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Introduction to Production and Operations Management

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What is Operations Management?

“ Operation Management is the set of activities that create goods and services through the transformation of inputs into outputs.”

(Slack, 2001)

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Typical Organization Chart

Source: Reid and Sanders, 2005.

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What is Role of OM?OM Transforms inputs to outputs

Inputs are resources such as

People, Material, and Money

Outputs are goods and services

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OM’s Transformation Role

Source: Reid and Sanders, 2005.

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OM’s Transformation RoleTo add value

Increase product value at each stage

Value added is the net increase between output product

value and input material value

Provide an efficient transformation

Efficiency – means performing activities well for least

possible cost

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Goods & ServicesManufacturing

Tangible productProduct can be

inventoriedLow customer

contactLonger response

timeCapital intensive

ServicesIntangible productProduct cannot be

inventoriedHigh customer

contactShort response

timeLabor intensive

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On the other hand…Both use technology Both have quality, productivity, &

response issuesBoth must forecast demandBoth will have capacity, layout, and

location issuesBoth have customers, suppliers,

scheduling and staffing issuesManufacturing often provides servicesServices often provides tangible goods

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OM DecisionsAll organizations make decisions and follow a

similar pathFirst decisions very broad – Strategic decisions

Strategic Decisions – set the direction for the entire company; they are broad in scope and long-term in nature

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OM DecisionsFollowing decisions focus on specifics -

Tactical decisionTactical decisions: focus on specific day-to-day

issues like resource needs, schedules, & quantities to produce

are frequentStrategic decisions less frequentTactical and Strategic decisions must

align

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OM Decisions

Source: Reid and Sanders, 2005.

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Historical Development of OMIndustrial revolution Late

1700sScientific management Early 1900sHuman relations movement 1930s-Management science 1940s-Computer age 1960s-Environmental Issues 1970s-JIT & TQM 1980s-

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Historical Development of OMReengineering 1990-Global competition 1980-

Flexibility1990-

Time-Based Competition 1990-Supply chain Management

1990-Electronic Commerce

2000-Outsourcing & flattening of world 2000-