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Operations Management is…

Explore the systematic design, direction, and control of processes that transform inputs into services and products. Learn about key functions and types of organizations in operations management.

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Operations Management is…

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  1. Transformation Processes(Adding value) Outputs Inputs Operations Management is… “The systematic design, direction and control of processes that transform inputs into services and products for internal, as well as external, customers.”

  2. Functions • Accounting • Distribution • Engineering • Operations • Finance • Human resources • Marketing Types of Organizations Bank Construction Government Health care Manufacturing Retailing Transportation Wholesaling • ----------------- • ----------------- • ----------------- • ----------------- • ----------------- • ----------------- • ----------------- • ----------------- Operations Management as a Function

  3. Processes • Processes should add value. • Processes can be broken down into sub-processes, which in turn can be broken down further. • Any process that is part of a larger process is considered a “nested process.” • Each process and each nested process has inputs and outputs.

  4. Process View of an Ad Agency Accounting process • Advertisement design and planning process • Create the ad to the needs of the client and prepare a plan for media exposure • Output interface process • Communicate with client, get needs, and coordinate progress Inputs Outputs • Production process • Prepare ad for publication and deliver to media outlets

  5. Outputs to Internal or to External customers Inputs from other processes Transformation Processes(Adding value) External vs. Internal Customers • External Customers are those who purchase the goods and services. • Internal Customers are those who receive the output of others within the firm. They are part of the transformation process.

  6. Service Processes and Manufacturing Processes Manufacturing processes change materials in one or more of the following dimensions: • Physical properties • Shape • Fixed dimensions • Surface finish • Joining parts and materials If a process isn’t doing at least one of these, then it is a service (non-manufacturing) process.

  7. Goods Production Tangible Can be inventoried Low customer contact Capital Intensive Quality easily measured Service Production Intangible Can’t be inventoried High customer contact Labor Intensive Quality hard to measure Manufacturing and Service Most firms provide both goods and services.

  8. Value Chains • Value chains are an interrelated series of processes that produce a service or product to the satisfaction of customers. • Value chains may have core processes or support processes. • Core processes deliver value to external customers. • Support processes provide vital inputs for the core processes.

  9. Progressive Insurance • Grew from $1.3 billion to $11 in 13 years. • How did they do it? • Operational Innovation (Designing new processes) • Immediate Response Claims Handling (24 hours a day). • Streamlined claims processing, from 7-10 days to 9 hours. • Web site for agents only. • Web site for customer information, inquiries and routine processing. • Agents quickly go to scene of accident.

  10. Operations as a Set of Decisions • Recognize and clearly define the problem. • Collect the information needed to analyze possible alternatives. • Choose the most attractive alternative. • Implement the chosen alternative. Basic Decision-making Steps

  11. Operations as a Set of Decisions • Development of new capabilities • Maintenance of existing capabilities • Design of new processes • Development and organization of value chains • Key performance measures Tactical Decisions Strategic Decisions • Process improvement and performance measures • Management and planning of projects • Generation of production and staffing plans • Inventory management • Resource scheduling

  12. Other Challenges in Operations Management • Rapid technological change • Ethical issues across cultures • Increasing diversity of the workforce • Environmental impact issues

  13. Managing Value Chains Managing Processes Using Operationsto Compete Supply Chain Strategy Location Process Strategy Operations As a Competitive Weapon Inventory Management Process Analysis Forecasting Operations Strategy Process Performance & Quality Sales & OperationsPlanning Constraint Management Project Management Process Layout Resource Planning Lean Systems Scheduling Addressing the Challenges in Operations Management

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