Stevenson5ce_PPT_Ch01

Chapter

Slides prepared byLaurel DonaldsonDouglas College

Slides prepared byLaurel DonaldsonDouglas College

Introduction to Operations Management

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Copyright © 2015 by The McGraw-Hill Companies, Inc. All rights reserved.

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Learning ObjectivesDefine the term operations management and identify

operations management jobs.Identify the three major functional areas of

organizations and describe how they interrelate.Describe the scope of operations management,

differentiate between design and planning/control decisions.

Compare goods and services.Discuss the operations manager’s job.Describe key aspects of operations mgmt decision

making.Briefly describe the historical evolution of operations

mgmt.Identify major trends that affect operations

management.

LO6

LO1

LO2

LO3

LO4

LO5

LO7

LO8


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Chapter Outline What is operations management

(OM)? Three basic functions within

organizations The scope of operations

management Differentiating goods and services Operations manager’s job Operations managers and decision

making The historical evolution of operations

management Major trends


4LO 1

OM is the

management of activities and resources

that create goods and/or provide services.

What is Operations Management?

Companies use OM to improve:efficiency (minimize cost and time) andeffectiveness (achieving intended goals: quality &

timeliness)


5LO 1

OM Activities Airline company (services)

Bicycle factory (goods)

ForecastingCapacity planningSchedulingManaging inventories

Assuring qualityMotivating employees

Where to locate facilities

Detail the following OM activities for each company

What is Operations Management?


6LO 1

Why study Operations Management?

1. A large percentage of a company’s expenses occur in OM area (improvements = more profits)

2. A large number of all jobs are in OM area (purchasing, quality, planning, scheduling, inventory, etc)

3. Activities in all other areas( finance, marketing) are interrelated with OM activities


7LO 2

Three Basic Functions1. Operations: create goods and services2. Finance: provide funds and the economic analysis

of investment proposals3. Marketing: assess customer wants and needs and

communicate them to others

OperationsFinance/

AccountingMarketing

GroundSupport

FlightOperations

FacilityMaintenance Catering

Airline Company


8LO 2

Three Basic Functions Is OM function adding value during the

transformations process? Is there any overlapping between the main

functions?

FinanceMarketing

Operations


9LO 2

Inputs:BuildingsLabourMachinesMaterialsInformation

Transformation/conversion

Process

Outputs:GoodsServices

Control

Feedback

FeedbackFeedback

Value Added

Operations function


10LO 2

Stage of Production Value Added

Value of Product

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

What is added value?


11LO 2

Types of Operations Operations ExamplesGoods Producing Farming, mining, construction,

manufacturing, power generation

Storage/Transportation Warehousing, trucking, mailservice, moving, taxis, buses,hotels, airlines

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

Entertainment Films, radio and television,concerts, recordingCommunication Newspapers, radio and televisionnewscasts, telephone, satellites

Services


12LO 2

Inputs Process OutputRaw VegetablesMetal SheetsWaterEnergyLabourBuildingEquipment

CleaningMaking cansCuttingCookingPackingLabelling

Canned vegetables

Transformation Process at a Food Processor


13LO 2

Inputs Process OutputDoctorsNursesBuildingMedical suppliesEquipmentLabs

ExaminationSurgeryMonitoringMedicationTherapy

Healthy patients

Transformation Process at a Hospital


14LO 2

Logistics

Accounting

Product Design

Operations

Maintenance

PersonnelPurchasing

ManufacturingEngineering

MIS

Operations Interfaces


15LO 3

The Scope of Operations Management

• capacity, • location, • equipment

Designing Decisions

• personnel• inventory• scheduling• quality assurance

Planning/Control

Decisions


16LO 3

Decision area Basic question Chapter

Forecasting What will the demand be? 3

Product/ service design What customers want? How to improve products/services? 4

Capacity How much capacity will be needed? 5

Process What processes should be used? 6

Layout What is the best arrangement for the departments? 6

Design of Work Systems How to improve work methods? 7

Quality How to define quality? How to improve it? 9

Supply Chain Management Which supplier to choose? 11

Inventory How much to order? 12

Aggregate planning How much capacity will be needed over the medium term? 13

JIT systems How to coordinate production and purchasing? 15

Scheduling How to schedule jobs, staff? 16

Which decision is design type and which is planning/control type?

The Scope of Operations Management


17LO 4

Differences Goods(Produce a car)

Services (Teach a class)

Output Tangible Intangible

Customer contact Low High

Uniformity of input High LowLabour content Low HighUniformity of output

High Low

Measurement of productivity

Easy Difficult

Quality assurance Easy Difficult

Goods vs. Services


18LO 4

Goods or Service?

Tangible Act

Most systems are a blend of both good & service. Service sector accounts for > 78% of jobs in Canada.


19LO 5

Management Process

Field of responsibility

Planning Capacity, Location, Mix of products and Services, Make or buy, Projects

Organizing Degree of Centralization, Specialization, Subcontracting, Staffing, Suppliers

Controlling Inventory, Quality, Motivation, Cost, Productivity

Directing Scheduling, Incentive Plans, Work Orders, Job Assignments

The Operations Manager’s Job


20LO 5

Level of Job Satisfaction


21LO 6

Operations Managers and Decision Making

Models

Quantitative techniques

Analysis of trade-offs

Systems approach

Establishing Priorities

Ethics


22LO 6

A model is an abstraction of reality.

Physical

Schematic

Mathematical

Models


23LO 6

Quantitative Approaches

• Linear programming• Queuing techniques• Inventory techniques• Project techniques• Statistical techniques


24LO 6

Analysis of Trade-OffsDecision on amount of inventory to

stock Increased cost of holding inventory

vs.Level of customer service


25LO 6

Establishing PrioritiesPareto 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?


26LO 6

Ethical IssuesFinancial

statementsWorker safety

Product safety

QualityEnvironment

Community

Hiring/firing

workers


27LO 7

The Historical Evolution of OMEarliest

daysCraft

production (no

economies of

scale),

Mercant-ilism

Industrial revolutio

nInterchangeable Parts (Eli

Whitney, 1700)

Division of Labour

(Adam Smith, 1776)

Scientific Management

(1920s, Frederick

Taylor, Frank and Lillian Gilbreth,

Henry Gantt, Henry Ford)

Human relations Moveme

nt Improve

Productivity (Elton Mayo,

1930)Motivational

Theories (Abraham Maslow),

1940sEmployee Problem Solving (William Ouchi), 1970s

Decision Models

and Comput

er (1960+)

Manage-ment

Science,

EDI,

ERP

Japanese

Manufacturers

(1980+)TQM

revolution

lean productio

n

World Class Mftg


28LO 8

Trends in BusinessThe Internet and e-commerce

Management technology

Globalization

Management of supply chains

Sustainability


29LO 8

Supply Chain Supply Chain: A sequence of activities and

organizations involved in producing and delivering a good or service


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Operations management is responsible for planning and coordinating the use of the organization’s resources to convert inputs into outputs.

The operations function is one of three primary functions of organizations; the other two are marketing and finance.

Operations decisions involve design decisions and planning/control decisions. Design decisions relate to capacity planning, product design, processes design, layout of facilities, and selecting locations for facilities. Planning/control decisions relate to quality assurance, production planning, scheduling and control, inventory management, and project management.

Service differs from goods production in customer contact and labour content, lack of inventories, variation in inputs and outputs, and difficulties in productivity measurement and quality assurance.

Chapter SummaryLO1

LO2

LO3

LO4


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Operations managers plan, organize, control, and direct.

They use models, trade-off analysis, systems approach, priorities, and ethics in decision making.

Operations management evolved through craft, mass, and lean production systems.

Major trends currently are e-commerce, technology, globalization, supply chains, and sustainability.

Chapter Summary (Cont’d)LO5

LO6

LO7

LO8


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Learning Checklist Define the term operations management and

describe what an operation manager might do. Identify the three major functional areas of

organizations and describe how they interrelate. Differentiate between design and operations

decisions. Compare goods versus services. Describe key aspects of operations management

decision making. Briefly describe the historical evolution of

operations management. Identify current trends that affect operations

management.

Stevenson5ce_PPT_Ch01

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