Chapter 1 Introduction to OM

1. Chapter 1Introduction to OM Agora Vs/ Meena Bazaar Vs. PQS 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. Organization’s Basic Functions Competitiveness?

4. Value-Added Process Value-added = Value or price of outputs – Cost of inputs

5. Value-Added Process 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

6. Food Processor Hospital Process

7. Tangible Act Products/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 Product packages = Good(s) + service(s) Make a company more competitive- more value to customers

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

9. Example! Goods vs Service- Key differences

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. 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!

12. 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

13. 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

14. Operations Business Operations Overlap Marketing Finance The operations function involves the conversion of inputs into outputs

15. Production Marketing Distribution Purchasing Public Relations Operations Legal Personnel Accounting MIS Operations interfaces with supporting functions Lead time

16. OM- Planning and Decision Making

17. Decision Making … (Level)

18. How to make decisions Different approaches to make informed decision.

19. 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. Quantitative Approaches • Linear programming • Queuing Techniques • Inventory models • Project models • Statistical models Vs. Qualitative Approaches

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

23. Establishing prioritiesPareto Phenomenon • A few factors account for a high percentage of the occurrence of some event(s). • The 80/20 Rule • 80% of problems are caused by 20% of the activities. How do we identify the vital few?

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

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. 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

27. Current trends in Business

28. Technology: The application of scientific discoveries to the development and improvement of goods and services Product and service technology Process technology Information technology Management Technology

29. Supply Chain Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service

30. A Supply Chain for Bread

31. 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