INTRODUCTION TO OPERATIONS MANAGEMENT

CHAPTER OUTLINE

Definition of Operations Management Operations Decisions - A Framework Cross-Functional Decision Making Operations as a System Operations Strategy Model Emphasis on Operations Objectives Linking Strategies Operations Competence Global Scope of Operations Contemporary Operations Themes
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DEFINITION OF OPERATIONS MANAGEMENT

Operations is responsible for supplying the product or service of the organization. Managers are involved in planning, organizing and controlling; and Operation Manager has direct responsibility of getting the job done Operation Managers job is to manage the process of converting inputs into desired outputs Operations managers make decisions regarding the operations function and its connection with other functions.
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DEFINITION OF OPERATIONS MANAGEMENT

Operations managers plan, organize and control the production process and its interfaces within the organization and with the external environment. Operation management is about getting the day-to-day work done quickly, efficiently, with out error, and at low cost. OM creates dramatic improvements in customers services and reduction in cost OM defined as the design, operation and improvement of the systems that create and deliver the firms primary products and services OM Is concerned with the management of entire system (from input to output) that produces goods or deliver products. (deals with effective and efficient 1-4 transformation process)

KEY POINTS IN OM DEFINITION

Operation Management is the field of study that tries to understand, explain, predict and change organizational and strategic effects of the transformation process. Hence, OM deals with the effective and efficient management of the transformation process Decisions : the operations manager must make

Decisions (process, quality, capacity, and inventory)

Functions : Operation is the main Functions in the

organization. (manufacturing, Production dept)

Process: Plan and control Process for producing

goods and services
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KEY POINTS IN OM DEFINITION

the operations manager must make Decisions (process, quality, capacity, and inventory) Operation is the main Functions in the organization. (manufacturing, Production dept) Plan and control Process for producing

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MAJOR DECISIONS FRAMEWORK FOR OM

Process
How

to produce & deliver

measurement & process for achieving facilities & labor

Quality
Criteria,

Capacity
Physical

Inventory
What,

when & how much?

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EXAMPLES OF IMPORTANT POLICIES IN OPERATIONS

Policy Type

Process

Policy Area Span of process Automation Process flow Job specialization Supervision Approach Training Suppliers Facility size Location Investment Amount Distribution Control Systems

Strategic Choices Make or buy Handmade or machinemade Flexible or specialized Project, batch, line, or continuous Centralized or empowered workers Prevention or inspection Technical or managerial training Selected on quality or cost One large or several small facilities Near markets, labor, or materials Permanent or temporary High or low levels of inventory Centralized or decentralized warehouses Control in great detail or less detail

Quality Systems Capacity

Inventory

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CROSS-FUNCTIONAL DECISION MAKING

Operations as the primary function: OM is a functional field of business with clear line management responsibilities
Uses

decision making tools Considers facility automation

Other primary functions:

Marketing Finance

Other supporting functions may exist

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OPERATIONS AS A SYSTEM (PROCESS)

Input

Transformation (Conversion) Process

Output

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OPERATIONS AS A PROCESS

Input

Transformation Fabrication

Transformation Assembly

Output

Fabrication: making the parts

Assembly: putting the parts together
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OPERATIONS AS A PROCESS
Energy Materials Labor Capital Information Feedback information for control of process inputs and process technology
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Transformation (Conversion) Process

Goods or Services

RELATION OF OPERATIONS TO ITS ENVIRONMENT

SOCIETY
Human Engineering Marketing Resources

External Environment

Suppliers

Operations transformation system

CUSTOMERS

Accounting

Finance

MIS

COMPETITORS GOVERNMENT

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FRAMEWORK FOR MANAGING OPERATION

Planning: defines the objectives for the operations subsystem (polices, programs and procedure) Organizing: establish a structure of role and flow of information within the operation subsystem Controlling: ensure the plan of subsystem accomplished Behavioral: how their effort to plan, organize and control affect human behavior Models: simplify difficulties by using models
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HISTORICAL DEVELOPMENT OF OM
JIT and TQC: integrated set of activities to achieve high volume production with minimum inventory/ aggressively seek to eliminate cause of production defect Manufacturing Strategy paradigm: manufacturing as competitive weapon/ creating focused factory/ Service quality and productivity: unique approach to quality how to deliver high volume standardized services Total quality management and quality certification (ISO 900 certification) Business Process Reengineering: eliminating non value adding steps/ focus on end to end process based analysis/ Supply chain management: flow of information, material, and services E-commerce

OPERATIONS MANAGEMENT ELEMENTS FROM VARIOUS SCHOOL OF MANAGEMENT Classical Scientific Management Process orientation Behavioral Human relation Behavioral science Social system Modeling Decision Making System theory Mathematical Model
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DISTINGUISHING BETWEEN MANUFACTURING AND SERVICE OPERATION

Tangible/intangible nature of output Can be inventoried/ can not be inventoried Consumption of outputs (consume over time, consumes immediately Simultaneous consumption and production) Nature of the work (less labor and more equipment, high labor and less equipment) Degree of customer contact little consumer contact, Extensive consumer contact Customer participation in conversion distinguish between output (generated service, medical service) and throughput(going through the processes ) Measurement of performance/quality easy to assess/ difficulty to assess 1-17

KEY ELEMENT OF OPERATION MANAGMENT Product selection and design Process selection and planning Facilities (plant) location, Facilities layout and material handling Capacity planning Production planning and control (PPC) Inventory control Quality assurance and control Work study and job design Cost reduction and cost control

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THE STRATEGIC PERSPECTIVE: INFLUENCE DOWN THE OPERATIONS

STRATEGIC PERSPECTIVE

Organizational Strategy The general thrust of the process could be guided by competition and market conditions in the industry Where is the industry now/What are the existing and potential market/ what market gab exists/Where will it be in the future Situational analysis and market gab analysis After assessing, considering the following four priorities organizational strategy must be developed Quality (product performance) Cost efficiency(low product cost) Dependency(Reliable, timely delivery) Flexibility( responsiveness in product and volume 1-20 change)

OPERATIONS STRATEGY MODEL

Internal analysis

Corporate strategy

Business strategy

Operations Strategy
Mission Distinctive Competence External analysis Objectives (cost, quality, flexibility, delivery) Policies (process, quality systems, capacity, and inventory) Functional strategies in marketing, finance, engineering, human resources, and information systems

Consistent pattern of decisions Results

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DISTINCTIVE COMPETENCE
Something an organization does better than any competing organization that adds

value for the customer.

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OPERATIONS STRATEGIC OBJECTIVES OF OM

Effectiveness objective (right kind product that satisfy customers) Efficiency objective (Maximize output with minimum resource input) Quality objective (conform to preset quality specifications) lead time objective (minimizing throughput time, the time elapse in conversion process, reduce delay, waiting and idle time) Capacity utilization objective (Maximizing utilization of manpower, machine etc) Cost objective (minimizing cost of producing goods and services) Flexibility objectiveschedule or product change Reliability objective

OPERATIONS STRATEGIC OBJECTIVES

The major strategic objectives are:

Quality Flexibilityschedule or product change Delivery

Time Reliability

Cost efficiency

How does a firm use them to gain a competitive advantage, and how do they trade-off?

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LINKING OPERATIONS TO BUSINESS STRATEGIES

Business strategy alternatives Product imitator Operations must focus on keeping costs low. (generic drugs) Product innovator Operations must maintain flexibility in processes, labor and suppliers. (Rubbermaid) Order qualifiers and Winners Qualifiers: why the product is considered-traits such as lead time, cost or quality acceptable to be considered and to fill customers order Winners: why you choose the product-OM function must perform well relative to competitors. (how the firm wins orders)

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OPERATIONS COMPETENCE

To be sustainable, a distinctive competence must not only be unique, it must be difficult to imitate or copy.

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EXAMPLES OF OPERATIONS DISTINCTIVE COMPETENCE

Skills of employees Proprietary equipment or processes Rapid continuous improvement Well developed partnerships Location Organizational knowledge Proprietary information or control systems

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GLOBAL SCOPE OF OPERATIONS

Traditional versus Global company, i.e. companies operating in one country vs. those operating in many. Characteristics of Global Corporation: facilities, products, suppliers, transportation Operations must have a global distinctive competence. Value, not Cost, is critical to success The system is more the sum of its parts Prize simplicity and avoid complexity Not only the operation management function but 1-28 the firm as whole is the critical to success

CONTEMPORARY AND CORE ISSUES OPERATIONS THEMES

Service and Manufacturing (differences and implications) Customer-Directed Operations Time Reduction (Lean Operations) Integration of Operations and Other Functions Environmental Concerns Supply Chain Management Globalization of Operations

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End

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