6.Introduction to OM

8/8/2019 6.Introduction to OM

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Operation Management

Overview

What is Operations Management?

The business function responsible for

planning,coordinating, and controlling

the resourcesneeded to produce a

companys products and services

Operation Management Scope Operations strategy

Production/Service process

Production/Service Technology

Quality management

Project Management

Supply Chain Management

Inventory Management

Lean Production


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Where is OM?

What is Operation?Thebusi ss functi n t

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Operations in services:

Health careInputs Processes Outputs

Doctors, nurses Examination Healthypatients

Hospital Surgery

Medi cal Supp lies Monitoring

Equipment Medication

Laboratories Therapy

Question: What are Inputs, Processes and Outputs in education?


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Operations are everywhere !

Operations ExamplesGoods

producing

Farming, mining, construction

Storage/

transportation

Warehousing, trucking, mail, taxis,

buses, hotels

Exchange Trade, retailing, wholesaling, renting,

leasing, loans

Entertainment Radio, movies, TV, concerts, recording

Communication Newspapers, journals, radio, TV,

telephones, satellite

Marketing-OM-Finance should

work together

Operations

FinanceMarketing

Accounting

Industrial

Engineering

Operations

Maintenance

Public

Relations

PersonnelPurchasing

Distribution

Manufacturing vs. Service Operations

Production of goods

Tangible products

Automobiles,Refrigerators,Aircrafts, Coats, Books, Sodas

Services

Repairs, Improvements, Transportation, Regulation

Regulatory bodies:Government, Judicial system, FAA, FDA

Entertainment services: Theaters, Sport activities

Exchange services: Wholesale/retail

Appraisal services: Valuation, House appraisal

Security services: Police force, Army

Financial services: Banks

Education: Universities,K-12 schools


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Manufacturing vs. Services

Characteristic Manufacturing ServiceOutput Tangible Intangible

Customer contact Low High

Uniformity of output High Low

Labor content Low High

Uniformity of input High Low

Measurement of productivity Easy Difficult

Opportunity to correct qualityproblems

Easy Difficult

Steel productionAutomobile fabrication

Home remodelingRetail sales

Auto RepairAppliance

repair

Maid ServiceManual car wash

TeachingLawn mowing

High percentage goods Low percentage goods

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ProjectConstruction of the aircraft carrier USS Nimitz was a huge project that

took almost 10 years to complete.

Batch ProductionAt Martin Guitars bindings on the guitar frame are installed

by hand and are wrapped with a cloth webbing until glue isdried.

Mass ProductionHere in a clean room a worker performs quality

checks on a com puter assembly line.

Continuous ProductionA paper manufacturer produces a

continuous sheet paper from woo d pulpslurry, which is mixed, pressed, dried, and

wound onto reels.

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Professional ServiceA doctor provides personal service to each patient based on

extensive training in medicine.

Service ShopAlthough a lecture may be prepared in advance, its

delivery is affected by students in each class.

Mass ServiceA retail store provides a standard array of

products from which customers may choose.

Service FactoryElectricity is a commodity available

continuously to cu stomers.


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IV.Continuous

Flow

III.Assembly

Line

II.Batch

I.Job

Shop

LowVolume

One of a

Kind

MultipleProducts,

Low

Volume

FewMajor

Products,

HigherVolume

HighVolume,

High

Standard-ization

Commercial

Printer

Tailor and Boutique

Heavy

Equipment

Coffee Shop

Automobile

Assembly

Burger King

Sugar

Refinery

Flexibility (High)

Unit Cost (High)

Flexibility (Low)

Unit Cost (Low)

Source:Modified fromRobertHayes andStevenWheelwright, Restoring Our Competitive Edge: Competing through Manufacturing(New

York:John Wiley& Sons, 1984). p. 209. 13

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Four Steps for Strategy

Formulation Defining a primary task

What is the firm in the business of doing?

Assessing core competencies

What does the firm do better than anyone else?

Determining order winners and order qualifiers

What wins the order? What qualifies an i tem to be considered for purchase?

Positioning the firm

How will the firm compete?

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Competitive Priorities Cost

Quality

Flexibility

Speed

Service

Technology


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Quality Management

Quality Management is the processes thatinsure the project will meet the needs via:

Quality Planning, Quality Assurance, andQuality Control

Clearly Defined Quality Performance Standards

How those Quality and Performance Standards are

measured and satisfied

How Testing and Quality Assurance Processes will

ensure standards are satisfied

Continuous ongoing quality control

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Operations Strategy: Quality

What types of systems will be set up to

ensure quality?

How will quality awareness be

maintained?

How will quality efforts be evaluated?

How will customer perceptions of quality

be determined?

How will decisions in other functional

areas affect qual ity?

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Strategic Decisions in

Operations

Products

Services Process

and

Technology

Capacity

Human

Resources Quality

Facilities Sourcing Operating

Systems


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Production Strategy:

Processes and technology

Project one-at-a-time production of a product to customerorder

Batch Production systems process many different j obs at the same time

in groups (or batches)

Mass Production large volumes of a standard product for a mass

market

Continuous Production used for very high volume commodity products

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Operations Strategy: Human

Resources What are the skill levels and degree of autonomy

required to operate production system?

What are the training requirements and selectioncriteria?

What are the policies on performance evaluations,

compensation, and incentives?

Will workers be salaried, paid an hourly rate, or

paid a piece rate?

Will profit sharing be allowed, and if so, on whatcriteria?

Simple Product Supply ChainSimple Product Supply Chain

Supply Ch

i

: A sequence of activities

And organizations involved in producing

And delivering a good or service


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ValueValue--AddedAdded

The difference between the cost of inputs

and the value or price of outputs.

SCM and Value added

Responsibilities of Operations

Management Planning Capacity, utilization

Location

Choosing products orservices

Make or buy

Layout

Projects

Scheduling

Market share

Plan for risk reduction,plan B?

Forecasting

S UP PLY S IDE DEMAND S IDE

Controll ing Inventory Quality Costs

Organization

Degree of standardization Subcontracting Process selection

Staff ing

Hiring/lay off Use of overtime Incentive plans

In a nutshell, the challenge is

Matching the Supply with Demand


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Supply Does Not Naturally Match

Demand

Inventory results from a mismatch between supply and demand

Mismatch can take one of the following two forms Supplywaits for Demand

Inventory = Finished goods and resources

Demand waits for Supply

Inventory is negative or said to be backordered in manufacturing

Inventory = Waiting customers in services

Mismatch happens because

the demand varies

the capacity is rigid and finite.

If the capacity is infinite, products (or services) can be provided at

an infinite rate and instantaneously as the demand happens.Then there is no mismatch.

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Key

PerformanceIndicators

Source:

Robert Kaplan and David

Norton,Strategy Maps:

Converting Intangible

Assets into Tangible

Outcomes (Boston:

Harvard Business School

Press, 2004), Figure 3-2,

p. 67

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Balanced Scorecard

Radar Chart

Dashboard


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Measuring Productivity

Productivity is a measure of how efficiently inputs areconverted to outputs

Productivity = output/input Total Productivity Measure

Productivity relative to all inputs

Partial Productivity MeasureProductivity relative to a single input(e.g., labor hours)

Multifactor Productivity MeasureProductivity relative to a subgroup of inputs(e.g., labor

and materials)

Virtual Factory Defined

A virtual factory can be defined as amanufacturing operation where activities are

carried out not in one central plant, but in

multiple locations by suppliers and partner

firms as part of a strategic alliance.

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Issues and Trends in

Operations Global Markets,Global Sourcing, and

Global Operations

Virtual Companies

Greater Choice, More Individualism

Emphasis on Service

Speed and Flexibility


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Issues and Trends in

Operations (cont.)

Supply Chains Collaborative Commerce

Technological Advances

Knowledge and Ability to Learn

Environmental and Social Responsibilities

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Characteristic

20th-Century

Corporation

21st-Century

Corporation

Changing Corporation

Operations

Products

Reach

Financials

Inventories

Strategy

Vertical integration

Mass production

Domestic

Quarter ly

Mon ths Top-down

Virtual integration

Mass customization

Global

Real- time

Hours

Bottom-up

Source:Reprinted from John Byrne, Management by Web,Business Week(August 28, 2000), p. 87by special permission, copyright 2000 by The McGraw-Hill Companies, Inc.

Business Information Flow


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Example:

What will happen if we develop / purchase technology X?

Better technologies are always (?) nice to have, but will they pay for themselves?

OM provides tools to evaluate system designs before implementation

Responsiveness

Low

High

Redesign

process

Current frontier

In the industry

Labor Productivity(e.g. $/call)

Low labor

productivity

High labor

productivity

New frontier

Evaluate Redesigns/New Technologies

Responsiveness

Low

High

Eliminate

inefficiencies

Current frontier

In the industry

Labor Productivity(e.g. $/call)

Low labor

productivity

High labor

productivity

CompetitorA

CompetitorC

CompetitorB

Example:

Benchmarking shows the pattern above

Do not just manage the current system Change it!

OM Provides tools to identify and eliminate inefficiencies

Overcome Inefficiencies

Trends in OM Service sector growing to

80% of non-farm jobs-See Figure 1-4

Global competitiveness

Demands for higher

quality

Huge technology

changes

Time based competition

Work force diversity


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Lean Production

Lean Productioncan be defined as anintegrated set of activities designed toachieve high-volume production usingminimal inventories (raw materials, workin process, and finished goods)

Lean Productionalso involves theelimination of waste in production effort

Lean Productionalso involves the timingof production resources (i.e., parts arriveat the next workstation just in time)

Thank you

6.Introduction to OM

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