers Do

Plan - Organize - Staff - Lead - Control

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Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Ten Critical Decisions

Service, product design..
Quality management
Process, capacity design..
Location .
Layout design ..
Human resources, job design..
Supply-chain management
Inventory management .
Scheduling
Maintenance .
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Principles of Operations Management, 5e, and Operations
Management, 7e

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Ch. 5
Ch. 6, 6S
Ch. 7, 7S
Ch. 8
Ch. 9
Ch. 10, 10S
Ch. 11,11s
Ch. 12, 14, 16
Ch. 3, 13, 15
Ch. 17
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Where are the OM Jobs

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Where are the OM Jobs

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

The Heritage of Operations Management

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Significant Events in Operations

Management

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

New Challenges in OM
From
Local or national focus
Batch shipments
Low bid purchasing

To
Global focus
Just-in-time

Lengthy product
development

Rapid product
development,
alliances
Mass customization
Empowered
employees, teams

Supply chain
partnering

Standard products
Job specialization
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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Operations in the Service Sector

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Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Characteristics of Goods
Tangible product
Consistent product
definition
Production usually
separate from
consumption
Can be inventoried
Low customer
interaction
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Principles of Operations Management, 5e, and Operations
Management, 7e

1995 Corel Corp.

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Characteristics of Service

1995 Corel Corp.

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Principles of Operations Management, 5e, and Operations
Management, 7e

Intangible product
Produced & consumed at
same time
Often unique
High customer interaction
Inconsistent product
definition
Often knowledge-based
Frequently dispersed
1-20

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Goods Versus Services

Goods
Can be resold
Can be inventoried

Service
Reselling unusual
Difficult to
inventory
Quality difficult to
measure
Selling is part of
service

Some aspects of
quality measurable
Selling is distinct
from production
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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Goods Versus Services Continued

Goods

Service

Provider, not product

is transportable
Site of facility
important for
customer contact
Often difficult to
Often easy to
automate
automate
Revenue generated
Revenue generated
primarily from tangible
primarily from
product
intangible service.
Product is
transportable
Site of facility
important for cost

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Principles of Operations Management, 5e, and Operations
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Exciting New Challenges in Operations

Management

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Changing Challenges for the

Operations Manager
Past

Causes

Local or
national
focus
Batch (large)
shipments

Low-cost, reliable worldwide

communication and
transportation networks
Cost of capital puts pressure on
reducing investment in
inventory
Quality emphasis requires that
suppliers be engaged in product
improvement
Shorter life cycles, rapid
international communication,
computer-aided design, and
international collaboration

Low-bid
purchasing
Lengthy
product
development

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Principles of Operations Management, 5e, and Operations
Management, 7e

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Future
Global Focus
Just-in-time
shipments
Supply-chain
partners
Rapid product
development,
alliances,
collaborative
designs

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Changing Challenges for the

Operations Manager
Past
Standardized
products
Job
specialization
Low cost
focus

Causes

Future

Affluence and worldwide markets;

increasingly flexible production
processes
Changing sociocultural milieu.
Increasingly a knowledge and
information society.
Environmental issues, ISO 14000,
increasing disposal costs

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Principles of Operations Management, 5e, and Operations
Management, 7e

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Mass
customization
Empowered
employees,
teams, and lean
production
Environmentally
sensitive
production,
Green
manufacturing,
recycled
materials,
remanufacturing

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

The Productivity Challenge

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Productivity
Measure of process improvement
Represents output relative to input

Productivity

Units produced
= Input used

Only through productivity increases can our

standard of living improve

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Multi-Product Productivity

Productivity

Output
Labor + material + energy + capital + miscellaneous

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Measurement Problems
Quality may change while the quantity of
inputs and outputs remains constant
External elements may cause an increase or
decrease in productivity
Precise units of measure may be lacking

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Principles of Operations Management, 5e, and Operations
Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Key Variables for Improved Labor

Productivity
Basic education appropriate for the labor
force
Diet of the labor force
Social overhead that makes labor available
Maintaining and enhancing skills in the midst
of rapidly changing technology and
knowledge
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Management, 7e

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458