Chapter1 OM Introd,nkj
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Transcript of Chapter1 OM Introd,nkj
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Operations Management
The business function responsible for
planning , coordinating , and controlling the
resources needed to produce products and
services for a company
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Operations Management is:
A management function
An organizations core function
In every organization whether Service or
Manufacturing, profit or Not for profit
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Typical Organization Chart
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What is Role of OM? OM Transforms inputs to outputs
Inputs are resources such as Men, Material, and
Money Outputs are goods and services.
Helps to minimize wastage
Helps in value creation..
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OMs Transformation Process
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OMs Transformation Role
To add value
Increase product value at each stage
Value added is the net increase between output product
value and input material value
Provide an efficient transformation
Efficiency means performing activities well for least
possible cost
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Operations are everywhere !
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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
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OM at the core of Businesses
Three basic functions Operations/Production
Goods oriented (manufacturing and assembly) Service oriented (health care, transportation and retailing) Value-added (the essence of the operations functions)
Finance-Accounting Budgets (plan financial requirements) Provision of funds (the necessary funding of the operations)
Marketing Selling, Promoting Assessing customer wants and needs
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Organization
Finance Operations Marketing
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Manufacturing vs. Service Operations
Differences with respect to1. Customer contact2. Uniformity of input
3. Labor content of jobs4. Uniformity of output5. Measurement of productivity6. Production and delivery7. Quality assurance8. Amount of inventory
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On the other hand
Both use technology Both have quality, productivity, & response issues Both must forecast demand Both will have capacity, layout, and location issues Both have customers, suppliers, scheduling and
staffing issues
Manufacturing often provides services Services often provides tangible goods
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Responsibilities of Operations Management
Planning Capacity, utilization Location Choosing products or
services Make or buy Layout Projects Scheduling Market share Plan for risk reduction Forecasting
13SUPPLY SIDE DEMAND SIDE
Controlling Inventory Quality Costs
Organization Degree of standardization Subcontracting Process selection
Staffing Hiring/lay off Use of overtime Incentive plans
In a nutshell, thechallenge is
Matching the Supply
with Demand
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Supply Does Not Naturally MatchDemand
Inventory results from a mismatch between supply and demandMismatch can take one of the following two forms
Supply waits 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 rateand instantaneously as the demand happens. Then there is no mismatch.
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Types of Models Physical models (prototypes) Schematic models (Graphs, charts, pictures) Mathematical models, by application area
Statistical models Linear regression
Linear programming Queuing techniques
Inventory models EOQ model
Project management models Networks
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Types of Mathematical Models
Simulation models : to test a proposed idea Monte Carlo Simulation
Optimization models : to create an optimal idea Linear programming
Pattern recognition models : to recognize a pattern
Statistics, Forecasting, data mining
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OM Decisions
All organizations make decisions and follow asimilar path1. Strategic decisions
Strategic Decisions set the direction forthe entire company; they are broad inscope and long-term in nature
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OM Decisions
2. Tactical decision Tactical decisions: focus on specific day-
to-day issues like resource needs,schedules, & quantities to produce
They are very frequent Strategic decisions are less frequent Tactical and Strategic decisions must align
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OM Decisions
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Historical Development of OM
Industrial revolution Late 1700s Scientific management Early 1900s
Hawthorne Effect 1930s
Human relations movement 1930s- Management science 1940s- Computer age 1960s- Environmental Issues 1970s- JIT & TQM* 1980s-
*JIT= Just in Time, TQM= Total Quality Management
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Historical Development cont
Reengineering 1990- Global competition 1980- Flexibility 1990- Time-Based Competition 1990- Supply chain Management 1990- Electronic Commerce 2000- Outsourcing & flattening of world 2000-
For long-run success, companies must place much importance on their operations
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Business Information Flow
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OM Across the Organization
Most businesses are supported by the functionsof operations, marketing, and finance
The major functional areas must interact toachieve the organization goals
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OM Across theOrganization cont
Marketing is not fully able to meet customer needs if they do notunderstand what operations can produce
Finance cannot judge the need for capital investments if they do notunderstand operations concepts and needs
Information systems enables the information flow throughout theorganization Human resources must understand job requirements and worker
skills Accounting needs to consider inventory management, capacity
information, and labor standards
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Chapter 1 Highlights OM is the business function that is responsible for managing
and coordinating the resources needed to produce a companys products and services.
The role of OM is to transform organizational inputs intocompanys products or services outputs
OM is responsible for a wide range of decisions, ranging from
strategic to tactical.
Organizations can be divided into manufacturing and serviceorganizations, which differ in the tangibility of the product orservice
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Chapter 1 Highlights cont Many historical milestones have shaped OM. Some of these
are the Industrial Revolution, scientific management, thehuman relations movement, management science, and thecomputer age
OM is highly important function in todays dynamic businessenvironment. Among the trends with significant impact are
just-in-time, TQM, reengineering, flexibility, time-basedcompetition, SCM, global marketplace, and environmentalissues
OM works closely with all other business functions
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