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Page 1: McGraw-Hill/Irwin © The McGraw-Hill Companies, All Rights Reserved BUSINESS PLUG-IN B16 Operations Management.

McGraw-Hill/Irwin © The McGraw-Hill Companies, All Rights Reserved

BUSINESS PLUG-IN B16

Operations Management

Page 2: McGraw-Hill/Irwin © The McGraw-Hill Companies, All Rights Reserved BUSINESS PLUG-IN B16 Operations Management.

B16-2

LEARNING OUTCOMES

1. Define the term operations management

2. Explain operations management role in business

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LEARNING OUTCOMES

3. Describe the correlation between operations management and information technology

4. Describe the five characteristics of competitive priorities

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OM FUNDAMENTALS

• Production - is the creation of goods and services using the factors of production

• Production management - describes all the activities managers do to help companies create goods

• Operations management (OM) - the management of systems or processes that convert or transform resources into goods and services

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OM FUNDAMENTALS

• Transformation process - the actual conversion of inputs to outputs

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OM FUNDAMENTALS

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OM FUNDAMENTALS

• Value-added - the term used to describe the difference between the cost of inputs and the value of price of outputs

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B16-8

OM IN BUSINESS

• How does an airline service organization’s OM team adds value?– Forecasting– Capacity planning– Scheduling– Managing inventory– Assuring quality– Motivating and training employees– Locating facilities

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IT’S ROLE IN OM

• Managers use IT to heavily influence OM decisions including :– What: What resources will be needed and in

what amounts?– When: When should the work be scheduled?– Where: Where will the work be performed?– How: How will the work be done?– Who: Who will perform the work?

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OM Strategic Business Systems

• Operations strategy addresses broad questions about using major resources to achieve corporate objectives

• Major long-term issues addressed in operations strategy include:– How big to make the facilities?– Where to locate the facilities?– When to build additional facilities?– What type of process(es) to install to make

the products?

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OM Strategic Business Systems

• Strategic planning - focuses on long range planning

• Strategic business units (SBUs) - consist of several stand-alone businesses

• Materials requirement planning (MRP) - use sales forecasts to make sure that needed parts and materials are available at the right time and place

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OM Strategic Business Systems

• Tactical planning - focuses on producing goods and services as efficiently as possible within the strategic plan

• Global inventory management system - provides the ability to locate, track, and predict the movement of every component or material anywhere upstream or downstream in the production process

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OM Strategic Business Systems

• Operational planning and control (OP&C) - deals with the day-to-day procedures for performing work, including scheduling, inventory, and process management– Inventory management and control

system– Transportation planning system– Distribution management system

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COMPETITIVE OM STRATEGY

• Five key competitive priorities which a company can add value to its OM decisions including:1. Cost2. Quality3. Delivery4. Flexibility5. Service

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COMPETITIVE OM STRATEGY

1. Cost: There can be only one lowest-cost producer, and that firm usually establishes the selling price in the market

2. Quality: Is divided into two categories product and process quality

– Six Sigma Quality– Malcolm Balridge National Quality Awards– ISO 900, ISO 14000– CMMI

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COMPETITIVE OM STRATEGY

3. Delivery: a firms ability to provide consistent and fast delivery

4. Flexibility: a firms ability to offer a wide variety of products

5. Service: high-quality customer service adds tremendous value to an ordinary product

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OM AND THE SUPPLY CHAIN

• Supply chain - consists of all parties involved, directly or indirectly, in the procurement of a product or raw material

• Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

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OM AND THE SUPPLY CHAIN

• Typical manufacturing supply chain

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OM AND THE SUPPLY CHAIN

• Typical service supply chain

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CLOSING CASE ONEHow Levi’s Got Its Jeans into Wal-Mart

1. How did Levi Strauss achieve business success through the use of supply chain management?

2. What might have happened to Levi’s if its top executives had not supported investments in SCM?

3. David Bergen, Levi’s CIO, put together a cross-functional team of key managers from IT, finance, and sales to transform Levi’s systems to meet Wal-Mart’s requirements. Analyze the relationships between these three business areas and OM. How can OM systems help support these three critical business areas?

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CLOSING CASE ONEHow Levi’s Got Its Jeans into Wal-Mart

4. Describe the five basic SCM components in reference to Wal-Mart’s business model

5. Explain RFID and provide an example of how Levi’s could use the technology to increase its business operations

6. Identify any security and ethical issues that might occur for a company doing business with Wal-Mart

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CLOSING CASE TWOThe Digital Hospital

1. Why would operations management be a critical component to a hospital?

2. How would a hospital use each of the three OM planning strategies to improve its operations?

3. How might a hospital use each of the five competitive priorities to increase value to its goods and services?


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