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Operations Management Fundamentals
- 1. 1 - 1 Dr. Ahmad H Sutawidjaya., M.Phil,M.Com,CSCP, ASCA, CIPM matriculation Operations and Productivity
- 2. 1 - 4 Outline u What Is Operations Management? u Organizing to Produce Goods and Services u Why Study OM? u What Operations Managers Do u The Heritage of Operations Management u Operations in the Service Sector u Exciting New Trends in Operations Management u Scope Production and Operations Management
- 5. 1 - 7 The best way to start understanding the nature of ‘operations’ is to look around you Everything you can see around you has been processed by an operation Every service you consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation Operations Managers create everything you buy, sit on, wear, eat, and throw away 7 Concept of Operations Management m m m m
- 6. 1 - 8 They are all operations Back office operation in a bank Kitchen unit manufacturing operation Retail operation Take-out / restaurant operation Examples of Operations 8
- 8. 1 - 10 Education is an operation ▸In an educational position the students are a primary input. ▸The transformation process is the learning process. ▸The main output is the educated student. ▸for Operation to take place there has to be schedule, lecture facilities, marketing, admission staff and management of the whole activity.
- 9. 1 - 11 What Is Operations Management? operations is is that part of as organization, which is concerned with the transformation of a range of inputs into the required output (services) having the requisite quality level. management is the process, which combines and transforms various resources used in the operations of the organization into value added services.
- 10. 1 - 12 What Is Operations Management? Production is the creation of goods and services Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs
- 11. 1 - 13 What Is Operations Management? Operations management (OM) is about the way organisations produce goods and services
- 12. 1 - 14 Figure : Schematic production system
- 13. 1 - 15 Figure : General model for managing operations
- 14. 1 - 16 Organizing to Produce Goods and Services u Essential functions: 1. Marketing – generates demand, customer to take buying the product. 2. Production/operations – creates the product 3. Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
- 15. 1 - 17 Organizational Charts Operations Teller scheduling Cheque clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Finance Investments Security Real estate Accounting Auditing Marketing Loans Commercial Industrial Financial Personal Mortgage Trust department Commercial Bank Figure 1.1(A)
- 16. 1 - 18 Organizational Charts Operations Ground support equipment Maintenance Ground operations Facility Maintenance Catering Flight operations Crew scheduling Flying Communications Dispatching Management science Finance/ Accounting Accounting Payables Receivables General ledger Finance Cash control International exchange Airline Figure 1.1(B) Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising
- 17. 1 - 19 Marketing Sales promotion Advertising Sales Market research Organizational Charts Operations Facilities Production and inventory control Quality assurance and control Supply-chain management Manufacturing Design Industrial engineering Process analysis Finance/ Accounting Disbursements/ credits Funds management Capital requirements Manufacturing Figure 1.1(C)
- 18. 1 - 20 Why Study OM? 1. OM is one of three major functions of any organization. We want to study how people organize themselves for productive enterprise 2. We want (and need) to know how goods and services are produced 3. We want to understand what operations managers do 4. OM is such a costly part of an organization
- 19. 1 - 21 What Operations Managers Do u Planning u Organizing u Staffing u Leading u Controlling Basic Management Functions
- 20. 1 - 22 The Critical Decisions 1. Design of goods and services u What goods or services should we offer? u How should we design these products and services? 2. Managing quality u How do we define quality? u Who is responsible for quality? Table 1.2 (cont.)
- 21. 1 - 23 The Critical Decisions 3. Process and capacity design u What process and what capacity will these products require? u What equipment and technology is necessary for these processes? 4. Location strategy u Where should we put the facility? u On what criteria should we base the location decision? Table 1.2 (cont.)
- 22. 1 - 24 The Critical Decisions 5. Layout strategy u How should we arrange the facility? u How large must the facility be to meet our plan? 6. Human resources and job design u How do we provide a reasonable work environment? u How much can we expect our employees to produce? Table 1.2 (cont.)
- 23. 1 - 25 The Critical Decisions 7. Supply-chain management u Should we make or buy this component? u Who should be our suppliers and how can we integrate them into our strategy? 8. Inventory, material requirements planning (MRP), and JIT u How much inventory of each item should we have? u When do we reorder? Table 1.2 (cont.)
- 24. 1 - 26 The Critical Decisions 9. Intermediate and short–term scheduling u Are we better off keeping people on the payroll during slowdowns? u Which jobs do we perform next? 10.Maintenance u How do we build reliability into our processes? u Who is responsible for maintenance? Table 1.2 (cont.)
- 25. 1 - 27 Where are the OM Jobs? u Technology/methods u Facilities/space utilization u Strategic issues u Response time u People/team development u Customer service u Quality u Cost reduction u Inventory reduction u Productivity improvement
- 26. 1 - 28 Figure 1.3 Opportunities
- 27. 1 - 29 Certifications u ASCA - Supply Chain Management Professionals, (AAFM, America) u CIPM – Certified International Project Management (AAFM, America) u APICS, the Association for Operations Management u Institute for Supply Management (ISM) u Project Management Institute (PMI) u Supply Chain Management Professionals
- 28. 1 - 30 Significant Events in OM Figure 1.3
- 29. 1 - 31 The Heritage of OM u Division of labour (Adam Smith 1776; Charles Babbage 1852) u Standardized parts (Whitney 1800) u Scientific Management (Taylor 1881) u Coordinated assembly line (Ford/ Sorenson 1913) u Gantt charts (Gantt 1916) u Motion study (Frank and Lillian Gilbreth 1922) u Quality control (Shewhart 1924; Deming 1950)
- 30. 1 - 32 The Heritage of OM u Computer (Atanasoff 1938) u CPM/PERT (DuPont 1957, Navy 1958) u Material requirements planning (Orlicky 1960) u Computer aided design (CAD 1970) u Flexible manufacturing system (FMS 1975) u Baldrige Quality Awards (1980) u Computer integrated manufacturing (1990) u Globalization (1992) u Internet (1995) *
- 31. 1 - 33 New Challenges in OM u Global focus u Just-in-time u Supply-chain partnering u Rapid product development, alliances u Mass customization u Empowered employees, teams To From u Local or national focus u Batch shipments u Low bid purchasing u Lengthy product development u Standard products u Job specialization
- 32. 1 - 34 Goods and Services u The manufacturing–service distinction is more like a continuum u most manufacturing companies provide some services (e.g., financing from an auto manufacturer) as well as goods u most service companies provide some goods (e.g., shampoo at a hair salon) as well as services u Nevertheless, the two extremes differ in important ways, which may impact how operations managers approach decision making in one case vs. another
- 33. 1 - 35 Characteristics of Goods u Tangible product u Consistent product definition u Production usually separate from consumption u Can be inventoried u Low customer interaction
- 34. 1 - 36 Characteristics of Services u Intangible product u Produced and consumed at same time u Often unique u High customer interaction u Inconsistent product definition u Often knowledge-based u Frequently dispersed
- 35. 1 - 37 Goods Versus Services Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Attributes of Goods (Tangible Product) Attributes of Services (Intangible Product) Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service Provider, not product, is often transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from the intangible service *
- 36. 1 - 38 Goods and Services Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counselling Percent of Product that is a Good Percent of Product that is a Service 100% 75 50 25 0 25 50 75 100% | | | | | | | | |
- 37. 1 - 39 Industry and Services as Percentage of GDP Services Manufacturing Australia Canada China Czech Rep France Germany Hong Kong Japan Mexico Russian Fed South Africa Spain UK US 90 − 80 − 70 − 60 − 50 − 40 − 30 − 20 − 10 − 0 −
- 38. 1 - 40 Manufacturing and Service Employment Figure 1.5(a)
- 39. 1 - 41 Changing Challenges Traditional Approach Reasons for Change Current Challenge Ethics and regulations not at the forefront Public concern over pollution, corruption, child labour, etc. High ethical and social responsibility; increased legal and professional standards Local or national focus Growth of reliable, low cost communication and transportation Global focus, international collaboration Lengthy product development Shorter life cycles; growth of global communication; CAD, internet Rapid product development; design collaboration Figure 1.5
- 40. 1 - 42 Changing Challenges Traditional Approach Reasons for Change Current Challenge Low cost production, with little concern for environment; free resources (air, water) ignored Public sensitivity to environment; ISO 14000 standard; increasing disposal costs Environmentally sensitive production; green manufacturing; sustainability Low-cost standardized products Rise of consumerism; increased affluence; individualism Mass customization Figure 1.5
- 41. 1 - 43 Changing Challenges Traditional Approach Reasons for Change Current Challenge Emphasis on specialized, often manual tasks Recognition of the employee's total contribution; knowledge society Empowered employees; enriched jobs “In-house” production; low-bid purchasing Rapid technological change; increasing competitive forces Supply-chain partnering; joint ventures, alliances Large lot production Shorter product life cycles; increasing need to reduce inventory Just-in-time performance; lean; continuous improvement Figure 1.5
- 42. 1 - 44 New Trends in OM u Ethics u Global focus u Environmentally sensitive production u Mass customization u Empowered employees u Supply-chain partnering u Just-in-time performance
- 43. 1 - 45 Figure : Scope of production and operations management
- 44. 1 - 46 uEvery organisation attempts to be successful in the market place by obtaining an acceptable market share through competitive strategies. uThe competitive advantage will be determined by the organisation's overall strategic plan and by its strategic objectives. uSuccess is dependent on the organisation adopting efficient and effective operations with respect to the manufacturing of their products or their services What Drives Operations? 46 COMPETITION!!
- 45. 1 - 47 Discussion uHow the operations activities in this company? uwww.Amazon.com uwww.alibaba.com