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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENTPRODUCTION/OPERATIONS

MANAGEMENTSIXTH EDITION

WILLIAM J. STEVENSONRochester Institute of Technology

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENTINTRODUCTION

PART ONE

• Chapter One• Production and Operations Management

• Chapter Two• Productivity, Competitiveness, and Strategy

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Operations Management

Operations function consists of all activities directlyrelated to producing goods or providing services.

Organization

Finance Production/Operations

Marketing

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Business Operations Overlap

Marketing

Production/Operations

Finance

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Types of Operations

Operations ExamplesGoods Producing Farming, mining, construction,

manufacturing, power generationStorage/Transportation Warehousing, trucking, mail

service, moving, taxis, buses,hotels, airlines

Exchange Retailing, wholesaling, banking,renting, leasing, library, loans

Entertainment Films, radio and television,concerts, recording

Communication Newspapers, radio and televisionnewscasts, telephone, satellites

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Value-Added• The difference between the cost of inputs

and the value or price of outputs.

Inputs Land Labor Capital

Transformation/Conversion

process

Outputs Goods Services

Control

Feedback

FeedbackFeedback

Value added

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Food Processor

Inputs Processing OutputsRaw Vegetables Cleaning Canned vegetablesMetal Sheets Making cansWater CuttingEnergy CookingLabor PackingBuilding LabelingEquipment

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Hospital Process

Inputs Processing OutputsDoctors, nurses Examination Healthy patientsHospital SurgeryMedical Supplies MonitoringEquipment MedicationLaboratories Therapy

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Accounting

IndustrialEngineering

Operations

Maintenance

Public Relations

PersonnelPurchasing

Distribution

Operations Interfaces

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Decision Making

• System Design– capacity– location– arrangement of departments– product and service planning– acquisition and placement of

equipment

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Decision Making

• System operation– personnel– inventory– scheduling– project

management– quality assurance

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Major Characteristics of Production Systems

• Degree of standardization• Type of operation– project– job shop– repetitive production– continuous processing

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Manufacturing or Service?

Tangible Act

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Key Differences

• Customer contact

• Uniformity of input

• Labor content

• Uniformity of output

• Measurement of productivity

• Quality assurance

These differences are beginning to fadein many cases

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Manufacturing vs Service

CharacteristicOutput

Customer contact

Uniformity of input

Labor content

Uniformity of output

Measurement of productivity

Opportunity to correct

ManufacturingTangible

Low

High

Low

High

Easy

High

ServiceIntangible

High

Low

High

Low

Difficult

Lowquality problems

High

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Responsibilities of Operations Management

Products and services

• Planning– Capacity– Location–

– Make or buy– Layout– Projects– Scheduling

• Controlling– Inventory– Quality

• Organizing– Degree of centralization– Subcontracting

• Staffing– Hiring/laying off– Use of Overtime

• Directing– Incentive plans– Issuance of work orders– Job assignments

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Models

• A model is an abstraction of reality.– Physical– Schematic– Mathematical

What are the pros and cons of models?

Tradeoffs

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Systems Approach

“The whole is greater than the sum of the parts.”

Suboptimization

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Quantitative Approaches

• Linear programming

• Queuing Techniques• Inventory models• Project models• Statistical models

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Pareto Phenomenon

• A vital few things are important for reachingan objective or solving a problem.

• 80/20 Rule - 80% of problems are caused by20% of the activities.

How do we identify the vital few?

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CHAPTER ONEPRODUCTION AND OPERATIONS MANAGEMENT

Recent Trends

• Global competition

• Operations strategy

• Total quality management (TQM)

• Flexibility

• Time reduction Technology

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Recent Trends (Continued)

• Worker involvement

• Reengineering

• Environmental issues

• Service