Chapter 1 Introduction to the Field

Operations Management Why Study Operations Management? Transformation Processes Defined Operations as a Service The Importance of Operations Management Historical Development of OM Current Issues in OM OBJECTIVES

Operations Management

Why Study Operations Management?

Transformation Processes Defined

Operations as a Service

The Importance of Operations Management

Historical Development of OM

Current Issues in OM

What is Operations Management? Defined Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services

Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services

Why Study Operations Management? Business Education Systematic Approach to Org. Processes Career Opportunities Cross-Functional Applications Operations Management

The consultancy services market % of world revenues of 40 largest firms Marketing/sales 2 Operations and process management 31 Corporate strategy 17 IT strategy 17 Benefits/Actuarial 16 Organizational design 11 Financial 6 Source: Nigel Slack and Michael Lewis 2003

The Future of Operations Outsourcing everything Smart factories Talking inventory Industrial army of robots What’s in the box Mass customization Personalized recommendations Sign here, please

The Future of Operations

Outsourcing everything

Smart factories

Talking inventory

Industrial army of robots

What’s in the box

Mass customization

Personalized recommendations

Sign here, please

Progressive Insurance Grew significantly from 1991 to 2002 Focused on increased operating efficiency Started claims in 9 hours versus 7-10 days Adjuster creates a claim on the spot Storing or renting ($28/day) reduced. Faster processing reduces fraud Higher customer satisfaction

Progressive Insurance

Grew significantly from 1991 to 2002

Focused on increased operating efficiency

Started claims in 9 hours versus 7-10 days

Adjuster creates a claim on the spot

Storing or renting ($28/day) reduced.

Faster processing reduces fraud

Higher customer satisfaction

Efficiency versus Effectiveness Efficiency – doing something at the lowest possible cost Effectiveness – doing the right thing to create the most value to the company

Efficiency versus Effectiveness

Efficiency – doing something at the lowest possible cost

Effectiveness – doing the right thing to create the most value to the company

Operations Management Decision Types Strategic (long-term) Tactical (intermediate-term) Operational planning and control (short-term)

Operations Management Decision Types

Strategic (long-term)

Tactical (intermediate-term)

Operational planning and control (short-term)

What is a Transformation Process? Defined A transformation process is defined as a use of resources to transform inputs into some desired outputs

A transformation process is defined as a use of resources to transform inputs into some desired outputs

Transformations Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications

Physical--manufacturing

Locational--transportation

Exchange--retailing

Storage--warehousing

Physiological--health care

Informational--telecommunications

What is a Service and What is a Good? “ If you drop it on your foot, it won’t hurt you.” (Good or service?) “ Services never include goods and goods never include services.” (True or false?)

“ If you drop it on your foot, it won’t hurt you.” (Good or service?)

“ Services never include goods and goods never include services.” (True or false?)

OM in the Organization Chart Operations Plant Manager Operations Manager Director Manufacturing, Production control, Quality assurance, Engineering, Purchasing, Maintenance, etc Finance Marketing

Core services are basic things that customers want from products they purchase Core Services Defined

Core Services Performance Objectives Operations Management Flexibility Quality Speed Price (or cost Reduction)

Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way Value-Added Services Defined

Value-Added Service Categories Operations Management Information Problem Solving Sales Support Field Support

The Importance of Operations Management Synergies must exist with other functional areas of the organization Operations account for 60-80% of the direct expenses that burden a firm’s profit.

Synergies must exist with other functional areas of the organization

Operations account for 60-80% of the direct expenses that burden a firm’s profit.

Historical Development of OM JIT and TQC Manufacturing Strategy Paradigm Service Quality and Productivity Total Quality Management and Quality Certification

JIT and TQC

Manufacturing Strategy Paradigm

Service Quality and Productivity

Total Quality Management and Quality Certification

Historical Development of OM (cont’d) Business Process Reengineering Supply Chain Management Electronic Commerce

Business Process Reengineering

Supply Chain Management

Electronic Commerce

Current Issues in OM Coordinate the relationships between mutually supportive but separate organizations. Optimizing global supplier, production, and distribution networks. Increased co-production of goods and services

Coordinate the relationships between mutually supportive but separate organizations.

Optimizing global supplier, production, and distribution networks.

Increased co-production of goods and services

Current Issues in OM (cont’d) Managing the customer’s experience during the service encounter Raising the awareness of operations as a significant competitive weapon

Managing the customer’s experience during the service encounter

Raising the awareness of operations as a significant competitive weapon

Question Bowl A major objective of this book is to show how smart managers can do which of the following? Improve efficiency by lowering costs Improve effectiveness by creating value Increasing value by reducing prices Serving customers well All of the above Answer: e. All of the above

A major objective of this book is to show how smart managers can do which of the following?

Improve efficiency by lowering costs

Improve effectiveness by creating value

Increasing value by reducing prices

Serving customers well

All of the above

Question Bowl In the Input-Transformation-Output Relationship, a typical “input” for a Department Store is which of the following? Displays Stocks of goods Sales clerks All of the above None of the above Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”.)

In the Input-Transformation-Output Relationship, a typical “input” for a Department Store is which of the following?

Displays

Stocks of goods

Sales clerks

All of the above

None of the above

Question Bowl In which of the following decades did the concept of quality control originate? 1920’s 1930’s 1940’s 1950’s 1970’s Answer: b. 1930’s (Tools such as sampling inspection and statistical tables where first developed by Walter Shewhart, H. F. Dodge, and H. G. Romig.)

In which of the following decades did the concept of quality control originate?

1920’s

1930’s

1940’s

1950’s

1970’s

End of Chapter 1