Chapter 1 Introduction to OM

1. Chapter 1Introduction to OM Walmart Vs. Sears/JC Penny in retail Boeing missed production deadline … Why some companies succeed While others fail

2. Managing that part of the organization responsible for producing goods and services Management of systems or processes that create goods and/or provide services Operations Management

3. An OrganizationThe Three Basic Functions Figure 1.1 What is producing?

4. Value-Added Process Figure 1.2 The operations function involves the conversion of inputs into outputs Value added Inputs * Land * Labor * Capital Outputs Goods Services Transformation/ Conversion process Feedback Control (Measurement) Feedback Feedback

5. Food Processor Table 1.2 Value-added = Value or price of outputs – Cost of inputs What about services?

6. Tangible Act Goods-service Continuum Goods Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile Repair, fast food Grameen Cell phone Product/Service? Home remodeling, retail sales Automobile assembly, steel making

7. Hospital Process • Product packages = Good(s) + service(s) • Added Value

8. Production of Goods vs. Delivery of Services • Production of goods • Tangible output • Production oriented • Delivery of services • An act • Yet operations are similar!

9. Example! Goods vs Service

10. Scope of Operations Management • Forecasting • Capacity planning • Scheduling • Managing inventories • Assuring quality • Motivating & Training employees • Deciding where to locate facilities • Supply chain management • And more . . . Example!

11. Types of Operations

12. Decline in Manufacturing Jobs in US! Increase of Service Jobs • Productivity • Increasing productivity allows companies to maintain or increase their output using fewer workers • Outsourcing • Some manufacturing work has been outsourced to more productive companies Bangladesh!

13. More than half of the total R&D performed is in the manufacturing industries When a California manufacturing job is lost, an average of 2.5 service jobs are lost Accounts for most exports Manufacturing Matters What about Outsourcing

14. Service jobs are often less structured than manufacturing jobs Customer contact is higher Services hire many low-skill, entry-level workers Employee turnover is higher Input variability is higher Service performance can be affected by worker’s personal factors Managing Services is Challenging

15. Operations Management Planning and Decision Making

16. Decision Making of an O. Manager

17. Approaches (Make Informed Decision) • 1- Models • 2- Quantitative approaches • 3- Analysis of trade-offs • 4- Systems approach • 5- Establishing priorities • Ethics

18. A model is

19. 1- Models • An abstraction of reality. • A simplified version (typically) • Physical ~ Crash test • Schematic ~ Blueprints • Mathematical ~ Statistical Tradeoffs • Models are not perfect • Pros and cons of models

21. 2- Quantitative Approaches • Linear programming • Queuing Techniques • Inventory models • Project models • Statistical models Vs. Qualitative Approaches

22. Decision on the amount of inventory to stock 3- Analysis of Trade-Offs

23. Suboptimization Systems Approach“The whole is greater than the sum of the parts.”

24. 5- Establishing prioritiesPareto 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?

25. Consider how a decision will affect Shareholders ~ Financial statements Management Employees ~ Worker safety, Hiring/firing workers, Worker’s rights Customer ~ Quality, Product safety Community ~ Closing facilities Environment ~ Product safety Ethical Issues

26. Business Operations Overlap Operations Figure 1.5 Marketing Finance

27. Operations Interfaces Production Marketing Distribution Purchasing Public Relations Operations Legal Personnel Accounting MIS Lead time

28. Historical Evolution of Operations Management • Industrial revolution (1770’s) • End of craft production • Introduction of Machine Power • Scientific management (1911) & Ford Model T • Mass production • Interchangeable parts • Division of labor • Human relations movement (1920-60)~ Hawthorne • Decision models (1915, 1960-70’s)~ IM Models, SPC • Influence of Japanese manufacturers (After WWII) • Quality revolution Table 1.7

29. The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior Operations strategy Working with fewer resources Revenue management Process analysis and improvement Increased regulation and product liability Lean production Trends in Business impacting OM

30. Group AssignmentG-C1 Case: Total Recall P-33

31. Suppliers’ Suppliers DirectSuppliers Final Consumer Distributor Producer Simple Product Supply Chain Figure 1.7 Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service

32. A Supply Chain for Bread

33. 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 Learning Objectives

34. 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 Learning Objectives