Introduction ToOperations and Production Management Chap 11

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Islamic University, Gaza - Palestine

Department of Industrial Engineering
Introduction to Operations and

Productions Management
Presented by
First Semester 2011- 2012
Dr. Eng. Abed Schokry
Operations Management For Competitive

Advantage
CHASE AQUILANO JACOBS
McGraw Hill Higher Education, ninth edition
1

Chapter 1: Learning Outcomes
You should be able to:
Define the term operations management
Compare and contrast service and manufacturing operations
Describe the operations function and the nature of the
operations managers job
Describe the key aspects of operations management decision
making
Briefly describe the historical evolution of operations
management
Identify current trends in business that impact operations
management

Overview
Introduction
Historical Milestones in OM
Factors Affecting OM Today
Different Ways of Studying OM
Wrap-Up: What World-Class Producers Do
2

Introduction
Operations management is the management of an

organizations productive resources or its production
system.
A production system takes inputs and converts them into
outputs.
The conversion process is the predominant activity of a
production system.
The primary concern of an operations manager is the
activities of the conversion process.

Organizational Model
Finance
Sales HRM
OM
QA
Marketing
MIS Accounting
Engineering
MIS: Management Information System
3

Historical Milestones in OM
The Industrial Revolution

Post-Civil War Period
Scientific Management
Human Relations and Behaviorism
Operations Research
The Service Revolution
Historical Milestones in OM and Significant Events in OM
Division of labor (Smith, 1776)

Standardized parts (Whitney, 1800)
Scientific management (Taylor, 1881)
Coordinated assembly line (Ford 1913)
Gantt charts (Gantt, 1916)
Motion study (the Gilbreths, 1922)
Quality control (Shewhart, 1924)
4
Historical milestones in OM and significant events in OM

(cont.)
CPM/PERT (Dupont, 1957)

MRP (Orlicky, 1960)
CAD
Flexible manufacturing systems (FMS)
Manufacturing automation protocol (MAP)
Computer integrated manufacturing (CIM)

The industrial revolution developed in England in the

1700s.
The steam engine, invented by James Watt in 1764,
largely replaced human and water power for factories.
Adam Smiths The Wealth of Nations in 1776 touted the
economic benefits of the specialization of labor.
Thus the late-1700s factories had not only machine
power but also ways of planning and controlling the
tasks of workers.
5

The industrial revolution spread from England to other

European countries and to the United Sates.
In 1790 an American, Eli Whitney, developed the concept
of interchangeable parts.
The first great industry in the US was the textile industry.
In the 1800s the development of the gasoline engine and
electricity further advanced the revolution.
By the mid-1800s, the old cottage system of production
had been replaced by the factory system.
. . . more

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
6

Frederick W. Taylor

Known as father of scientific management
in 1881, as chief engineer for Midvale Steel, studied
how tasks were done
Began first motion & time studies
Created efficiency principles

Taylor: Management Should Take More Responsibility for

Matching employees to right job
Providing the proper training

Providing proper work methods and tools
Establishing legitimate incentives for work to be accomplished
7

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 & 12 children

Henry Ford (MAKE THEM ALL ALIKE!)

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!)
8

W. Edwards Deming

Engineer & physicist
Credited with teaching Japan quality control
methods in post-WW2
Used statistics to analyze process
His methods involve workers in decisions

Post-Civil War Period
During the post-Civil War period great expansion of

production capacity occurred.
By post-Civil War the following developments set the
stage for the great production explosion of the 20th
century:
increased capital and production capacity
the expanded urban workforce
new Western US markets
an effective national transportation system
9

Frederick Taylor is known as the father of scientific

management. His shop system employed these steps:
Each workers skill, strength, and learning ability were
determined.
Stopwatch studies were conducted to precisely set
standard output per worker on each task.
Material specifications, work methods, and routing
sequences were used to organize the shop.
Supervisors were carefully selected and trained.
Incentive pay systems were initiated.

In the 1920s, Ford Motor Companys operation embodied

the key elements of scientific management:
standardized product designs
mass production
low manufacturing costs
mechanized assembly lines
specialization of labor
interchangeable parts
10
Human Relations and Behavioralism
In the 1927-1932 period, researchers in the Hawthorne

Studies realized that human factors were affecting
production.
Researchers and managers alike were recognizing that
psychological and sociological factors affected
production.
From the work of behavioralists came a gradual change
in the way managers thought about and treated workers.
The Service Revolution
The creation of services organizations accelerated sharply

after World War II.
Today, more than two-thirds of the US workforce is
employed in services.
About two-thirds of the US GDP is from services.
There is a huge trade surplus in services.
Investment per office worker now exceeds the investment
per factory worker.
Thus there is a growing need for service operations
management.
11

The Computer Revolution
Explosive growth of computer and communication

technologies
Easy access to information and the availability of more
information
Advances in software applications such as Enterprise
Resource Planning (ERP) software
Widespread use of email
More and more firms becoming involved in E-Business
using the Internet
Result: faster, better decisions over greater distances

Today's Factors Affecting OM
Global Competition
Quality, Customer Service, and Cost Challenges
Rapid Expansion of Advanced Technologies
Continued Growth of the Service Sector
Scarcity of Operations Resources
Social-Responsibility Issues
12

Studying Operations Management
Operations as a System
Decision Making in OM

Production System
Conversion
Inputs Outputs
Subsystem
Control
Subsystem
13


Inputs of an Operations System
External
Legal, Economic, Social, Technological
Market
Competition, Customer Desires, Product Info.
Primary Resources
Materials, Personnel, Capital, Utilities
14

Conversion Subsystem
Physical (Manufacturing)
Locational Services (Transportation)
Exchange Services (Retailing)
Storage Services (Warehousing)
Other Private Services (Insurance)
Government Services (Federal)

Outputs of an Operations System
Direct
Products
Services
Indirect
Waste
Pollution
Technological Advances
15

Production as an Organization Function
US companies cannot compete with marketing, finance,

accounting, and engineering alone.
We focus on OM as we think of global competitiveness,
because that is where the vast majority of a firms
workers, capital assets, and expenses reside.
To succeed, a firm must have a strong operations
function teaming with the other organization functions.
Decision Making in OM
Strategic Decisions
Operating Decisions
Control Decisions
16

Strategic Decisions
These decisions are of strategic importance and have

long-term significance for the organization.
Examples include deciding:
the design for a new products production process
where to locate a new factory
whether to launch a new-product development plan
Operating Decisions
These decisions are necessary if the ongoing production of

goods and services is to satisfy market demands and
provide profits.
how much finished-goods inventory to carry
the amount of overtime to use next week
the details for purchasing raw material next month
17

Control Decisions
These decisions concern the day-to-day activities of

workers, quality of products and services, production
and overhead costs, and machine maintenance.
labor cost standards for a new product
frequency of preventive maintenance
new quality control acceptance criteria
What Controls the Operations System?
Information about the outputs, the conversions, and the

inputs is fed back to management.
This information is matched with managements
expectations
When there is a difference, management must take
corrective action to maintain control of the system
18
Wrap-Up: World Class Practice
OM important in any organization

Global competition forces rapid evolution of OM
Decision based framework focus of course
Strategic, Operating, and Control
Management Concept
Planning and Decision Making:

Determining the organizational goal and deciding how best to achieve
them.
Organizing: Determine how best to group activities and resources.

Leading: Motivating members of organization to work in the best
interest of organization.
Controlling: Monitoring and correcting ongoing activities.
Efficient: Using the resources wisely and without unnecessary
waste.
Effective: Making the right decision and successfully implementing
them.
19
Objectives of the Organization
Customer or user satisfaction

Investor's Satisfaction
Employees and workers morale
Objectives of the Organization
Customer or user satisfaction:
It is essential to promote sales. The factors, which influence the

customer or user satisfaction are:
Product Quality
Product Price
Delivery Schedule
20
Organizational Functions
Marketing
Gets customers
Operations
creates product or service
Finance/Accounting
Obtains funds
Labor Cost, Production quantities, Quality
Japanese System of Management
1. Job Rotation
2. Long Term Employment
3. Promotion and Pay Increase

4. Continuing Education
5. Consensual Decision Making
6. Group Consciousness
7. Implicit Informal Controls

8. Holistic Concern for People
9. Paternalistic Employers
10. Respect of Humanity
21
Contributions From
Human factors
Industrial engineering
Management science
Biological science
Physical sciences
Information science

Why Study Operations Management?
Systematic Approach
to Org. Processes
Business Education Operations Career Opportunities

Management
Cross-Functional
Applications
22

Why Study OM? (cont.)
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.

Why Manufacturing Matters?
Over 18 million workers in manufacturing jobs

Accounts for over 70% of value of U.S. exports
Average full-time compensation about 20% higher than average
for all workers
Manufacturing workers more likely to have benefits
Productivity growth in manufacturing in the last 5 years is more
than double that of the U.S. economy
23

Why Study OM?
Every aspect of business revolves around operations
Many service jobs are closely related to operations

Financial services
Marketing services
Accounting services
Information services
There is a significant amount of interaction and collaboration

amongst the functional areas
It provides an excellent vehicle for understanding the world in

which we live
Career Opportunities in OM
Industrial engineer
Operations manager
Production manager
Inventory manager
Quality analyst and or Quality manager
Production analyst
And others
24

OM-Related Professional Societies in USA
APICS - The Association for Operations Management

American Society for Quality (ASQ)
Institute for Supply Management (ISM)
Institute for Operations Research and Management Science
(INFORMS)
The Production and Operations Management Society (POMS)
The Project Management Institute (PMI)
Council of Supply Chain Management Professionals (CSCMP)

Entry-Level Jobs in OM
Purchasing planner/buyer
Production (or operations) supervisor
Production (or operations) scheduler/controller
Production (or operations) analyst
Inventory analyst
Quality specialist
25

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

Core Services Performance Objectives
Quality
Flexibility Operations Speed

Management
Price (or cost

Reduction)
26

Good or Service?
Goods are physical items that include raw materials, parts,

subassemblies, and final products.
Automobile, Computer, Oven, Shampoo
Services are activities that provide some combination of

time, location, form or psychological value.
Air travel, Education, Haircut, Legal counsel

What is a Service and What is a Good?
If you drop it on your foot, it wont hurt you. (Good or

service?)
Services never include goods and goods never include

services. (True or false?)
27

Operations in the Service Sectors
Continuum of Characteristics

Core Services Definition
Core services are basic things that customers want from

products they purchase.
28

Value-Added Services
Value-added services differentiate the organization from

competitors and build relationships that bind customers to
the firm in a positive way.

I. Operations Strategy 1. Introduction
and Managing Change to OM
2. Operations 3. Project
Strategy and Managemen
Competitiveness t
II. Product Design

and Process III. Supply 8. Supply
Selection Chain Design Chain Strategy
9. Strategic 10. Just-in-Time

4. Understanding Capacity Outsourcing and Lean
Processes Management Systems
Plan of This Book
5. 6. Service
Manufacturing Products and IV. Planning and 11. Forecasting
Product & Process Design Controlling the
Process Des. Supply Chain
12. Aggregate
Planning
V. Revising
7. Quality the System
Managemen 13. Inventory 14. Materials
t Control Requirements
Planning
16. Consulting and 17.
Reengineering Synchronous
Manufacturing
& Theory of
Constraints
29

Basic Principles of production Management
Customers satisfaction is the prime goal of any organization, collect
information about customer requirements.
Develop management commitment for product quality
Quality is the responsibility of every person in the organization
Develop the strategy for global competition
Rework and rejection are costly, so do the job right first time and every time
Set the production rate and supply in conformance with customer's

demand rate
Reduce the unnecessary variety of products, parts and materials

(Standardization)

Basic Principles of production Management (cont.)
Reduce set-up time and idle non-productive time
Reduce cycle time by eliminating unnecessary operations and combining
operations where possible
Use the full capacity of production equipment
Select simple, low cost production equipment avoiding redundant features
Before ordering replacement of an old machine, establish the economic
justification
Operational reliability and maintenance factors should be considered while
ordering new equipment
Reduce variety of production equipment for low inventory of spares and ease of
maintenance
Plan the layout of equipment to minimize workflow
30

Basic Principles of production Management (cont.)
Use principles of motion economy to design the layout of workplaces
Assign codes to parts, material and tools to facilitate traceability
Exercise job rotation for mastery of multiple skills
Automatic gradually and only when the process variability cannot be controlled
otherwise
Create more cells and workstations where waiting time and queues involve high
cost
Reduce inventories to minimum workable levels
Record the performance of all-important function, particularly the output, quality

appraisal and equipment breakdown and maintenance
Analyze the records and derive interfaces for future decisions
Rate the vendors and suppliers to select the best ones.

Decision Making
Most operations decisions involve many alternatives that can

have quite different impacts on costs or profits
Typical operations decisions include:
What: What resources are needed, and in what amounts?
When: When will each resource be needed? When should the work
be scheduled? When should materials and other supplies be
ordered?
Where: Where will the work be done?
How: How will he product or service be designed? How will the
work be done? How will resources be allocated?
Who: Who will do the work?
31
End of Chapter 1
32

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