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Introduction to Operations Management

CHAPTER

Production & Operations Management

McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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Introduction to Operations Management

Operations Management

William J. Stevenson

8th edition

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Introduction to Operations Management

CHAPTER

Introduction to Operations Management

McGraw-Hill/Irwin

Operations Management, Eighth Edition, by William J. Stevenson Copyright 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

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Introduction to Operations Management

What is meant by OPERATIONS

yThe

operations function consists of all activities directly related to producing goods or providing services.

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Introduction to Operations Management

Examples of Operations Performed by Organizations

Operation Examples
Farming, mining, construction , manufacturing, power generation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Retailing, wholesaling, banking, renting, leasing, library, loans Films, radio and television, concerts, recording Newspapers, radio and television newscasts, telephone, satellites

Table 1.4
Goods Producing Storage / Transportation Exchange Entertainment Communication

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Introduction to Operations Management

Main Functions in organizations

Organizatio n

Finance

Operations

Marketing

y The

operations function is a core function in all organizations.

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Introduction to Operations Management

Operations Management The management of systems or processes or function in an organization that create goods and/or provide services

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Introduction to Operations Management

Figure 1.2

ValueValue-Addition

The difference between the cost of inputs and the value or price of outputs.
Value added
Inputs Land Labor Capital

Transformation/ Conversion process

Feedback

Outputs Goods Services

Control
Feedback Feedback

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Introduction to Operations Management

Food Processor
Table 1.2

Inputs
Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Processing Outputs
Cleaning Making cans Cutting Cooking Packing Labeling Canned vegetables

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Hospital Process
Table 1.2

Inputs
Doctors, nurses Hospital Medical Supplies Equipment Laboratories

Processing
Examination Surgery Monitoring Medication Therapy

Outputs
Healthy patients

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Manufacturing or Service?

Tangible

Act

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y Operations

Management includes: y Forecasting of demand y Capacity planning y Scheduling y Managing inventories y Assuring quality y Motivating employees y Deciding where to locate facilities y And more . . .

Scope of Operations Management

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Figure 1.4

Year Mfg. Service 45 79 21 50 72 28 55 72 28 60 68 32 65 64 36 70 64 36 75 58 42 80 44 46 85 43 57 90 35 65 95 32 68 00 30 70

U.S. Manufacturing vs. Service Employment

100 80 P er c e n t 60 40 20 0 45 50 55 60 65 70 75 80 85 90 95 00 Year

Responsibilities of Operations Management Table 1.6

Planning
Capacity Location Products & services Make or buy Layout Projects Scheduling

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Organizing
Degree of centralization Process selection

Staffing
Hiring/laying off Use of Overtime

Directing

Incentive plans Controlling/Improving Issuance of work orders Inventory Job assignments Quality Costs Productivity

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y What

Key Decisions of Operations Managers

What resources/what amounts y When Needed/scheduled/ordered y Where Work to be done y How Designed y Who To do the work

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Decision Making
System Design
capacity location arrangement of departments product and service planning acquisition and placement of equipment

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Decision Making
System operation
personnel inventory scheduling project management quality assurance

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Decision Making
Models y Quantitative approaches y Analysis of trade-offs y Systems approach
y

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Systems Approach The whole is greater than

the sum of the parts.

Suboptimization

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Business Operations Overlap

Figure 1.5

Operations

Marketing

Finance

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Operations Interfaces
Industrial Engineering Maintenance Distribution

Purchasing

Operations
Legal

Public Relations

Personnel Accounting

MIS

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Trends in Business
y Major
y The

trends

Internet, e-commerce, ebusiness y Management technology y Globalization y Management of supply chains y Agility

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Other Important Trends

y Ethical

behavior y Operations strategy y Working with fewer resources y Cost control and productivity y Quality and process improvement y Increased regulation and product liability y Lean production

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Pareto Phenomenon
A few factors account for a high percentage of the occurrence of some event(s). 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few?

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Models
A model is an abstraction of reality.
Physical Schematic Mathematical

Tradeoffs

What are the pros and cons of models?

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Models Are Beneficial

y Easy

to use, less expensive y Require users to organize y Systematic approach to problem solving y Increase understanding of the problem y Enable what if questions y Specific objectives y Consistent tool y Power of mathematics y Standardized format

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Quantitative Approaches
Linear programming Queuing Techniques Inventory models Project models Statistical models

Historical Evolution of Operations Management Table 1.7

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Industrial revolution (1770s) y Scientific management (1911) y Mass production y Interchangeable parts y Division of labor y Human relations movement (1920-60) y Decision models (1915, 1960-70s) y Influence of Japanese manufacturers
y

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Simple Product Supply Chain

Figure 1.7 Suppliers Suppliers Direct Suppliers Distributor Final Consumer Producer

Supply Chain: A sequence of activities and organizations involved in producing and delivering a good or service

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A Supply Chain for Bread

Stage of Production Farmer produces and harvests wheat Wheat transported to mill Mill produces flour Flour transported to baker Baker produces bread Bread transported to grocery store Grocery store displays and sells bread Total Value-Added Value Added $0.15 $0.08 $0.15 $0.08 $0.54 $0.08 $0.21 $1.29 Value of Product $0.15 $0.23 $0.38 $0.46 $1.00 $1.08 $1.29