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Introduction to Operations Management
Operations ManagementSession 1
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ObjectivesThe student will be able to:
– Define Operations Management – Describe the nature and role of the operations
function – Construct and use transformation models – Appreciate that operations produce both products and
services – Understand the difference between micro and macro
operations – Understand the importance of internal supplier-
customer chains – Build a Typology of Operations based on the Four V’s – Appreciate how operations fit in with Operations
Strategy
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Topics
• What is Operations?• What do Operations Managers do?• Operations Management in Goods and
Services• Transformation Model• Business Process Analysis• Typology of Operations• Missions and Strategies
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Definition
• Operations Management (OM)management of activities that lead to the creation of goods and services through the transformation of inputs to outputs
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Functions - Airline
OperationsFinance/
AccountingMarketing
Ground
Support
Flight
Operations
Facility
MaintenanceCatering
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OM - Critical Decisions1. Managing quality2. Design of goods and services3. Process and capacity design4. Layout design5. Human resources6. Location strategies7. Supply-chain management8. Inventory management9. Scheduling10. Maintenance
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The Critical Decisions - 1
• Quality management– Who is responsible for quality?– How do we define quality?
• Goods and services design– What product or service should we offer?– How should we design these products and
services?
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The Critical Decisions - 2
• Process and Capacity design– What processes will these products require
and in what order?– What equipment and technology is
necessary for these processes?
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The Critical Decisions - 3
• Layout design– How should we arrange the facility?– How large a facility is required?
• Human resources and job design– How do we provide a reasonable work
environment?– How much can we expect our employees
to produce?
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The Critical Decisions - 4
• Supply chain management and JIT “Just-in-time” Inventory, Material Requirements Planning– Should we make or buy this item?– Who are our good suppliers and how many
should we have?– How much inventory of each item should we
have?– When do we re-order?
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The Critical Decisions - 5
• Immediate, short term, and project scheduling– Is subcontracting production a good idea?– Are we better off keeping people on the payroll during
slowdowns?
• Maintenance– Who is responsible for maintenance?
• Location– Where should we put the facility– On what criteria should we base this location
decision?
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CR
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PURE GOODSTangible
Can be storedProduction precedes
consumptionLow customer
contactCan be transported
Quality is evident
PURE SERVICESQuality difficult to judge
Cannot be transported
High customer contact
Production and consumption are simultaneous
Cannot be storedIntangible
Output of most Operations a Mixture of Goods and Services
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Goods Versus Services - 1
Can be resold Can be inventoried Some aspects of
quality measurable Selling is distinct
from production
Reselling unusual Difficult to inventory Quality difficult to
measure Selling is part of
service
Good Service
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Goods Versus Services - 2
• Product is transportable
• Site of facility important for cost
• Often easy to automate
• Revenue generated primarily from tangible product
• Provider, not product is transportable
• Site of facility important for customer contact
• Often difficult to automate
• Revenue generated primarily from intangible service.
Good Service
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The Transformation Model
Input Transformed Resources
Input Transforming Resources
MaterialsInformationCustomers
FacilitiesStaff
TransformationProcess Customers
Input Resources Output Services+ Products
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Economic System Transforms Inputs to Outputs
Economic system transforms inputs to outputs at about an annual 1% increase in productivity:- capital 1/6 of 1%- labour 1/6 of 1%- management 2/3 of 1%
Land, Labour, Capital, Management
Goods and Services
Feedback Loop
Inputs Process Outputs
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Macro and Micro Operations
• Micro– An operation or process that can not be split
up into smaller operations and processes
• Macro– An operation or process that can be split up
into smaller operations and processes
• All Macro operations are made up of many Micro operations
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Internal Customer Concept
• To treat internal suppliers and customers as if they were independent external organisations
• Each micro-operation should identify its internal customers and internal suppliers
• Discuss with them what they need and what they can offer
• Related to Business Process Re-engineering (BPR)
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The Four V’s• Volume of demand
– How many the organisation makes– Service vs. Mass Production
• Variety in operations– The ability to adapt the transformation process to meet needs of
the customer– Taxi vs. Train
• Variation in demand– Adapting to changing demand
• Visibility of transformation– How much of the operations functions are visible to the customer– Some operations have mixed high/low visibility
eg Restaurant Front and Kitchen
Often they are in conflict
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Variation
in DemandHigh Low
Television plant
Fast food restaurant
Routine surgery
Mass rapid transport
Electricity generator factoryGourmet restaurantPioneering surgeryTaxi service
Bespoke tailor
University tutorials
Corporate tax advice
Department store
Off-the-peg suit plant
University lectures
Financial audits
Jeans shop
Electricity utility
Financial audits
Emergency service
London underground
Bread bakery
Consultancy advice
Shopping mall security
Trucking operation
Health care "Cook at your table" restaurantDentistMusic teacher
Most manufacturingPrepackaged sandwichmakerDental techniciansDistance learning
High LowVisibility
VarietyHigh Low
VolumeLow High
A Typology of Operations
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The Most Important Conflict
Volume vs Variety
Project Job Batch Mass Continuous
Product UniqueUnique
aspect to each
product
Made to order
Made to stock
Commodity
Volume Very lowVery low
to lowLow to med
High Very high
Variety InfiniteVery high
to highMedium to high
Low Very low
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Process Types - Products
Project
Job
Batch
Mass
Continuous
Volume
Var
iety
Low
Hig
h
Low High
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Process Types - Services
Professional
Service (e.g shops)
Mass Services
Volume
Var
iety
Low
Hig
h
Low High
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Organisation Mission Statement
• Mission – the purpose or rationale for an organisation’s existence
• Example Mission Statement –“To manufacture and service a growing and profitable worldwide microwave communications business that exceeds our customers’ expectations”
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Operations Management Mission Statement
• General –To produce products consistent with the company’s mission as the worldwide low-cost manufacturer
• Specific – To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production and field service opportunities
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Strategies
• Strategy – How an organisation expects to achieve its missions and goals
• Generic Strategies – – Competing on price– Competing on differentiation– Competing on response
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