Chapter 1 - Introduction to Operations Management

1. Chapter 1 - Introduction to Operations Management Operations Management 6th Edition R. Dan Reid & Nada R. Sanders

2. Learning Objectives • Define operations management. • Describe difference between manufacturing and service organizations. • Describe decisions that operations managers make. • Identify major historical developments in operations management. • Identify current trends in operations management. • Describe the flow of information between operations management and other business functions.

3. Operations Management The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company

4. Operations Management Characteristics • A management function • An organization’s core function • In every organization • Small or large • Service or Manufacturing • For-profit or Not-for-profit

5. Typical Organization Chart

6. What is the Role of OM? • OM Transforms inputs to outputs • Inputs are resources such as • People, Facilities and Processes, Material, Technology and Information • Outputs are finished goods and services

7. OM’s Transformation Process

8. OM’s Transformation Role • To add value • Increase product value at each stage • Value added is the net increase between output product value and input material value • Provide an efficient transformation • Efficiency – means performing activities well and at the lowest possible cost

9. Service Organizations vs. Manufacturers Services: • Intangible product • Product cannot be inventoried • High customer contact • Short response time • Labor intensive Manufacturers: • Physical product • Product is inventoried • Low customer contact • Longer response time • Capital intensive

10. Similarities for Service/Manufacturers • Both use technology • Both have quality, productivity, & response issues • Both must forecast demand • Both can have capacity, layout, and location issues • Both have customers, suppliers, scheduling and staffing issues

11. Service vs. Manufacturing • Manufacturing can provide services • Services can provide tangible goods • Some companies are a blend of Service/Manufacturing/Quasi-Manufacturing (QM) organizations • QM characteristics include • Low customer contact • Capital intensive

12. Growth of the Service Sector

13. OM Decisions • All organizations make decisions and follow a similar path Strategic decisions  Tactical decisions • Tactical and Strategic decisions must align

14. OM Decisions – cont’d Strategic Decisions • Set the direction for the entire company; they are broad in scope and long-term in nature • Less frequent Tactical Decisions • Focus on specific day-to-day issues like resource needs, schedules, & quantities to produce • More frequent

15. OM Decisions – cont’d

16. Historical Development of OM

17. Historical Development cont’d

18. Scientific Management Scientific management is an approach to management that focused on improving output by redesigning jobs and determining acceptable levels of worker output. • Promoted by Frederick W. Taylor • Increase worker productivity and organizational output • Popularized by Henry Ford • Assembly line • Mass production

19. Human Relations Movement • Hawthorne studies are studies responsible for creating the human relations movement, which focused on giving more consideration to workers’ needs. • Human relations movement is a philosophy based on the recognition that factors other than money can contribute to worker productivity. • Job enlargement is an approach in which workers are given a larger portion of the total task to do. • Job enrichment is an approach in which workers are given a greater role in planning.

20. Management Science • Management science is a field of study that focuses on the development of quantitative techniques to solve operations problems. • An example is Linear programing

21. Just-in-time (JIT) • Just-in-time (JIT) is An all-inclusive organizational philosophy designed to achieve high-volume production through elimination of waste and continuous improvement.

22. Total Quality Management (TQM) • Total quality management (TQM) is a philosophy that seeks to improve quality by eliminating causes of product defects and by making quality the responsibility of everyone in the organization. • ISO 9000 is a global set of standards, with many companies requiring their suppliers to meet the standards as a condition for obtaining contracts.

23. Business Process Reengineering, Flexibility, and Time-based competition • Reengineering is redesigning a company’s processes to make them more efficient. • Flexibility is an organizational strategy in which the company attempts to offer a greater variety of product choices to its customers. • Mass customization is the ability of a firm to highly customize its goods and services at high volumes. • Time-based competition is an organizational strategy focusing on efforts to develop new products and deliver them to customers faster than competitors.

24. Supply Chain Management • Supply chain management (SCM) Management of the flow of materials from suppliers to customers in order to reduce overall cost and increase responsiveness to customers.

25. Global Marketplace • Global marketplace is a trend in business focusing on customers, suppliers, and competitors from a global perspective. • OM decides • Whether to tailor products to different customer needs • Where to locate facilities • How to manage suppliers • How to meet local government standards • Regional trading agreements • North American Free Trade Agreement (NAFTA) • European Union (EU) • World Trade Organization (WTO)

26. Sustainability and Green Operations • Sustainability is a trend in business to consciously reduce waste, recycle, and reuse products and parts. • ISO 14000 was developed by the International Organization for Standardization (ISO) to provide guidelines and a certification program documenting a company’s environmentally responsible actions.

27. Electronic Commerce • Business-to-business (B2B) is Electronic commerce between businesses. • Business-to-customers (B2C) is Electronic commerce between businesses and their customers. • Customer-to-customer (C2C) isElectronic commerce between customers.

28. Outsourcing and Flattening of the World • Outsourcing is obtaining goods or services from an outside provider

29. Big Data Analytics • Big data analytics is applying mathematics and statistics to large volumes of structured and unstructured data to gain unprecedented business insights. • Data comes in all forms • Point-of-sale (POS) • Radio frequency identification (RFID) • Global positioning systems (GPS) data • Twitter feeds • Facebook • Call centers • Consumer blogs.

30. Today’s OM Environment • Customers demand better quality, greater speed, and lower costs • Companies implementing lean system concepts – a total systems approach to efficient operations • Recognized need to better manage information using ERP and CRM systems • Increased cross-functional decision making

31. OM in Practice • OM has the most diverse organizational function • Manages the transformation process • OM has many faces and names such as; • V. P. Operations, Director of Supply Chains, Manufacturing Manager • Plant Manger, Quality Specialists, etc. • All business functions need information from OM in order to perform their tasks

32. Business Information Flow

33. OM Across the Organization • Most businesses are supported by the functions of: • Operations • Marketing • Finance

34. OM Across the Organization (cont’d) • Marketing is not fully able to meet customer needs if they do not understand what operations can produce • Finance cannot judge the need for capital investments if they do not understand operations concepts and needs • Information systems (IS) enables the information flow throughout the organization • Human Resources must understand job requirements and worker skills • Accounting needs to consider inventory management, capacity information, and labor standards

35. Chapter 1 Highlights • OM is the business function that is responsible for managing and coordinating the resources needed to produce a company’s products and services. • The role of OM is to transform organizational inputs into company’s products or services outputs • OM is responsible for a wide range of decisions, ranging from strategic to tactical. • Organizations can be divided into manufacturing and service organizations, which differ in the tangibility of the product or service

36. Chapter 1 Highlights – cont’d • Many historical milestones have shaped OM. Some of these are the Industrial Revolution, scientific management, the human relations movement, management science, and the computer age • OM is a highly important function in today’s dynamic business environment. Among the trends with significant impact are Just-In-Time, TQM, Reengineering, Flexibility, Time-based Competition, SCM, Global Marketplace, and Environmental Issues • OM teams with all other business functions