Production and Operations Management

#Gaither Chapter 1#Chapter 1Introduction to Operations Management

#Gaither Chapter 1#OverviewIntroductionHistorical Milestones in OMFactors Affecting OM TodayDifferent Ways of Studying OMWrap-Up: What World-Class Producers Do#Gaither Chapter 1#IntroductionOperations management is the management of an organizations productive resources or its production system.A production system takes inputs and converts them into outputs.The conversion process is the predominant activity of a production system.The primary concern of an operations manager is the activities of the conversion process.#Gaither Chapter 1#Organizational Model MarketingMISEngineeringHRMQA AccountingSalesFinanceOM#Gaither Chapter 1#Entry-Level Jobs in OMPurchasing planner/buyerProduction (or operations) supervisorProduction (or operations) scheduler/controllerProduction (or operations) analystInventory analystQuality specialist#Gaither Chapter 1#Historical Milestones in OMThe Industrial RevolutionPost-Civil War PeriodScientific ManagementHuman Relations and BehaviorismOperations ResearchThe Service Revolution# 1700s Cottage Industry.... Machine power for human power.... factory system which resulted in greater productivity. 1790 Eli Whitney invented concept of interchangeable parts. Forced consistent production of parts. Variation evil. 1865 -1900 Joint stock companies formed changing capital structure of companies. Expansion into West created demand for products, development of rail lines provided quick, cheap transportation of goods. Also influx of labor from farm to urban centers. Early 1900s Frederick Taylor developed the concept of Shop System. Henry Ford put concepts into practice with assembly lines that utilized modern scientific management concepts..... Standardized product design, mass production for low mfg. costs, mechanized the lines, specialization of labor, & interchangeable parts.1927 -32 Hawtorne studies at Western Electric plant demonstrated human factors also impacted production. World War II required enormous qtys of supplies, people, etc. Operations Research teams formed to develop models to manage the complex logistics. Linear programming, PERT/CPM, forecasting developed/refined.Accelerated after WWII, 2/3s workforce in service and 2/3s GNP generated by service industry. Gaither Chapter 1#The Industrial RevolutionThe industrial revolution developed in England in the 1700s.The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories.Adam Smiths The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor.Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.

#Gaither Chapter 1#The Industrial RevolutionThe industrial revolution spread from England to other European countries and to the United Sates.In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.The first great industry in the US was the textile industry.In the 1800s the development of the gasoline engine and electricity further advanced the revolution.By the mid-1800s, the old cottage system of production had been replaced by the factory system.. . . more#Gaither Chapter 1#Post-Civil War PeriodDuring the post-Civil War period great expansion of production capacity occurred.By post-Civil War the following developments set the stage for the great production explosion of the 20th century:increased capital and production capacitythe expanded urban workforcenew Western US marketsan effective national transportation system#Gaither Chapter 1#Scientific ManagementFrederick Taylor is known as the father of scientific management. His shop system employed these steps:Each workers skill, strength, and learning ability were determined.Stopwatch studies were conducted to precisely set standard output per worker on each task.Material specifications, work methods, and routing sequences were used to organize the shop.Supervisors were carefully selected and trained.Incentive pay systems were initiated.#Gaither Chapter 1#Scientific ManagementIn the 1920s, Ford Motor Companys operation embodied the key elements of scientific management:standardized product designsmass productionlow manufacturing costsmechanized assembly linesspecialization of laborinterchangeable parts

#Gaither Chapter 1#Human Relations and BehavioralismIn the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production.Researchers and managers alike were recognizing that psychological and sociological factors affected production.From the work of behavioralists came a gradual change in the way managers thought about and treated workers.

#Gaither Chapter 1#Operations ResearchDuring World War II, enormous quantities of resources (personnel, supplies, equipment, ) had to be deployed.Military operations research (OR) teams were formed to deal with the complexity of the deployment.After the war, operations researchers found their way back to universities, industry, government, and consulting firms.OR helps operations managers make decisions when problems are complex and wrong decisions are costly.#Gaither Chapter 1#The Service RevolutionThe creation of services organizations accelerated sharply after World War II.Today, more than two-thirds of the US workforce is employed in services.About two-thirds of the US GDP is from services.There is a huge trade surplus in services.Investment per office worker now exceeds the investment per factory worker.Thus there is a growing need for service operations management.#Gaither Chapter 1#The Computer RevolutionExplosive growth of computer and communication technologiesEasy access to information and the availability of more informationAdvances in software applications such as Enterprise Resource Planning (ERP) softwareWidespread use of emailMore and more firms becoming involved in E-Business using the InternetResult: faster, better decisions over greater distances

#Gaither Chapter 1#Today's Factors Affecting OMGlobal CompetitionQuality, Customer Service, and Cost ChallengesRapid Expansion of Advanced TechnologiesContinued Growth of the Service SectorScarcity of Operations ResourcesSocial-Responsibility Issues#Gaither Chapter 1#Studying Operations ManagementOperations as a SystemDecision Making in OM# Table 1.5 discusses the concepts, Figure 1.2 shows the model of inputs, conversion, and outputs, and Table 1.6 shows the diversity of production systems. Table 1.7 shows various jobs available in OM. Highly paid, active market right now. More companies recognize strategic importance of OM. E.G.. Assets management..... inventory. Millions of $ tied up that could be applied to NPI, process improvement, R&D.Strategic ... what kind of product, process, and facility... location.. LONG-TERM Operating .... Planning production to meet demand Control .... Day-to-day activity of workers, product, processGaither Chapter 1#Operations as a SystemInputsOutputsConversionSubsystemProduction SystemControlSubsystem#Gaither Chapter 1#Inputs of an Operations SystemExternalLegal, Economic, Social, TechnologicalMarketCompetition, Customer Desires, Product Info.Primary ResourcesMaterials, Personnel, Capital, Utilities#Gaither Chapter 1#Conversion SubsystemPhysical (Manufacturing)Locational Services (Transportation)Storage Services (Warehousing)Exchange Services (Retailing)Other Private Services (Insurance)Government Services (Federal)#Gaither Chapter 1#Outputs of an Operations SystemDirectProductsServicesIndirectWastePollutionTechnological Advances#Gaither Chapter 1#Production as an Organization FunctionUS companies cannot compete with marketing, finance, accounting, and engineering alone.We focus on OM as we think of global competitiveness, because that is where the vast majority of a firms workers, capital assets, and expenses reside.To succeed, a firm must have a strong operations function teaming with the other organization functions.#Gaither Chapter 1#Decision Making in OMStrategic DecisionsOperating DecisionsControl Decisions

#Gaither Chapter 1#Strategic DecisionsThese decisions are of strategic importance and have long-term significance for the organization.Examples include deciding:the design for a new products production processwhere to locate a new factorywhether to launch a new-product development plan

#Gaither Chapter 1#Operating DecisionsThese decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.Examples include deciding:how much finished-goods inventory to carrythe amount of overtime to use next weekthe details for purchasing raw material next month#Gaither Chapter 1#Control DecisionsThese decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance.Examples include deciding:labor cost standards for a new productfrequency of preventive maintenancenew quality control acceptance criteria#Gaither Chapter 1#What Controls the Operations System?Information about the outputs, the conversions, and the inputs is fed back to management.This information is matched with managements expectationsWhen there is a difference, management must take corrective action to maintain control of the system#Gaither Chapter 1#Wrap-Up: World Class PracticeOM important in any organizationGlobal competition forces rapid evolution of OM Decision based framework focus of courseStrategic, Operating, and Control#Gaither Chapter 1#End of Chapter 1#Gaither Chapter 1#*

Slides prepared by Prakash.L