This document provides an overview of operations management concepts. It discusses key topics such as transformation processes, manufacturing versus services, capacity, facilities planning and layout, technology, quality management, and supply chain management. Operations management involves planning, organizing, and supervising the activities required to transform inputs into finished goods and services.

1. FHF
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. part
Managing for Quality
3
and Competitiveness
CHAPTER 6 The Nature of Management
CHAPTER 7 Organization, Teamwork, and Communication
CHAPTER 8 Managing Service and Manufacturing
Operations
FHF
8-2

3. Operations Management
 Development and administration of the
activities involved in transforming resources
into goods and services
• Emphasis on viewing the operations function as a whole
• The “core” of most organizations
Manufacturing/Production
• Activities and processes used in making tangible products
Operations
• The activities and processes used in making both tangible and intangible
products
FHF
8-3

4. Transformation Processes of
Operations Management
…continued on next page FHF
8-4

5. Transformation Processes of
Operations Management
 Inputs
 The resources (labor, materials, energy, etc.) that are
converted into outputs
 Outputs
 The goods, services and ideas that result from the
conversion of inputs
FHF
8-5

6. OM in Service Businesses
 Salons, colleges, airlines
 70% of all employment in the United
States; fastest growth market for jobs
 Represent over 72% of GDP in U.S.
 Services are actions/performances directed at consumers
 Different than manufacturing that produces tangible products
FHF
8-6

7. Services Are...
 Generally intangible
 Perishable
 Demand can be variable
 Cannot be saved, stored, resold, or packaged
FHF
8-7

8. Manufacturing and Service
Compared
Manufacturing Service
Tangible Intangible
Uniform inputs Customized inputs
Uniform outputs Customized outputs
Less labor intensive More labor intensive
Easy to measure productivity More difficult to measure productivity
(due to variations in demand, service,
requirements and intangibility)
FHF
8-8

9. Planning the Product
What do consumers want?
Develop the product
 Can be a long and expensive process
Turn product ideas into workable design
 The job of engineers and research and development departments
FHF
8-9

10. Designing Operations Process
Standardization
 The making of identical interchangeable components or
products. Faster, reduces production costs
Modular Design
 Creation of an item in self-contained units that can be
combined or interchanged to create different products
…continued on next page FHF
8-10

11. Designing Operations Process
Customization
 Making products to meet a particular customer’s needs or
wants
Mass Customization
 Making products to meet needs or wants of a large number
of individual customers.
FHF
8-11

12. Capacity
Maximum load that an organizational unit
can carry or operate
FHF
8-12

13. Planning Facilities
 Facility location
• High costs involved
• Permanent
 Pay attention to
• Proximity to market
• Availability of raw materials, transportation, power, labor
 Climatic influences
• Community characteristics
• Taxes and inducements
FHF
8-13

14. Facilities Layout
 Fixed-Position Layout
 Project Organization
 Process Layout (Intermittent Organization)
 Product Layout (Continuous Manufacturing Organization)
…continued on next page FHF
8-14

15. Facilities Layout
Fixed-Position Layout (Project Organization)
All resources needed for a product are brought
to a central location
Process Layout (Intermittent Organization)
Layout is organized into departments that group related processes
Product Layout (Continuous Manufacturing Organization)
Production is broken down into relatively simple tasks assigned to workers
positioned along a line
FHF
8-15

16. Technology
Basic underlying technology dictates each
industry’s transformation process
Computer Assisted Manufacturing
Manufacturing that employs specialized computer systems to guide and control the
transformation process
Flexible Manufacturing
The direction of machinery by computers to adapt to different versions of similar
operations
Computer-Integrated Manufacturing (CIM)
A complete system that designs products, manages machines and materials and
controls the operations function
FHF
8-16

17. Sustainability and Manufacturing
 Pressure has increased for manufacturing and
production systems to reduce waste and improve
sustainability
 Consumers prefer to purchase goods that were manufactured in
an environmentally-friendly facility
FHF
8-17

18. Supply Chain Management
[ Connecting and integrating all parties or
members of the distribution system in
order to satisfy customers ]
FHF
8-18

19. Purchasing
Buying of all materials needed by the
organization
Desired quality
Correct quantities
Lowest cost
Otherwise known as Procurement
FHF
8-19

20. Inventory
All raw materials, components, completed
or partially completed products, and pieces
of equipment that a firm uses
Inventory Control
• Process of determining how many supplies and goods are
needed and keeping track of quantities on hand, where each
item is and who is responsible for it
FHF
8-20

21. Supply Chain Management
Economic Order Quantity Model
A model that identifies the optimum number of items to
order to minimize the costs for managing them (ordering,
storing and using)
Just-in-Time Inventory Management
Eliminates waste by using smaller quantities arriving “just in time” for use in
the transformation process.
Materials Requirements Planning
Planning system that schedules the precise quantity of materials needed to
make the product.
FHF
8-21

22. Outsourcing
 Increasingly a part of supply chain
management in operations
 Outsource aspects of operations to companies that
provide products more efficiently, at lower cost,
greater customer satisfaction.
FHF
8-22

23. Routing & Scheduling
Routing
Sequence of operations through which the product must pass
Scheduling
The assignment of required tasks to departments or specific
machines, workers, or teams.
FHF
8-23

24. Program Evaluation and
Review Technique (PERT)
[ Identifies major activities required to
complete a project, determines the critical
path and estimates time needed to finish ]
FHF
8-24

25. Quality
Degree to which a good or service meets
the demands and requirements of customers
A critical element of operations management
Determining quality can be difficult
Subjective based on consumers’ expectations and perspectives
FHF
8-25

26. Managing Quality
Quality Control
Processes an organization uses to maintain its established
quality standards.
Total Quality Management (TQM)
Philosophy that uniform commitment to quality will promote a culture that
meets customers’ perceptions of quality
Statistical Process Control
System to collect and analyze information about production processed to
pinpoint quality problems in the system
FHF
8-26

27. International Organization
for Standardization
(ISO) system of quality management
standards designed to ensure the customer’s
quality standards are met
ISO 9000: Quality assurance standards for product quality
under many conditions
ISO 14000: Uniform environmental standards for use by global
corporations to help businesses be cleaner, safer and less wasteful
FHF
8-27

28. Inspection and Sampling
Inspection
Reveals whether a product meets quality standards.
Sampling
How many items should be inspected.
Depends on potential costs of product flaws in terms of human
lives and safety.
FHF
8-28