OPERATIONS MANAGEMENT Introduction Importance Scope Trends Careers Course Overview Applied...

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT

IntroductionIntroduction ImportanceImportance ScopeScope TrendsTrends CareersCareers Course OverviewCourse Overview

Applied Management Science for Decision Making, 1e ©2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro, PhD

Operations Operations ManagementManagement

The competent and adept management

of complex systems in the service, non- profit, manufacturing, and government sectors via the effective and efficient utilization of time, labor, money, and materials in the generation of goods and/or services.

DEFINITION


OverviewOverview

Operations Management plans for, and creates thecompetitive advantagescompetitive advantages that all businesses need for fueling profitable growth. As a result, OM is

the most critical of the business functions.Studying OM means studying modern planning, decision-making and management methods in all

functional areas of an organization, including strategic and tactical planning, products and services

development, product and project management, process and supply chain management, and more.

Why Study OM?Why Study OM?

MARKETINGMARKETING

FINANCEFINANCE

All firms market (sell) , finance (account), and produce (operate)

TheStrategic

Triad

I. Operations Management is one of the three major functions of any organization……and they are integrally related.

THESTRATEGIC

TRIAD

PRODUCTIONPRODUCTION


II. Operations Management shows us how goods and services are generated. Consequently, it is the………

foundation of all business!foundation of all business!


III. Operations Management shows us what

OM managers do. This enables us to learn the skills, techniques, and models needed to practice 21st century management, and to also explore the lucrative career opportunities in OM.


Manufacturing activity Warehousing Distribution Inventories Research and Development

Maintenance Facilities and Equipment Worker training Cost and Quality Control Planning and Scheduling

IV. Operations Management represents as much as 70% of the operating budget of most firms due to:


V. Operations Management, by virtue of its huge collective budget, provides a major opportunity for the firm to improve its profitability.

In fact, OM has become the last resort for most firms that have exhausted the potential of marketing, finance, and general management.


VI. About 40% of allAbout 40% of all jobs in the United States jobs in the United States are in are in Operations ManagementOperations Management. .

Exposure to the following disciplines will Exposure to the following disciplines will enhance one’s job prospects:enhance one’s job prospects:

Operations research Statistics Information systems Economics Logistics / Transportation

Mathematics Accounting / Finance Computer science Engineering Manufacturing

What OM Managers DoWhat OM Managers Do

Supervise skilled trade workers & technicians.

Manage the production and technical operations.

Integrate new technology into manufacturing and service processes.


Develop, monitor, and update measures of efficiency.

Develop, monitor, and change operating plans and schedules.

Control costs and quality.


Evaluate and improve the existing operating system in terms of productivity and customer responsiveness.

Translate improved operating systems into competitive advantage in the marketplace.

OM Necessary SkillsOM Necessary Skills

Keen understanding of people and processes. Ability to solve problems in multi-disciplinary teams. Strong leadership/coordinating ability. Strong analytical and problem-solving skills. Strong interpersonal communication skills. Strong background in mathematics. Strong background in computer programming. Proficiency in one or more foreign languages. Graduate degree in the field or a related field.

Exciting New Trends in Exciting New Trends in OMOM

CAUSESCAUSES FUTUREFUTURE

Global FocusGlobal Focus

Just-in-TimeJust-in-TimeShipmentsShipments

Low cost, reliableglobal

communicationand transport

networks

Cost of capitalputs pressure

on the reductionof inventoryinvestment



Quality emphasisrequires thatsuppliers beengaged in

productimprovement

Shorter product lifecycles, computer-aideddesign, international

collaboration andrapid communication

Supply ChainSupply ChainPartnersPartners

Rapid ProductRapid ProductDevelopmentDevelopment



Affluence and worldwidemarkets.

Increasingly flexibleproduction processes.

Changing socio-culturemilieu.

An increasinglyknowledge and

information basedsociety.

MassMassCustomizationCustomization

EmpoweredEmpoweredEmployees,Employees,

Teams, and LeanTeams, and LeanProductionProduction

Career PossibilitiesCareer Possibilities

Business Executive Blue-Collar Supervisor Construction Manager Production Manager Operations Manager Information System Manager Materials Manager Project Manager Customer Service Mgr Defense Analyst

Purchasing Agent Inventory Analyst Cost Estimator Systems Analyst Industrial Engineer Quality Control Mgr Time & Motion Analyst Operations Scheduler Operations Planner Process Improvement Manager

Career Possibilities

In corporations, OM managers are responsible for developingnew products and services, the strategic and tactical plans,

and the execution of, and realization of the plans.

Demand for OM concentrators is particularly high in financial services, IT, manufacturing, non-profit,

government, education, and health care.

Entrepreneurs will find OM knowledge pivotal.

The advancement opportunities are superior and may leadall the way to the organization’s senior leadership.

The Ten Critical The Ten Critical DecisionsDecisions


1. SERVICE AND PRODUCT DESIGN

What goods or services should we offer?

How should we design these products?



2. QUALITY MANAGEMENT

Who is responsible for quality?

How do we define the quality we want in our services and products?



3. PROCESS AND CAPACITY DESIGN

What processes will these products require and in what order?

What equipment and technology is necessary for these processes?



4. LOCATION

Where should we put the facility?

On what criteria should we base the location decision?



5. LAYOUT DESIGN

How should we arrange the facility?

How large must the facility be to meet our plan?



6. HUMAN RESOURCES & JOB DESIGN

How do we provide a reasonable work environment?

How much can we expect our employees to produce?



7. SUPPLY CHAIN MANAGEMENT

Should we manufacture or buy a particular component or product?

Who are our good suppliers and how many should we have?



8. INVENTORY CONTROL AND JUST-in-TIME ( JIT )

How much inventory of each item should we have?

When do we reorder or manufacture?



9. INTERMEDIATE, SHORT-TERM, AND PROJECT SCHEDULING

Is subcontracting or outsourcing production a good idea?

Are we better off keeping people on the payroll during slowdowns?

Which job do we perform next?



10. MAINTENANCE

Who is responsible for maintenance?

When do we perform maintenance?

What are the effects of a maintenance program on productivity and efficiency?

WHY AACSB ACCREDITORS WHY AACSB ACCREDITORS STRENGTHENED OM STRENGTHENED OM

GUIDELINESGUIDELINES

“ To sustain a career in business for many years, a business graduate needs an understanding of the analytical foundations and tools that are important for managerial decision-making.”



“ The explosive growth of informationtechnology applications is being driven by

management science-based models such as decision analysis, scenario generation,

simulation, and optimization ”.*

* OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT



“Since management science techniques are driving operations, supply chains, and e-commerce, they constitute a major driver of the entire economy.”

OPERATIONS OPERATIONS MANAGEMENTMANAGEMENT

A Brief HistoryA Brief History

Applied Management Science for Decision Making, 1e ©2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro, PhD

17761776

Adam Smith develops the concept Adam Smith develops the concept of of specialization of laborspecialization of labor wherein wherein the production process is broken the production process is broken

down into discrete stages allowing down into discrete stages allowing specially-designed machines or specially-designed machines or

narrowly-trained workers to performnarrowly-trained workers to perform each step with the least materialeach step with the least material

waste and the maximum productivity.waste and the maximum productivity.

19001900

A Philadelphia engineer namedA Philadelphia engineer named Frederick W. Taylor publishesFrederick W. Taylor publishes

The Principles of Scientific The Principles of Scientific Management Management , a guide to , a guide to

increasing the efficiency of increasing the efficiency of factory workers. factory workers.

His methods, known as His methods, known as Taylorism, dominate industrialTaylorism, dominate industrial work through much of the 20work through much of the 20thth

century, from automobilecentury, from automobile plants to McDonald’s.plants to McDonald’s.

19001900

Frederick Taylor believed there were natural laws governing production systems.

Once these laws were identified through experimentation and observation, the best way to perform any job or to produce any

product could be found.

He also called for separation of responsibilities between floor workers and managers.

The latter would develop processes, jobs, work methods, and select, train, plan, coordinate,

and control.

19401940

Researchers in Britain and the Researchers in Britain and the United States build mathematical United States build mathematical models of North American shippingmodels of North American shipping

lanes. Their goal: to find an optimizedlanes. Their goal: to find an optimized approach for getting convoys safely approach for getting convoys safely

past Nazi submarines.past Nazi submarines.

The result is operations research, a The result is operations research, a mathematics discipline that now runsmathematics discipline that now runs

the logistics and operations of the the logistics and operations of the modern world.modern world.

1950s1950s

W. Edwards Deming begins teaching statisticalmanagement in Japan. His thesis: MeticulousControl of Quality also leads to lower costs.

His methods contribute to startling advancesin Japanese manufacturing which later spreadthroughout the world.

1980s1980s

W. Edward Deming and J.M. Juran stressed that..

Everyone is responsible for quality… not just inspectors. Product should be made right the first time to avoid rework. Reliance on workers to make suggestions…not “experts”. Elimination of any activity or material that does not add value to the product.

1970s1970s

Manufacturing becomes Manufacturing becomes the second major the second major

functional area of business functional area of business to utilize the computer. to utilize the computer.

Applications includeApplications include machine movementmachine movement

control, equipment & control, equipment & material monitoring, material monitoring, and the continuousand the continuous

adjustment of settings adjustment of settings and flow rates.and flow rates.

Early 21Early 21stst Century Century

Database systems and all manufacturing equipmentand subsystems are integrated into a single system.In theory, this computer-integrated manufacturingsystem (CIM) would control and coordinate everyphase of production from initial customer order, tocustom-product design, inventory purchase orders,tooling requirements, production schedules, tracking,quality control monitoring, assembly of informationon productivity, profitability, and tool wear, as well as shipping and billing.

Mission / Strategy Mission / Strategy RelationshipRelationship

Corporate Mission and GoalsCorporate Mission and Goals

Product and Service SelectionsProduct and Service SelectionsMarket Segment SelectionsMarket Segment Selections

Competitive Advantage FactorsCompetitive Advantage FactorsPolicy ConstraintsPolicy Constraints

Functional StrategiesFunctional Strategies

Operations,Operations,Marketing, FinanceMarketing, Finance

Strategy ImplementationStrategy Implementation andandPerformance MeasurementPerformance Measurement

Corporate StrategyCorporate Strategy

External FactorsExternal Factors Internal FactorsInternal Factors

Data InputData Input andand FeedbackFeedback

Functional StrategiesFunctional Strategies

Corporate strategy dictates the individualstrategies of the firm’s three functional units: marketing, finance, and operations.

The operations functional strategyoperations functional strategy shouldidentify tasks related to the planning, de-sign, and operation of the production con-version system.

Operations Functional Operations Functional StrategyStrategy

It must delineate the tasks that the operations function must do well in order to support and achieve the corporate strategy.

Almost any operations task can be used to support a firm’s strategy but most firms can compete very effectively by emphasizing one or two.

The operations functional strategy should be con- sistent with the marketing and finance strategies, as well.

Operations Functional Operations Functional StrategyStrategy

The ten critical decisionsten critical decisions of operations management developed in chapter one provide an excellent checklist for identifying the particular tasks that an operations functional strategy must perform in supporting and achieving the firm’s corporate strategy.

Operations Functional Operations Functional Strategy ChecklistStrategy Checklist

1. QUALITY QUALITY - customer expectations- customer expectations - quality systems design- quality systems design - quality measures and standards- quality measures and standards

2.2. PRODUCTPRODUCT - customized- customized - standardized- standardized


3. SUPPLY CHAINSUPPLY CHAIN - sole or multiple vendors- sole or multiple vendors - type of distribution system- type of distribution system

4.4. LABORLABOR - specialized skills- specialized skills - multiple skills- multiple skills


5. MAINTENANCEMAINTENANCE - “as needed”- “as needed” - preventitive- preventitive

6.6. LAYOUTLAYOUT - assembly line- assembly line - work cells- work cells - project- project


7. INVENTORYINVENTORY - ordering policy- ordering policy - stockage levels- stockage levels - type of system- type of system

8.8. PROCESSPROCESS - scale of operation- scale of operation - choice of technology- choice of technology - in-house production- in-house production - outsourcing- outsourcing


9. SCHEDULINGSCHEDULING - stable- stable - variable- variable

10.10. LOCATIONLOCATION - near supplier- near supplier - near customer- near customer

The Dynamics of The Dynamics of StrategyStrategy

Strategies change over time due to two reasons: 1. changes within the organization.

2. changes in the environment.

FOR EXAMPLE, CHANGES IN TECHNOLOGY, PRODUCT, OR PROCESS AFFECT FOR EXAMPLE, CHANGES IN TECHNOLOGY, PRODUCT, OR PROCESS AFFECT A FIRM’S STRENGTHS AND WEAKNESSES, AND THEREFORE ITS STRATEGY.A FIRM’S STRENGTHS AND WEAKNESSES, AND THEREFORE ITS STRATEGY.

The Dynamics of The Dynamics of StrategyStrategy

Birth Growth Maturity DeclineBirth Growth Maturity Decline

Sales + RevenuesSales + Revenues

THE PRODUCT LIFE CYCLETHE PRODUCT LIFE CYCLE

Change in Corporate & Change in Corporate & OM Functional StrategiesOM Functional Strategies

CORPORATECORPORATESTRATEGYSTRATEGY

OPERATIONSOPERATIONS

STRATEGYSTRATEGYSTAGE

Birth

Growth

Maturity

Decline

INCREASE MARKETSHARE, R+D, ENGRG

FREQUENT PRODUCTAND PROCESS DESIGN

CHANGES, QUALITYFOCUS, SHORT

PRODUCTION RUNS

STRENGTHEN HOLD ONMARKET SEGMENT VIAPRICING AND QUALITY

IMAGE

MORE PRODUCT OPTIONSPRODUCT AND PROCESS

RELIABILITYENHANCE DISTRIBUTION

INCREASE CAPACITY

DEFEND MARKET SHARECUT COSTS

PRODUCT STANDARDIZATIONMINOR PRODUCT CHANGESLONG PRODUCTION RUNS

INCREASE PROCESS STABILITY

COST CONTROL EVEN MORE CRITICAL

REDUCE CAPACITYELIMINATE POOR PROFIT MAKES + MODELS

COST MINIMIZATIONLITTLE PRODUCT DIFFERENTIATION

INTRODUCTION TO INTRODUCTION TO OPERATIONS OPERATIONS

MANAGEMENTMANAGEMENT

Applied Management Science for Decision Making, 1e Applied Management Science for Decision Making, 1e ©©2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD


EPILOGUEEPILOGUE

Applied Management Science for Decision Making, 1e ©2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD

What You Have SeenWhat You Have Seen

• Decision Theory• Basic Simulation• Queuing Theory• Manufacturing Processes


• Service Processes• Transportation Algorithm• Line Balancing• Work Measurement• Time Standards


• Learning Curve• Just-in-Time Systems• Inventory Control• Short-term Scheduling


• Assignment Algorithm• Project Management• Linear Programming

What You Have Not What You Have Not SeenSeen

• Decoupling Theory• Outsourcing / Offshoring• Telecommunications• Yield Management


• Data Envelopment Analysis• Data Mining• Internet Service Design• Environmental Management


• Process Opportunities• Experiential Blueprinting• Sensitivity Analysis


• Minimal Spanning Trees• Maximal Flow Technique• Shortest Route Technique• Stochastic Inventory Control


• Advanced Transportation Theory• Reliability Theory• Product Development / Design• Artificial Intelligence• Agile Manufacturing


• Data Base Management• Quality Control• Game Theory• Markov Processes• Project Budgeting


• Project Crashing• Resource Leveling• Duality• Goal Programming• Integer Programming


• Dynamic Programming• Optimization Theory• Quantitative EXCEL programming


• Survey Information• Utility Theory• Complex Simulation• Service Systems Theory


• Global Operations • Logistics• Supply Chain Management• E-commerce


• Maintenance & Reliability Theory• Mathematical Modeling• Materials Requirements Planning


• Decision Support Systems ( DSS )• Forecasting Methods and Models• Capacitated Transhipment Models


• Traveling Salesman Network• Enterprise Resource Systems• Ergonomics

…….and so on, and so on !

Solutions to the Solutions to the DilemmaDilemma

APPLY YOURDEGREE CREDITS

TOWARD A 2nd DEGREE

IN ODS or MIS


Earn an MBA or Earn an MBA or MS in:MS in:

- Decision Sciences- Decision Sciences

- Operations Research- Operations Research

- Operations - Operations ManagementManagement

- Logistics - Logistics

- Materials ManagementMaterials Management

- TransportationTransportation

- Management ScienceManagement Science

- Decision Support SystemsDecision Support Systems

- Industrial engineering- Industrial engineering


Earn a certificate or certification in: • Supply chain management• Quality control• Integrated resource management• Manufacturing management

…..and many more !


Thank you !Come again !

Applied Management Science for Decision Making, 1e Applied Management Science for Decision Making, 1e ©©2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD2010 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD

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