The document provides an overview of operations management, covering its definition, historical milestones, and key factors influencing it today. It discusses the evolution of production systems, the role of technological advancements, and the significance of strategic decision-making in organizations. Additionally, it highlights the growing importance of service operations management and the impact of global competition and advanced technologies on operations.

1. 1 1

 2002 South-Western/Thomson Learning
2002 South-Western/Thomson Learning TM
TM
Slides prepared
Slides prepared
by John Loucks
by John Loucks

2. 2
Chapter 1
Chapter 1
Introduction to Operations Management
Introduction to Operations Management

3. 3
Overview
Overview

Introduction
Introduction

Historical Milestones in OM
Historical Milestones in OM

Factors Affecting OM Today
Factors Affecting OM Today

Different Ways of Studying OM
Different Ways of Studying OM

Wrap-Up: What World-Class Producers Do
Wrap-Up: What World-Class Producers Do

4. 4
Introduction
Introduction

Operations management
Operations management is the management of an
is the management of an
organization’s productive resources or its production
organization’s productive resources or its production
system.
system.

A
A production system
production system takes inputs and converts
takes inputs and converts
them into outputs.
them into outputs.

The
The conversion process
conversion process is the predominant activity
is the predominant activity
of a production system.
of a production system.

The primary concern of an
The primary concern of an operations manager
operations manager is the
is the
activities of the conversion process.
activities of the conversion process.

5. 5
Organizational Model
Organizational Model
Marketing
Marketing
MIS
MIS
Engineering
Engineering
HRM
HRM
QA
QA
Accounting
Accounting
Sales
Sales
Finance
Finance
OM
OM

6. 6
Entry-Level Jobs in OM
Entry-Level Jobs in OM

Purchasing planner/buyer
Purchasing planner/buyer

Production (or operations) supervisor
Production (or operations) supervisor

Production (or operations) scheduler/controller
Production (or operations) scheduler/controller

Production (or operations) analyst
Production (or operations) analyst

Inventory analyst
Inventory analyst

Quality specialist
Quality specialist

7. 7
Historical Milestones in OM
Historical Milestones in OM

The Industrial Revolution
The Industrial Revolution

Post-Civil War Period
Post-Civil War Period

Scientific Management
Scientific Management

Human Relations and Behaviorism
Human Relations and Behaviorism

Operations Research
Operations Research

The Service Revolution
The Service Revolution

8. 8
The Industrial Revolution
The Industrial Revolution

The
The industrial revolution
industrial revolution developed in England in the
developed in England in the
1700s.
1700s.

The steam engine, invented by James Watt in 1764,
The steam engine, invented by James Watt in 1764,
largely replaced human and water power for factories.
largely replaced human and water power for factories.

Adam Smith’s
Adam Smith’s The Wealth of Nations
The Wealth of Nations in 1776 touted
in 1776 touted
the economic benefits of the
the economic benefits of the specialization of labor
specialization of labor.
.

Thus the late-1700s factories had not only machine
Thus the late-1700s factories had not only machine
power but also ways of planning and controlling the
power but also ways of planning and controlling the
tasks of workers.
tasks of workers.

9. 9
The Industrial Revolution
The Industrial Revolution

The industrial revolution spread from England to
The industrial revolution spread from England to
other European countries and to the United Sates.
other European countries and to the United Sates.

In 1790 an American, Eli Whitney, developed the
In 1790 an American, Eli Whitney, developed the
concept of
concept of interchangeable parts
interchangeable parts.
.

The first great industry in the US was the textile
The first great industry in the US was the textile
industry.
industry.

In the 1800s the development of the gasoline engine
In the 1800s the development of the gasoline engine
and electricity further advanced the revolution.
and electricity further advanced the revolution.

By the mid-1800s, the old
By the mid-1800s, the old cottage system
cottage system of
of
production had been replaced by the
production had been replaced by the factory system
factory system.
.

. . . more
. . . more

10. 10
Post-Civil War Period
Post-Civil War Period

During the post-Civil War period great expansion of
During the post-Civil War period great expansion of
production capacity occurred.
production capacity occurred.

By post-Civil War the following developments set the
By post-Civil War the following developments set the
stage for the great production explosion of the 20th
stage for the great production explosion of the 20th
century:
century:

increased capital and production capacity
increased capital and production capacity

the expanded urban workforce
the expanded urban workforce

new Western US markets
new Western US markets

an effective national transportation system
an effective national transportation system

11. 11
Scientific Management
Scientific Management

Frederick Taylor is known as the father of
Frederick Taylor is known as the father of scientific
scientific
management
management. His
. His shop system
shop system employed these steps:
employed these steps:

Each worker’s skill, strength, and learning ability
Each worker’s skill, strength, and learning ability
were determined.
were determined.

Stopwatch studies were conducted to precisely set
Stopwatch studies were conducted to precisely set
standard output per worker on each task.
standard output per worker on each task.

Material specifications, work methods, and routing
Material specifications, work methods, and routing
sequences were used to organize the shop.
sequences were used to organize the shop.

Supervisors were carefully selected and trained.
Supervisors were carefully selected and trained.

Incentive pay systems were initiated.
Incentive pay systems were initiated.

12. 12
Scientific Management
Scientific Management

In the 1920s, Ford Motor Company’s operation
In the 1920s, Ford Motor Company’s operation
embodied the key elements of scientific management:
embodied the key elements of scientific management:

standardized product designs
standardized product designs

mass production
mass production

low manufacturing costs
low manufacturing costs

mechanized assembly lines
mechanized assembly lines

specialization of labor
specialization of labor

interchangeable parts
interchangeable parts

13. 13
Human Relations and Behavioralism
Human Relations and Behavioralism

In the 1927-1932 period, researchers in the
In the 1927-1932 period, researchers in the
Hawthorne Studies realized that human factors were
Hawthorne Studies realized that human factors were
affecting production.
affecting production.

Researchers and managers alike were recognizing
Researchers and managers alike were recognizing
that psychological and sociological factors affected
that psychological and sociological factors affected
production.
production.

From the work of
From the work of behavioralists
behavioralists came a gradual
came a gradual
change in the way managers thought about and
change in the way managers thought about and
treated workers.
treated workers.

14. 14
Operations Research
Operations Research

During World War II, enormous quantities of
During World War II, enormous quantities of
resources (personnel, supplies, equipment, …) had to
resources (personnel, supplies, equipment, …) had to
be deployed.
be deployed.

Military
Military operations research
operations research (OR) teams were formed
(OR) teams were formed
to deal with the complexity of the deployment.
to deal with the complexity of the deployment.

After the war, operations researchers found their way
After the war, operations researchers found their way
back to universities, industry, government, and
back to universities, industry, government, and
consulting firms.
consulting firms.

OR helps operations managers make decisions when
OR helps operations managers make decisions when
problems are complex and wrong decisions are
problems are complex and wrong decisions are
costly.
costly.

15. 15
The Service Revolution
The Service Revolution

The creation of services organizations accelerated
The creation of services organizations accelerated
sharply after World War II.
sharply after World War II.

Today, more than two-thirds of the US workforce is
Today, more than two-thirds of the US workforce is
employed in services.
employed in services.

About two-thirds of the US GDP is from services.
About two-thirds of the US GDP is from services.

There is a huge trade surplus in services.
There is a huge trade surplus in services.

Investment per office worker now exceeds the
Investment per office worker now exceeds the
investment per factory worker.
investment per factory worker.

Thus there is a growing need for service operations
Thus there is a growing need for service operations
management.
management.

16. 16
The Computer Revolution
The Computer Revolution

Explosive growth of computer and communication
Explosive growth of computer and communication
technologies
technologies

Easy access to information and the availability of
Easy access to information and the availability of
more information
more information

Advances in software applications such as Enterprise
Advances in software applications such as Enterprise
Resource Planning (ERP) software
Resource Planning (ERP) software

Widespread use of email
Widespread use of email

More and more firms becoming involved in E-
More and more firms becoming involved in E-
Business using the Internet
Business using the Internet

Result:
Result: faster, better decisions over greater distances
faster, better decisions over greater distances

17. 17
Today's Factors Affecting OM
Today's Factors Affecting OM

Global Competition
Global Competition

Quality, Customer Service, and Cost Challenges
Quality, Customer Service, and Cost Challenges

Rapid Expansion of Advanced Technologies
Rapid Expansion of Advanced Technologies

Continued Growth of the Service Sector
Continued Growth of the Service Sector

Scarcity of Operations Resources
Scarcity of Operations Resources

Social-Responsibility Issues
Social-Responsibility Issues

18. 18
Studying Operations Management
Studying Operations Management

Operations as a System
Operations as a System

Decision Making in OM
Decision Making in OM

19. 19
Operations as a System
Operations as a System
Inputs
Inputs Outputs
Outputs
Conversion
Conversion
Subsystem
Subsystem
Production System
Production System
Control
Control
Subsystem
Subsystem

20. 20
Inputs of an Operations System
Inputs of an Operations System

External
External

Legal, Economic, Social, Technological
Legal, Economic, Social, Technological

Market
Market

Competition, Customer Desires, Product Info.
Competition, Customer Desires, Product Info.

Primary Resources
Primary Resources

Materials, Personnel, Capital, Utilities
Materials, Personnel, Capital, Utilities

21. 21
Conversion Subsystem
Conversion Subsystem

Physical
Physical (Manufacturing)
(Manufacturing)

Locational Services
Locational Services (Transportation)
(Transportation)

Storage Services
Storage Services (Warehousing)
(Warehousing)

Exchange Services
Exchange Services (Retailing)
(Retailing)

Other Private Services
Other Private Services (Insurance)
(Insurance)

Government Services
Government Services (Federal)
(Federal)

22. 22
Outputs of an Operations System
Outputs of an Operations System

Direct
Direct

Products
Products

Services
Services

Indirect
Indirect

Waste
Waste

Pollution
Pollution

Technological Advances
Technological Advances

23. 23
Production as an Organization Function
Production as an Organization Function

US companies cannot compete with marketing,
US companies cannot compete with marketing,
finance, accounting, and engineering alone.
finance, accounting, and engineering alone.

We focus on OM as we think of global
We focus on OM as we think of global
competitiveness, because that is where the vast
competitiveness, because that is where the vast
majority of a firm’s workers, capital assets, and
majority of a firm’s workers, capital assets, and
expenses reside.
expenses reside.

To succeed, a firm must have a strong operations
To succeed, a firm must have a strong operations
function teaming with the other organization
function teaming with the other organization
functions.
functions.

24. 24
Decision Making in OM
Decision Making in OM

Strategic Decisions
Strategic Decisions

Operating Decisions
Operating Decisions

Control Decisions
Control Decisions

25. 25
Strategic Decisions
Strategic Decisions

These decisions are of strategic importance and have
These decisions are of strategic importance and have
long-term significance for the organization.
long-term significance for the organization.

Examples include deciding:
Examples include deciding:

the design for a new product’s production process
the design for a new product’s production process

where to locate a new factory
where to locate a new factory

whether to launch a new-product development plan
whether to launch a new-product development plan

26. 26
Operating Decisions
Operating Decisions

These decisions are necessary if the ongoing
These decisions are necessary if the ongoing
production of goods and services is to satisfy market
production of goods and services is to satisfy market
demands and provide profits.
demands and provide profits.

Examples include deciding:
Examples include deciding:

how much finished-goods inventory to carry
how much finished-goods inventory to carry

the amount of overtime to use next week
the amount of overtime to use next week

the details for purchasing raw material next month
the details for purchasing raw material next month

27. 27
Control Decisions
Control Decisions

These decisions concern the day-to-day activities of
These decisions concern the day-to-day activities of
workers, quality of products and services, production
workers, quality of products and services, production
and overhead costs, and machine maintenance.
and overhead costs, and machine maintenance.

Examples include deciding:
Examples include deciding:

labor cost standards for a new product
labor cost standards for a new product

frequency of preventive maintenance
frequency of preventive maintenance

new quality control acceptance criteria
new quality control acceptance criteria

28. 28
What Controls the Operations System?
What Controls the Operations System?

Information about the outputs, the conversions, and
Information about the outputs, the conversions, and
the inputs is fed back to management.
the inputs is fed back to management.

This information is matched with management’s
This information is matched with management’s
expectations
expectations

When there is a difference, management must take
When there is a difference, management must take
corrective action to maintain control of the system
corrective action to maintain control of the system

29. 29
Wrap-Up: World Class Practice
Wrap-Up: World Class Practice

OM important in
OM important in any
any organization
organization

Global competition forces rapid evolution of OM
Global competition forces rapid evolution of OM

Decision based framework focus of course
Decision based framework focus of course

Strategic, Operating, and Control
Strategic, Operating, and Control

30. 30
Chapter 1 HW Assignment
Chapter 1 HW Assignment

Using FIU as a business in education and treating operation
Using FIU as a business in education and treating operation
management as:
management as:
1.
1. A production system
A production system
1.
1. draw a graph which shows its primary inputs,
draw a graph which shows its primary inputs,
outputs, the conversion system, and its control
outputs, the conversion system, and its control
subsystem.
subsystem.
2.
2. Also explain how the production system works.
Also explain how the production system works.
2.
2. A business function,
A business function,
1.
1. identify two issues for each of strategic, operational,
identify two issues for each of strategic, operational,
and control decisions.
and control decisions.

Due date: 1/22/2008
Due date: 1/22/2008

31. 31
End of Chapter 1
End of Chapter 1