OM I

SESSION 1
OVERVIEW

OPERATIONS MANAGEMENT
Process adopted to satisfy
customers.
Critical business function
Design , operation & improvement of
processes that creates & delivers the
products/services.

VALUE ADDING PROCESS

VALUE ADDING PROCESSES

Physicalmanufacturing ( Plastic
surgery)
Locationaltransportation (Couriers)
Exchangeretailing
Storage/Distribution--warehousing
Physiological--health care
Informational--telecommunications

OM

Operations account for 6080% of the direct expenses

that burden a firms profit.

PRODUCTS VS. SERVICES

PRODUCT - SERVICE
BUNDLE
Goods
Services
Facilitating services
Facilitating goods

EVOLUTION : OM

The Industrial Revolution

Scientific Management
Human Relations and Behaviorism
Operations Research
The Service Revolution

The Industrial Revolution

The industrial revolution :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
specialization of labor.
By late-1700s factories had
machine power
ways of planning and controlling the
tasks of workers.

The Industrial Revolution

In 1790 an American, Eli Whitney,
developed the concept of
interchangeable parts. (machine tools
could make standardized parts to
exact specifications)
1800s : development of the gasoline
engine and electricity
By the mid-1800s, the old cottage
system of production had been
replaced by the factory system.

SCIENTIFIC MANAGEMENT
Frederick Taylor (1881)
One best way of doing a job
Best method to be standardize
Material specifications, tools ,
jigs/fixtures to be standardize
Train workmen with the best method
Incentive pay systems (measured day
work)

Frank & Lillian Gilbreth

Frank (1868-1924); Lillian (1878-1972)
Husband-and-wife engineering team
Further developed work
measurement methods

HUMAN RELATIONS AND

BEHAVIORALISM
In the 1927-1932 period, researchers in
the Hawthorne Studies realized that
human factors were affecting
productivity.
Researchers and managers alike were
recognizing that psychological and
sociological factors affected productivity.
From the work of behavioralists came a
gradual change in the way managers
thought about and treated workers.

Operations Research
World War II,
Optimization of allocation of
resources (personnel, supplies,
equipment, )
OR : Optimization decisions (when
problems are complex and wrong
decisions are costly.)

QUALITY MANAGEMENT
Deming
Juran

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

New Trends in OM
Past

Causes

Future

Local or
national
focus

Reliable worldwide
communication and
transportation networks

Global focus,
moving
production
offshore

Batch (large)
shipments

Short product life cycles

and cost of capital put
pressure on reducing
inventory

Just-in-time
performance

Low-bid
purchasing

Supply chain competition

requires that suppliers be
engaged in a focus on the
end customer

Supply chain
partners,
collaboration,
alliances,
outsourcing

New Trends in OM
Past

Causes

Future

Lengthy
product
development

Shorter life cycles,

Internet, rapid international
communication, computeraided design, and
international collaboration

Rapid product
development,
alliances,
collaborative
designs

Standardized
products

Affluence and worldwide

markets; increasingly
flexible production
processes

Mass
customization
with added
emphasis on
quality

Job
specialization

Changing socioculture
milieu; increasingly a
knowledge and information
society

Empowered
employees,
teams, and lean
production

New Trends in OM
Past

Causes

Future

Low-cost
focus

Environmental issues, ISO

14000, increasing disposal
costs

Environmentally
sensitive
production, green
manufacturing,
recycled
materials,
remanufacturing

Ethics not
at forefront

Businesses operate more

openly; public and global
review of ethics; opposition
to child labor, bribery,
pollution

High ethical
standards and
social
responsibility
expected

Decision Making in OM
Strategic Decisions
Operating Decisions
Control Decisions

Strategic Decisions
Decisions of strategic importance
Have long-term significance for the
organization.

Product Design
Production process
Capacity & Location
Manpower planning

Operating Decisions
Decisions to satisfy customers
demands.

Production Planning
Inventory Management
Quality Managemnet

Control Decisions
Operations