Operations Management: Transforming Resources into Goods and Services

1. Operations Management • Development and administration of the activities involved in transforming resources into goods and services. • Historically called “production” or “manufacturing” where the focus was on methods to operate a factory • “Operations” view the operations functions as a whole rather than just inputs and outputs • The planning and designing of the processes that transform resources into finished products; managing the transformation process; ensuring high quality of finished goods. FHF 8-3

2. Operations Management • Manufacturing – activities and processes used in making tangible products (also called production) • Production – activities and processes used in making tangible products (also called manufacturing) • Operations – the activities and processes used in making both tangible and intangible products FHF 8-3

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

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

5. Service Businesses – • Airlines • Universities • Hotels • Restaurants • Nonprofit organizations • Over 70% of all employment in developed economies; fastest growth of jobs FHF …continued on next page 8-10

6. Manufacturing and Service Compared FHF 8-8

7. Designing Operations Process What is the appropriate method of transformation? • A. Standardization – the making of identical interchangeable components or products. Faster, reduces production costs • Televisions, Ballpoint pens, Tortilla chips etc. • B. Modular Design – creation of an item in self-contained units that can be combined or interchanged to create different products • Personal computers -- CPU’s, motherboards, monitors, Automobiles FHF …continued on next page 8-10

8. Designing Operations Process • C. Customization – making products to meet a particular customer’s needs or wants • Repair services, Photocopy services, bridges, ships Mass Customization – making products to meet needs or wants of a large number of individual customers. • Customer selects model, size, color, style, design • Fitness program, travel packages FHF …continued on next page 8-10

9. 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 • Once the company knows the process it will use to create its products, then they need to decide on; • Facility location • Facility (physical) Layout FHF 8-13

10. Facility Layout • Fixed-Position Layout--Project organization • All resources needed for the product are brought to a central location. • Unique product e.g., construction, exploration • A company using a fixed position layout is called a project organization • Process Layout-- Intermittent organization • Layout is organized into departments that group related processes • Produce products to customers’ specifications, e.g.,hospital • Product Layout--Continuous manufacturing org • Production is broken down into relatively simple tasks assigned to workers positioned along an assembly line. • E.g., automobiles, TV FHF 8-15

11. Sustainability and Manufacturing • Pressure has increased for manufacturing and production systems to reduce waste and improve sustainability • Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas) • Consumers prefer to purchase goods that were manufactured in an environmentally-friendly facility • Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas) FHF 8-17

12. Connecting and integrating all parties or members of the distribution system in order to satisfy customers [ ] Also called Logistics: includes all the activities involved in obtaining and managing raw materials and component parts, managing finished products, packaging them and getting them to customers. Supply Chain Management FHF 8-18

13. Supply Chain Management: Purchasing Buying of all materials needed by the organization • Desired quality • Correct quantities • Lowest cost • Otherwise known as Procurement FHF 8-19

14. Supply Chain Management: Inventory All raw materials, components, completedor 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

15. 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

16. Managing 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

17. 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