Introduction to Operations Management.pptx

Introduction to Operations Management. Describes what is operation management, it functions, 10 critical decisions in operations, production, questions for each critical decision, top-down approach to operations management strategy and etc

1. Introduction to Operations Management

2. © 2011 Pearson Education The Hard Rock Cafe First opened in 1971 Now – 129 restaurants in over 40 countries Rock music memorabilia Creates value in the form of good food and entertainment 3,500 + custom meals per day in Orlando How does an item get on the menu? Role of the Operations Manager

3. What Is Operations Management? Production is the creation of goods and services Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

4. Why Study OM? OM is one of three major functions (marketing, finance, and operations) of any organization We want ( and need ) to know how goods and services are produced We want to understand what operations managers do OM is such a costly part of an organization 1 – 4

5. What Operations Managers Do Planning Organizing Staffing Leading Controlling Basic Management Functions

6. Organizing to Produce Goods and Services Essential functions: Marketing – generates demand Production/operations – creates the product Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

7. Ten Critical Decisions Design of goods and services Managing quality Process and capacity design Location strategy Layout strategy Human resources and job design Supply-chain management Inventory, MRP, JIT Scheduling Maintenance

8. The Critical Decisions Design of goods and services What good or service should we offer? How should we design these products and services? Managing quality How do we define quality? Who is responsible for quality? Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes?

9. The Critical Decisions Location strategy Where should we put the facility? On what criteria should we base the location decision? Layout strategy How should we arrange the facility? How large must the facility be to meet our plan? Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce?

10. The Critical Decisions Supply-chain management Should we make or buy this component? Who should be our suppliers and how can we integrate them into our strategy? Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order? Intermediate and short – term scheduling Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next? Maintenance How do we build reliability into our processes? Who is responsible for maintenance?

11. Where are the OM Jobs? Technology/methods Facilities/space utilization Strategic issues Response time People/team development Customer service Quality Cost reduction Inventory reduction Productivity improvement

12. Top-down Approach to OM Strategy Operations Strategy Decisions Strategic (long-range) Needs of customers (capacity planning) Tactical (medium-range) Efficient scheduling of resources Operational planning and control (short-range) Immediate tasks and activities

13. An Operational-Level OM Perspective OM’s function focuses on adding value through the transformation process ( technical core ) of converting inputs into outputs. Physical: manufacturing Locational: transportation Exchange: retailing Storage: warehousing Physiological: health care Informational: telecommunications

14. OM’s Contributions to Society Higher Standard of Living Ability to increase productivity Lower cost of goods and services Better Quality Goods and Services Competition increases quality Concern for the Environment Recycling and concern for air and water quality Improved Working Conditions Better job design and employee participation

15. The Emergence of OM Operations management has been gaining increased recognition in recent years for several reasons, including the application of OM concepts in service operations, an expanded definition of quality, the introduction of OM concepts to other functional areas such as marketing and human resources, and the realization that the OM function can add value to the end product.

16. Good The Emergence of OM (cont’d) Application of OM to Service Operations Batch cooking operations at McDonald’s Just-in-Time (JIT) at Northern Telecomm, Inc. Automatic inventory replenishment at Wal-Mart Service Product

17. Significant Events in OM

18. The Heritage of OM Division of labor (Adam Smith 1776; Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Coordinated assembly line (Ford/ Sorenson 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950)

19. The Heritage of OM Computer (Atanasoff 1938) CPM/PERT (DuPont 1957, Navy 1958) Material requirements planning ( Orlicky 1960) Computer aided design (CAD 1970) Flexible manufacturing system (FMS 1975) Baldrige Quality Awards (1980) Computer integrated manufacturing (1990) Globalization (1992) Internet (1995)

20. Eli Whitney Born 1765; died 1825 In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications Musket parts could be used in any musket

21. Frederick W. Taylor Born 1856; died 1915 Known as ‘father of scientific management’ In 1881, as chief engineer for Midvale Steel, studied how tasks were done Began first motion and time studies Created efficiency principles

22. Taylor’s Principles Management Should Take More Responsibility for:

23. Frank & Lillian Gilbreth Frank (1868-1924); Lillian (1878-1972) Husband-and-wife engineering team Further developed work measurement methods Applied efficiency methods to their home and 12 children! Book & Movie: “Cheaper by the Dozen,” “Bells on Their Toes”

24. Born 1863; died 1947 In 1903, created Ford Motor Company In 1913, first used moving assembly line to make Model T Unfinished product moved by conveyor past work station Paid workers very well for 1911 ($5/day!) Henry Ford

25. W. Edwards Deming Born 1900; died 1993 Engineer and physicist Credited with teaching Japan quality control methods in post-WW2 Used statistics to analyze process His methods involve workers in decisions

26. Contributions From Human factors Industrial engineering Management science Biological science Physical sciences Information technology

27. New Challenges in OM Global focus Just-in-time Supply-chain partnering Rapid product development, alliances Mass customization Empowered employees, teams To From Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization

28. Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction

29. Characteristics of Service Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed

30. Goods and Services Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counseling Percent of Product that is a Good Percent of Product that is a Service 100% 75 50 25 0 25 50 75 100% | | | | | | | | |

31. An Expanded Definition of Quality Quality is important in all functional areas of an organization. Quality is now much more than the technical requirements for manufactured goods. Service quality (customer relationships) is equally important. Quality 1 – 31

32. New Trends in OM Ethics Global focus Environmentally sensitive production Rapid product development Environmentally sensitive production Mass customization Empowered employees Supply-chain partnering Just-in-time performance

33. The Value Chain and Its Support Functions 1 – 33

34. Productivity Challenge Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labour and capital) The objective is to improve productivity! Important Note! Production is a measure of output only and not a measure of efficiency 1 – 34

35. Improving Productivity at Starbucks A team of 10 analysts continually look for ways to shave time. Some improvements: Stop requiring signatures on credit card purchases under $25 Saved 8 seconds per transaction Change the size of the ice scoop Saved 14 seconds per drink New espresso machines Saved 12 seconds per shot

36. Improving Productivity at Starbucks A team of 10 analysts continually look for ways to shave time. Some improvements: Stop requiring signatures on credit card purchases under $25 Saved 8 seconds per transaction Change the size of the ice scoop Saved 14 seconds per drink New espresso machines Saved 12 seconds per shot

37. Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve Productivity Productivity = Units produced Input used 1 – 37

38. Productivity Calculations Productivity = Units produced Labor-hours used = = 4 units/labor-hour 1,000 250 Labor Productivity One resource input  single-factor productivity 1 – 38

39. Multi-Factor Productivity Output Labor + Material + Energy + Capital + Miscellaneous Productivity = Also known as total factor productivity Output and inputs are often expressed in dollars Multiple resource inputs  multi -factor productivity

40. Measurement Problems Quality may change while the quantity of inputs and outputs remains constant External elements may cause an increase or decrease in productivity Precise units of measure may be lacking

41. Productivity Variables Labor - contributes about 10% of the annual increase Capital - contributes about 38% of the annual increase Management - contributes about 52% of the annual increase

42. Key Variables for Improved Labor Productivity Basic education appropriate for the labor force Diet of the labor force Social overhead that makes labor available Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge

43. Labor Skills About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type

44. Investment and Productivity 10 8 6 4 2 Percent increase in productivity Percentage investment 10 15 20 25 30 35

45. Service Productivity Typically labor intensive Frequently focused on unique individual attributes or desires Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality

46. Ethics and Social Responsibility Challenges facing operations managers: Developing and producing safe, quality products Maintaining a clean environment Providing a safe workplace Honoring stakeholder commitments