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1. CHAPTER 1
3. 3 Basic Functions of Business Organizations
4. Operations Management Operations Management:
Design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
OM is the management of processes that produce and distribute products and/or services to customers.
OM’s objective is to make sure that the processes work effectively and efficiently.
5. Operations: A Transformation Process
6. Physical -- manufacturing
Location -- transportation
Exchange -- retailing
Storage -- warehousing
Physiological -- health care
Informational -- telecommunications Different Types of Transformations
7. Input-Transformation-Output Relationships
8. A service is an intangible process with direct customer involvement in the transformation process. The location of the service facility is important.
A good is the physical output of some process with little customer involvement in the transformation process.
Many overlaps between Service Processes and Good Processes:
Manufacturers provide services as part of their products.
Services manufacture the physical products they deliver to their customers or consume goods in creating the service (e.g., McDonald’s). Differences between Services and Goods?
9. Operations Management (Cont.) Operations Management:
Design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.
OM is the management of processes that produce and distribute products and/or services to customers.
OM’s objective is to make sure that the processes work effectively and efficiently.
10. Efficiency and Effectiveness Efficiency: Doing something at the lowest possible cost.
11. Typical Operations Decisions and Their Hierarchy
12. An Example Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably
Strategy: Obtain a college education
Tactics: Select a college and a major
Operations: Register, buy books, take courses, study, graduate, get job
14. Operations as Services An emerging model in industry
Core services + value-added services
15. Core Services Basic things that customers (internal or external) want from products they purchase:
To be made correctly
Customized to customer needs
Delivered on time
Priced competitively
Somewhat easier to emulate or copy
16. Value-Added Services Services that differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way
Information
Problem solving
Sales support
Field support
Significantly more difficult to copy and implement
17. Reasons to Study Operations Management A business education is incomplete without an understanding of modern approaches to managing operations.
OM provides a systematic way of looking at organizational process.
OM presents interesting career opportunities:
Supply chain management
Quality assurance
Purchasing
And more
The concepts and tools of OM are widely used in managing other functions of a business.
18. CHAPTER 2
19. Key Performance Indicators (KPI) Key performance indicators (KPI): A set of measures that help managers evaluate a company’s economic performance and spot the need for changes in operations.
Financial measures: day’s cash on hand, operating income by units or division, etc.
Nonfinancial metrics: average time to respond to service calls, lead time to fill customer orders, percentage of sales from new products, etc.
A basic KPI -- Productivity
20. Productivity Productivity is a common measure on how well resources are being used. In the broadest sense, it can be defined as the following ratio:
One of the primary responsibilities of an operations manager is to achieve best use of an organization's resources.
Input: labor, capital, materials, energy, and others.
Output: goods and services.
21. Examples of Productivity Measures Multifactor Output Output
measure Labor + Capital + Energy Labor + Capital + Materials
22. Example 1 Input and output production data ($)
Output:
Finished units $10,000
Work in process $2,500
Dividends $1,000
Total output $13,500
Input:
Human $3,000
Material $153
Capital $10,000
Energy $540
Other expenses $1,500
Total input $15,193
23. Productivity Measures (other than $) Business Productivity Measure
Restaurant Customers (meals) per labor hour
Retail store Sales per square foot
Chicken farm Lb. of meat per lb. of feed
Utility plant Kilowatts per ton of coal
Paper mill Tons of paper per cord of wood
24. Example 2 You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.
a) Which productivity measure should be used?
Answer: Could be classified as a Partial Measure.
b) Is productivity increasing or decreasing?
Answer:
Last week’s productivity = 480/2000 = 0.24 forms/hr
This week’s productivity = 560/2400 = 0.23 forms/hr
So, productivity is decreasing slightly.
25. Example 3 (Page 32, problem 4) Two types of cars (Deluxe and Limited) were produced by a car manufacturer in 2005. Quantities sold, price per unit, and labor hours follow.
26. Solution to Example 3 A conventional measure of productivity.
May not provide all of the necessary information that is needed. For example, increases in productivity could result from decreases in quality, and/or increases in material cost.
27. Recap Operations management
Transformation process
Services vs. goods
Efficiency
Effectiveness
Value
