Operations

Management
PUTRI DESIANI M. 2015.811.023
TANNIA WIDYA P. 2015.811.026
AFIFFA NAUVALI R. 2015.811.027
Operations Management

Production is the creation of goods and services

Operations management (OM) is the set of activities

that create value in the form of goods and services by
transforming inputs into outputs
 Forecasting
??
Process of predicting a future
event
Underlying basis of all
business decisions
(Production, Inventory,
Personnel, Facilities)

1. Economic Forecast
Address business cycle inflation rate, money supply, housing starts, etc.
2. Technological Forecast
Predict rate of technological progress
Types of Forecasts Impacts development of new products
3. Demand Forecast
Predict sales of existing products and services
Managing Quality

The totality of features and characteristics of a product or service

that bears on its ability to satisfy stated or implied needs -
American Society for Quality

User-based: better performance, more features

Manufacturing-based: conformance to standards
Product-based: specific and measurable attributes of the
product
 Managing Quality
COST OF QUALITY

Prevention costs - reducing the potential for defects

Total Total Cost
Cost
External Failure
Appraisal costs - evaluating products, parts, and
services
Internal Failure

Internal failure costs - producing defective parts or

Prevention
service before delivery
Appraisal
Quality Improvement
External failure costs - defects discovered after
delivery
Process Strategy

How to produce a product or provide a service that

Meets or exceeds customer requirements

Meets cost and managerial goals

Has long term effects on

Efficiency and production flexibility

Costs and quality
Process Strategy
Process Focus Repetitive Focus Product Focus Mass
Customization
Facilities are Facilities often Facilities are The rapid, low-cost
organized around organized as organized by production of goods
specific activities assembly lines product and service to
or processes satisfy increasingly
unique customer
desires
General purpose Characterized by High volume but Combines the
equipment and modules with low variety of flexibility of a
skilled personnel parts and products process focus
assemblies made with the efficiency
previously of a product focus
Typically high Less flexibility Typically high
costs and low than process- fixed cost but low
equipment focused facilities variable cost
utilization but more efficient
Location Strategies
Location decisions based on low cost require careful consideration. Once in place,
location-related costs are fixed in place and difficult to reduce. Determining optimal
facility location is a good investment.

Factors That Affect Location Decisions

Exchange rates and currency risks (Can have a significant impact on costs, Rates
change over time).
Costs
Tangible - easily measured costs such as utilities, labor, materials, taxes
Intangible - less easy to quantify and include education, public transportation,
community, quality-of-life
Proximity to markets
Proximity to suppliers
Proximity to competitors (clustering)
Layout Strategy

The objective of layout strategy is to develop an effective

and efficient layout that will meet the firms competitive
requirements

Layout Design Considerations

Higher utilization of space, equipment, and people
Improved flow of information, materials, or people
Improved employee morale and safer working conditions
Improved customer/client interaction
Flexibility
Supply-Chain Management

Supply chain management is to coordinate activities within the supply chain to

maximize the supply chains competitive advantage and benefits to the ultimate
consumer.

The coordination of all supply chain activities, starting with raw materials and ending
with a satisfied customer. Includes suppliers, manufacturers and/or service providers,
distributors, wholesalers, retailers, and final customer.

Farmer Syrup Bottler Distributor Retailer

producer
Supply-Chain Management
Supply chain strategies

Many Few suppliers Vertical integration Joint ventures Keiretsu networks Virtual
suppliers companies

Commonly Suppliers more Developing the ability to Cooperation A middle ground Rely on a
used for willing to participate produce goods or service without diluting between few variety of
commodity in JIT programs and previously purchased brand or suppliers and supplier
products contribute design conceding vertical integration relationships
and technological competitive to provide
expertise advantage services on
demand
Purchasing Cost of changing Can improve cost, quality, Supplier becomes Relationships
is typically suppliers is huge and inventory but requires part of the company may be short-
based on capital, managerial skills, coalition or long-term
price and demand

Suppliers Buyer forms longer Integration may be Often provide

compete term relationships forward, towards the financial support for
with one with fewer suppliers customer, or backward, suppliers through
another towards suppliers ownership or loans
Inventory Management
The objective of inventory management is to strike a balance
between inventory investment and customer service

Functions of Inventory
Types of Inventory
To provide a selection of goods for
Raw material
anticipated demand and to separate the
Work-in-process (WIP) firm from fluctuations in demand
Maintenance/repair/operating (MRO) To decouple or separate various parts of
the production process
Finished goods
To take advantage of quantity discounts
To hedge against inflation
Thank you