4. 1-4
Learning Objectives
Define the term operations management
Identify the three major functional areas of
organizations and describe how they
interrelate
Compare and contrast service and
manufacturing operations
Describe the operations function and the
nature of the operations manager’s job
5. 1-5
Learning Objectives
Differentiate between design and operation
of production systems
Describe the key aspects of operations
management decision making
Briefly describe the historical evolution of
operations management
Identify current trends that impact operations
management
7. PRODUCTION
IS
Converting raw materials and
natural resources to useful products
IS
Initiate, improve and renew the
wealth
IS The measure of the ability to
achieve progress
17. 1-17
Value-Added & Product
Packages
Value-added is the difference between the
cost of inputs and the value or price of
outputs.
Product packages are a combination of
goods and services.
Product packages can make a company
more competitive.
18. 1-18
Value-Added
The essence of the operation function is to
add value during the transformation process
The value added in a for-profit organization
is the difference between cost of inputs and
price of outputs
Value added could be applied in a non-profit
organization and as their value to society
value added used in firm for research,
improvement, salaries and investment and
so on.
19. 1-19
Automobile assembly, steel making
Home remodeling, retail sales
Automobile Repair, fast food
Goods-service Continuum
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
• Goods and Services often occurs jointly
•The Goods-Services combination is a continuum (chain)
•There are relatively few pure goods and few pure services
20. 1-20
Example
Food Processor: Goods Oriented
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
vegetables
Metal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
21. 1-21
Example
Hospital Process: Service Oriented
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patients
Hospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
22. 1-22
Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/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 television
newscasts, telephone, satellites
23. Tangible Act-Oriented
Goods Services
Manufacturing and Service Organizations differ chiefly because
manufacturing is goods-oriented and service is act-oriented.
Manufacturing vs. Service?
Instructor Slides 1-23
24. 1-24
Production of Goods vs. Delivery of
Services
Production of goods – tangible output
Delivery of services – an act (intangible output)
Service job categories
Government
Wholesale/retail
Financial services
Healthcare
Personal services
Business services
Education, etc.,………….
25. Manufacturing vs. Service
1. Degree of customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
9. Evaluation of work
10. Ability to patent design
Instructor Slides 1-25
28. 1-28
Operations Management includes:
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
Supply chain management
And more . . .
Scope of Operations Management
29. 1-29
Decision Making
A primary function of operations
manager is to guide the system by
decision making
Decision either affect design of the system
or
affect the operation of the system
30. 1-30
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
Decision Making
System design
32. 1-32
Key Decisions of Operations
Managers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
The chief role of the operations
manager is that of planner and
decision maker
33. 1-33
Decision Making tools
Models
Quantitative approaches
Analysis of trade-offs
Systems approach
Establishing priorities
34. 1-34
Models
– Physical
– Schematic
– Mathematical
What are the pros and cons of models?
an abstraction of reality, a simplified
representation of the system.
35. Types of Models:
Physical Models
Look like their real-life counterparts
Schematic Models
Look less like their real-life counterparts than physical
models
Mathematical Models
Do not look at all like their real-life counterparts
Models
Instructor Slides 1-35
36. 1. Models are generally easier to use and less expensive than dealing
with the real system
2. Require users to organize and sometimes quantify information
3. Increase understanding of the problem
4. Enable managers to analyze “What if?” questions
5. Serve as a consistent tool for evaluation and provide a standardized
format for analyzing a problem
6. Enable users to bring the power of mathematics to solve a problem.
Benefits of Models
Instructor Slides 1-36
37. 1-37
Limitations of Models
Quantitative information may be emphasized
over qualitative
Models may be incorrectly applied and
results misinterpreted
Nonqualified users may not comprehend the
rules on how to use the model
Use of models does not guarantee good
decisions
38. 1-38
Quantitative Approaches
• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models, etc.,…..
An attempt to obtain
mathematically optimal solution to
managerial problems
39. 1-39
Analysis of Trade-Offs
Decision on the amount of inventory to stock
Increased cost of holding inventory Vs Level of customer service
What are the pros and cons of models?
What are the advantage and disadvantage of
models?
40. Systems Approach
System - a set of interrelated parts that must work together
The business organization is a system composed of subsystems
marketing subsystem
operations subsystem
finance subsystem
The systems approach
Emphasizes interrelationships among subsystems
Main theme is that the whole is greater than the sum of its parts
The output and objectives of the organization take precedence over
those of any one subsystem
Instructor Slides 1-40
41. 1-41
“The whole is greater than
the sum of the parts.”
Systems Approach
The objectives of the
organization as a whole take
precedence over those of
any one subsystems
Sub optimization
42. 1-42
Establishing
Priority
Certain few factors are more important than
the others, recognizing this enables the
managers to direct their efforts to where
they will do good and avoid wasting time
and energy on insignificant factors
How do we identify the vital few?
43. 1-43
Pareto 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?
44. 1-44
Pareto Phenomenon
1.Search for the few factors that will
have the greatest impact
2.Give them the highest priority
3.Use them for achieving the objective
or solving the problem
46. The Need for Supply Chain Management
In the past, organizations did little to
manage the supply chain beyond their
own operations and immediate suppliers
which led to numerous problems:
Oscillating inventory levels
Inventory stockouts
Late deliveries
Quality problems
Instructor Slides 1-46
47. Supply Chain Issues
1. The need to improve operations
2. Increasing levels of outsourcing
3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-business
7. The complexity of supply chains
8. The need to manage inventories
Instructor Slides 1-47
48. Elements of Supply Chain Management
Customers – what products/services do customers want
Forecasting – predicting timing and volume of customer demand
Design – incorporating customer wants, manufacturability, and time to
market
Capacity planning – matching supply and demand
Processing – controlling quality, scheduling work
Inventory – meeting demand requirements while managing costs
Purchasing – evaluating potential suppliers, supporting the needs of
operations on purchased goods and services
Suppliers – monitoring supplier quality, on-time delivery, and flexibility;
maintaining supplier relations
Location – determining the location of facilities
Logistics – deciding how to best move information and materials
Instructor Slides 1-48
50. 1-50
Stage of Production Value
Added
Value of
Product
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
A Supply Chain for Bread