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Ope r ations Management

Ope r ations Management. Chapter 1 – Operations and Productivity. PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e .

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Ope r ations Management

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  1. Operations Management Chapter 1 – Operations and Productivity PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e Some additions and deletions have been made by Ömer Yağız to this slide set. (Revised February 2012)

  2. Some real life scenarios which I used in the past to highlight the importance of Operations Management • fortunately, some of these scenarios are no more valid • many improvements have been realized both in the public and private sector • improvement, or continuous improvement, to be exact, is the right approach to increasing quality, efficiency, productivity, and profitability.

  3. Some Real Life Scenarios in OM • Many of us have witnessed the agony and the suffering (and even deaths) that many senior citizens have had to endure in order to collect their retirement or pension pay from the various commercial banks. This was an episode that repeated every month or every three months, especially in large urban centers. The government organizations and the banks involved in this service process unfortunately did nothing for a long time to improve the situation and increase the quality of this rather routine service (now the situation is a little better)

  4. Some Real Life Scenarios in OM SOME REAL-LIFE SCENARIOS IN OM • You mail a letter by Express Post (APS) to an address in İstanbul. The recipient gets it after 3 days; whereas a package sent to İstanbul via Yurtiçi Kargo (or any of the others) is in the hands of the addressee in 6 hours. Plus, order tracking on Google Earth! QUALITY OF SERVICE? • You buy a shirt from an expensive store and pay lots of money; the buttons come off after the shirt is worn three times. The manufacturer has to really make a special(!) effort to achieve this terrible quality.

  5. Some Real Life Scenarios in OM • A THY plane takes off 40 minutes late from an airport because some Japanese tourists on board forget to identify their baggage before boarding the plane. The plane flies from İstanbul to Ankara in 50 minutes. 40 minutes delay for a 50 minute flight !! HOW DO WE EXPLAIN THIS IN TERMS OF EFFICIENCY, PRODUCTIVITY, AND PROFITABILITY ? (This has been rectified some time ago by the elimination of baggage identification prior to boarding.)

  6. A real episode at Esenboğaon Feb. 6, 2012 Esenboğa Airport, two weeks ago lots of delays and cancellations due to snow and winter conditions an operations manager’s nightmare (kâbus) unhappy and angry passengers THY and TGS service personnel in a very difficult (and unenviable) position

  7. A real episode at Esenboğaon Feb. 6, 2012 • This serious situation had a very happy ending for the passengers and service personnel. HOW? • full and timely information given to passengers face-to-face and via electronic boards • effective and timely catering service to passengers at the gates • very courteous, understanding and helpful attitude by the ground service personnel towards the passengers • nobody had the courage to complain and/or say something bad about the situation, including myself..

  8. Some Real Life Scenarios in OM • Why do some people prefer McDonald’s or similar fast-food restaurants despite the fact that it they are more expensive than comparable food served elsewhere? The same is true for Varan and Ulusoy bus companies.. • When you go to some government office (say, the Tax Bureau) you spend so much you feel terribly exhausted after a very routine task. Is the whole process designed to maximize pain to citizens ? Now, things are a bit different; next slide…

  9. Some Real Life Scenarios in OM • Things are better at the Tax Bureau • attitude change on the part of personnel (civil servant concept) • technology in general, IT in particular, makes the whole process easier, less time-consuming, more efficient, and less costly • errors are minimized • personnel assist those in need of help for filling out forms, etc. • they even offer you free tea at the Hitit Vergi Dairesi..

  10. Some Real Life Scenarios in OM • Things are also better at Çankaya Kaymakamlığı.. • Apostille service unit • 1.5 TL per apostille charged • 2 X 1.5 TL = 3.00 TL • a 3-ply receipt costs 3.00 TL • no charge for 2 or less apostilles; 3 or more apostilles charged at the rate of 1.50 TL per apostille • amazingly clever practice by a public organization!! Olamaz, rüya mı bu?

  11. Some Real Life Scenarios in OM • During registration periods at many universities, poor students have to report to so many different offices and people, and have to wait so long in several lines. Not only the students but also instructors and administrators have to go through the same unpleasant experience. Indeed, we are a society of endless waiting lines! IS THIS SOMETHING ORDAINED BY GOD OR WHAT ?? (Now with online registration, the situation has improved somewhat)

  12. Outline • Global Company Profile: Hard Rock Cafe • What Is Operations Management? • Organizing to Produce Goods and Services • Why Study OM? • What Operations Managers Do • How This Book Is Organized

  13. Outline - Continued • The Heritage of Operations Management • Operations in the Service Sector • Differences between Goods and Services • Growth of Services • Service Pay • Exciting New Trends in Operations Management

  14. Outline - Continued • The Productivity Challenge • Productivity Measurement • Productivity Variables • Productivity and the Service Sector • Ethics and Social Responsibility

  15. Learning Objectives When you complete this chapter you should be able to: Define operations management Explain the distinction between goods and services Explain the difference between production and productivity

  16. Learning Objectives When you complete this chapter you should be able to: Compute single-factor productivity Compute multifactor productivity Identify the critical variables in enhancing productivity

  17. The Hard Rock Cafe • First opened in 1971 • Now – 121 restaurants in over 40 countries • Rock music memorabilia • Creates value in the form of good food and entertainment • 3,500+ custom meals per day in Orlando • How does an item get on the menu? • Role of the Operations Manager

  18. Köfteci Ramiz www.kofteciramiz.com

  19. DO & CO Catering www.doco.com

  20. What Is Operations Management? Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs Production is the creation of goods and services

  21. Transformation Process (Value Adding) OM Involves Managing Transformations Input Output • People • Plants • Parts • Processes • Planning and Control Transformation is enabled by The 5 Ps of OM:

  22. Transformations • Physical and chemical--manufacturing (shoes, PC’s, planes, paint, detergents) • Locational--transportation (rail, sea, air, road) • Exchange--retailing (all kinds of stores, offices), banking ?? • Storage--warehousing (normal and cold storage) • Physiological--health care (hospitals, clinics) • Informational--telecommunications (schools, Reuter Services, Internet and blogs, news media, TV services,METU)

  23. Capital Markets, Stockholders Finance Personnel Suppliers Workers Purchasing Operations Marketing Customers Operations as the Technical Core

  24. Organizing to Produce Goods and Services • Essential functions: • Marketing – generates demand • Production/operations – creates the product • Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

  25. Operations Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security Finance Investments Security Real estate Marketing Loans Commercial Industrial Financial Personal Mortgage Accounting Auditing Trust Department Organizational Charts Commercial Bank Figure 1.1(A)

  26. Operations Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science Finance/ accounting Accounting Payables Receivables General Ledger Finance Cash control International exchange Marketing Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising Organizational Charts Airline Figure 1.1(B)

  27. Operations FacilitiesConstruction; maintenance Production and inventory controlScheduling; materials control Quality assurance and control Supply chain management ManufacturingTooling; fabrication; assembly Design Product development and design Detailed product specifications Industrial engineering Efficient use of machines, space, and personnel Process analysis Development and installation of production tools and equipment Finance/ accounting Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall Marketing Sales promotion Advertising Sales Market research Organizational Charts Manufacturing Figure 1.1(C)

  28. Why Study OM? • OM is one of three major functions (marketing, finance, and operations) of any organization • We want (and need) to know how goods and services are produced • We want to understand what operations managers do • OM is such a costly part of an organization

  29. Finance/ Marketing Accounting OM Option Option Option Increase Reduce Reduce Sales Finance Production Current Revenue 50% Costs 50% Costs 20% Sales $100,000 $150,000 $100,000 $100,000 Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000 Gross Margin 20,000 30,000 20,000 36,000 Finance Costs – 6,000 – 6,000 – 3,000 – 6,000 Subtotal 14,000 24,000 17,000 30,000 Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500 Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500 Options for Increasing Contribution Increase in contribution 71% 21% 114%

  30. What Operations Managers Do Basic Management Functions Planning Organizing Staffing Leading Controlling

  31. Ten Decision Areas Chapter(s) • Design of goods and services 5 • Managing quality 6, Supplement 6 • Process and capacity 7, Supplement 7 design • Location strategy 8 • Layout strategy 9 • Human resources and 10, Supplement 10 job design • Supply chain 11, Supplement 11 management • Inventory management 12, 14, 16 • Scheduling 13, 15 • Maintenance 17 Ten Critical Decisions Table 1.2

  32. The Critical Decisions • Design of goods and services • What good or service should we offer? • How should we design these products and services? • Managing quality • How do we define quality? • Who is responsible for quality? Table 1.2 (cont.)

  33. The Critical Decisions • Process and capacity design • What process and what capacity will these products require? • What equipment and technology is necessary for these processes? • Location strategy • Where should we put the facility? • On what criteria should we base the location decision? Table 1.2 (cont.)

  34. The Critical Decisions • Layout strategy • How should we arrange the facility? • How large must the facility be to meet our plan? • Human resources and job design • How do we provide a reasonable work environment? • How much can we expect our employees to produce? Table 1.2 (cont.)

  35. The Critical Decisions • Supply chain management • Should we make or buy this component? • Who are our suppliers and who can integrate into our e-commerce program? • Inventory, material requirements planning, and JIT • How much inventory of each item should we have? • When do we re-order? Table 1.2 (cont.)

  36. The Critical Decisions • Intermediate and short–term scheduling • Are we better off keeping people on the payroll during slowdowns? • Which jobs do we perform next? • Maintenance • Who is responsible for maintenance? • When do we do maintenance? Table 1.2 (cont.)

  37. Where are the OM Jobs? Figure 1.2

  38. Where are the OM Jobs? • Technology/methods • Facilities/space utilization • Strategic issues • Response time • People/team development • Customer service • Quality • Cost reduction • Inventory reduction • Productivity improvement

  39. Significant Events in OM Figure 1.3

  40. The Heritage of OM • Division of labor (Adam Smith 1776; Charles Babbage 1852) • Interchangeable (standardized) parts (Whitney 1800) • Scientific Management (Taylor 1881) • Coordinated assembly line (Ford/ Sorenson 1913- (93 minutes vs. 12.5 hours for chassis assembly)) • Gantt charts (Gantt 1916) • Motion study (Frank and Lillian Gilbreth 1922) • Quality control (Shewhart 1924; Deming 1950)

  41. The Heritage of OM • Electronic digital computer (Atanasoff 1938) • not programmable; solved linear equations • CPM/PERT (DuPont 1957) • Material requirements planning (Orlicky 1960) • Computer aided design (CAD 1970) • Flexible manufacturing system (FMS 1975) • JIT,TQC,TQM,KANBAN, Poka Yoke (1980’s) • EFQM and Baldrige Quality Awards (1980) • Computer integrated manufacturing (1990) • Globalization (1992) • Internet (1995) • e-business, e-government (1996- )

  42. Eli Whitney • Born 1765; died 1825 • In 1798, received government contract to make 10,000 muskets • Showed that machine tools could make standardized parts to exact specifications • Musket (tüfek) parts could be used in any musket

  43. Frederick W. Taylor • Born 1856; died 1915 • Known as ‘father of scientific management’ • In 1881, as chief engineer for Midvale Steel, studied how tasks were done • Began first motion and time studies • Created efficiency principles

  44. Taylor’s Principles Management Should Take More Responsibility for: • Matching employees to right job • Providing the proper training • Providing proper work methods and tools • Establishing legitimate incentives for work to be accomplished

  45. Frank & Lillian Gilbreth • Frank (1868-1924); Lillian (1878-1972) • Husband-and-wife engineering team • Further developed work measurement methods • Applied efficiency methods to their home and 12 children! • Book & Movie: “Cheaper by the Dozen,” book: “Bells on Their Toes”

  46. Henry Ford • Born 1863; died 1947 • In 1903, created Ford Motor Company • In 1913, first used moving assembly line to make Model T • Unfinished product moved by conveyor past work station • Paid workers very well for 1911 ($5/day!) “The customer can have any color as long as it is black” H. Ford

  47. W. Edwards Deming • Born 1900; died 1993 • Engineer and physicist • Credited with teaching Japan quality control methods in post-WW2 • Used statistics to analyze process • His methods involve workers in decisions

  48. Deming Institute: http://deming.org

  49. Contributions From • Human factors (ergonomics, fatigue studies) • Industrial engineering • Management science (operations research) • Biological science • Physical sciences • Information technology

  50. What is Industrial Engineering ? Industrial engineering is concerned with the design, installation, and improvement of integrated systems of people, material, information, equipment and energy. It draws upon specializedknowledge and skills in the mathematical, physical and social sciences, together with the principles and methods of engineering analysis and design to specify, predict and evaluate theresults to be obtained from such systems. IIE Web Site -- http://www.iienet.org

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