Post on 15-Jan-2015
description
Introduction to Operations Management
OM Defined
Operations management:
The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services
Simplified Organizational Chart
Information FlowsTo & From Operations
The Role of OM in the Business
Transformation Process
Physical: as in manufacturing operationsLocational: as in transportation operationsExchange: as in retail operationsPhysiological: as in health carePsychological: as in entertainmentInformational: as in communication
Service - Manufacturing
Services:• Intangible product• No inventories• High customer
contact• Short response time• Labor intensive
Manufacturing:• Tangible product• Can be inventoried• Low customer
contact• Capital intensive• Long response time
Service-Manufacturing Continuum
What Operations Managers Do
Plan - Organize - Staff - Lead - Control
OM Decisions
• Strategic decisions:– Decisions that set the direction for the
entire company.– Broad in scope & long-term in nature
• Tactical decisions:– Short-term & specific in nature– Bound by the strategic decisions
The Critical Decisions
• Quality management– Who is responsible for quality?– How do we define quality?
• Service and product design– What product or service should we offer?– How should we design these products and
services?
The Critical Decisions - Continued
• Process and capacity design– What processes will these products require
and in what order?– What equipment and technology is necessary
for these processes?
• Location– Where should we put the facility– On what criteria should we base this location
decision?
The Critical Decisions - Continued
• Layout design– How should we arrange the facility?– How large a facility is required?
• Human resources and job design– How do we provide a reasonable work
environment?– How much can we expect our employees
to produce?
The Critical Decisions - Continued
• Supply chain management– Should we make or buy this item?– Who are our good suppliers and how many
should we have?
• Inventory, material requirements planning, – How much inventory of each item should we
have?– When do we re-order?
Example
Major Historical Developments
Industrial Revolution Late 1700sScientific Management Early 1900sHuman Relations Movement 1930s to 1960sManagement Science Mid-1900sComputer Age 1970sJust-In-Time Systems 1980sTotal Quality Management (TQM) 1980sReengineering 1980sFlexibility 1990sTime-based Competition 1990sSupply Chain Management 1990sGlobal Competition 1990sEnvironmental Issues 1990sElectronic Commerce Late 1990s – Early 21st Century
Industrial Revolution Late 1700s
• Replaced traditional craft methods
• Substituted machine power for labor
• Major contributions:– James Watt (1764): steam engine– Adam Smith (1776): division of labor– Eli Whitney (1790): interchangeable parts
Scientific ManagementEarly 1900s
• Separated ‘planning’ from ‘doing’
• Management’s job was to discover worker’s physical limits through measurement, analysis & observation
• Major contributors:– Fredrick Taylor: stopwatch time studies– Henry Ford: moving assembly line
Human Relations Movement1930s to 1960s
• Recognition that factors other than money contribute to worker productivity
• Major contributions:– Understanding of the Hawthorn effect:
Study of Western Electric plant in Hawthorn, Illinois intended to study impact of environmental factors (light & heat) on productivity, but found workers responded to management’s attention regardless of environmental changes
– Job enlargement– Job enrichment
Management ScienceMid-1900s
• Developed new quantitative techniques for common OM problems:– Major contributions include: inventory
modeling, linear programming, project management, forecasting, statistical sampling, & quality control techniques
Computer Age1970s
• Provided the tool necessary to support the widespread use of Management Science’s quantitative techniques – the ability to process huge amounts of data quickly & relatively cheaply
• Major contributions include the development of Material Requirements Planning (MRP) systems for production control
Developments: 1980sJapanese Influence
• Just-In-Time (JIT):– Techniques designed to achieve high-volume
production using coordinated material flows, continuous improvement, & elimination of waste
• Total Quality Management (TQM):– Techniques designed to achieve high levels of
product quality through shared responsibility & by eliminating the root causes of product defects
• Business Process Reengineering:– ‘Clean sheet’ redesign of work processes to
increase efficiency, improve quality & reduce costs
Developments: 1990s
• Flexibility:– Offer a greater variety of product choices on a
mass scale (mass customization)
• Time-based competition:– Developing new product designs & delivering
customer orders more quickly than competitors
• Supply Chain Management– Cooperating with suppliers & customers to reduce
overall costs of the supply chain & increase responsiveness to customers
Developments: 1990s
• Global competition:– International trade agreements open new markets for
expansion & lower barriers to the entry of foreign competitors (e.g.: NAFTA & GATT)
– Creates the need for decision-making tools for facility location, compliance with with local regulations, tailoring product offerings to local tastes, managing distribution networks, …
• Environmental issues:– Pressure from consumers & regulators to reduce, reuse
& recycle solid wastes & discharges to air & water
Electronic Commerce
• Internet & related technologies enable new methods of business transactions:– E-tailing creates a new outlet for retail goods &
services with global access and 24-7 availability– Internet provides a cheap network for coordinating
supply chain management information
• Developing influence of broadband & wireless
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Trends in Business
• Major trends– The Internet, e-commerce, e-business– Management technology– Globalization– Management of supply chains– Outsourcing– Agility– Ethical behavior
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Management Technology
• Technology: The application of scientific discoveries to the development and improvement of goods and services
• Product and service technology
• Process technology
• Information technology
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Suppliers’ Suppliers
DirectSuppliers Producer Distributor Final
Consumer
Simple Product Supply ChainSimple Product Supply Chain
Supply Chain: A sequence of activitiesAnd organizations involved in producingAnd delivering a good or service
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Other Important Trends
• Working with fewer resources
• Revenue management
• Process analysis and improvement
• Increased regulation and product liability
• Lean production