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Chapter 1Introduction
The 3 Dimensions of Operations
The Realm of Operations
The Operations Function
Marketing Operations Finance
-Creating Demand -Production of goods -Acquisition and
-Generating Sales & services, 80% of allocation of
both physical & capital
human resources
Manufacturing Service
Tangible Act
Production of goods – tangible output
Delivery of services – an act
Goods vs vs Service
Steel productionAutomobile fabrication
Home remodelingRetail sales
Auto RepairAppliance repair
Maid ServiceManual car wash
TeachingLawn mowing
High percentage goodsLow percentage service
Low percentage goodsHigh percentage service
Manufacturing vs ServiceManufacturing vs Service
Characteristic Manufacturing Service
Output
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct
Tangible
Low
High
Low
High
Easy
High
Intangible
High
Low
High
Low
Difficult
Lowquality problems
An Operation As A Productive System
Transformation (Conversion) Process
Goods or Services
Inputs Outputs Energy
Materials
Labor
Capital
Information
Feedback information for control of process inputs and process technology
What is Operations Mgmt.?
Creation and Distribution of Goods and Services
Procurement of Required Materials
What is Operations Mgmt.?
The Traditional Model OM transforms factors of production into
goods or services of higher value The Business Process Model of the
Firm OM is involved in doing or supporting the four core sets of business processes
Determining customer needs Developing product strategy (product innovation) Managing the entire supply chain Managing non-value adding support activities
Implications of the Business Process Perspective
Operations Managers Must Maintain a Cross-functional perspective Concern about pleasing the customer is
paramount A resource balancing act: things, humans
and information The Operations Manager must wear many
hats Profit = MS1 x MS2 x MS3
= market size x market share x margin on sales
where margin on sales = price – cost
Managing the Operations Subsystem Functions of the operations manager:
Planning Product Planning Facilities Design
Organizing Determines the activities required to achieve the
operations subsystem’s goals. Assign authority for carrying them out.
Controlling Measure the outputs to see if theyconform to
what has been planned.
Functions of the operations manager
Planning & Organizing Inputs
-Management
-Labor
-Capital
-Land
Planning & Organizing
The Conversion
Process
Outputs
-Goods
-Services
Feedback to enhance control
General Model for Production/Operations Management
Conversion Process
Inputs Outputs
Random Fluctuations
ControllingControlling the Conversion System
-Controlling Operations-Inventory Control-Quality Control
Feedback
PlanningPlanning the Conversion
System-Strategies & Plans for
Operations-Forecasting
-Capacity Planning-Facility Location
-Layout
OrganizingOrganizing for
Conversion-Organizing & Staffing
for Operations-Job design, work
measure, operationsstandards
Monitor
Tactical & Strategic Decisions
Operations Management Decisions
Work Force
Quality
Process
Capacity
Inve
ntor
y
Job
Design
Work Measure
Managing Work ForceP
lanning Quality
Quality C
ontrol
-Process Selection
-Choice of T
ech.
-
Layout
Facilities Decision
Sched. Oper.
Proj. Sched.
Inde
p. D
eman
dM
ater
ials
Req
uire
men
t
P
lann
ing
Criteria for Operations Decisions
Cost Quality
Concerned with the quality of product or service produced by operations
Dependability May be measured by:
Percentage of stockout Percentage of delivery promises met
Criteria for Operations Decisions
Flexibility Involves the ability of operations to
make changes in product design or in the volume of product delivery
Strategy Operations Management
Evolution of Strategy Know thy enemy/Know the customer
Forces impacting strategy Information technology/e-commerce Increase customer participation/demands Market growth opportunities may be limited
Your markets might be maturing Geographic expansion opportunities may be limited
Two Basic Approaches Focus on your core competencies (stick to your knitting) Demand innovation—investigate your customers’ total
needs and expand your product offering scope
POM: An Evolutionary PerspectiveDivision of Labor Massive data StorageTime Study Analysis & OptimizationStandards, Planning & Clerical DutiesControl
Tomorrow
The Continual Evolution of POM Practice
Quantitative Tech. Dominance of Service SystemLP Govt. RegulationsPERT & CPM Consumers' demand on P.O.M.
Automation, Robotry, & Computerized ControlInternational Scope of Productive SystemsForeign Imports in U.S. Markets
ScientificManageme
nt
Computers
OperationsResearch
Today'sDevelopment
1875-1925
1955 -Present
1940-Presen
t
CommonMarket
MoslemWorld
EasternBlock
Remants
U.S.A.
China
Japan/Korea
A More Complicated World
Other Southern Hemisphere States
CA.
The Impact of Pace Dimensions of Pace
Rate of new product introductions Rate of new process technology
introductions Rate of new players—often global,
introductions Consequences thereof on:
Organization structure Strategic processes Manufacturing processes
Future Challenges
To the OM function Scarcity of worthwhile human resources Deflation, inflation and/or currency
fluctuations A wired supply chain (is B2B still valid?) Increased customer involvement New product/process technologies The Intellectual Property Challenge Globalism
China / Japan / Europe / Mexico /So-called 3rd world