FHF

Operations ManagementOperations ManagementOperations ManagementOperations Management

• Development and administration of the activities involved in transforming resources into goods and services.

• Historically called “production” or “manufacturing” where the focus was on methods to operate a factory

• “Operations” view the operations functions as a whole rather than just inputs and outputs

• The planning and designing of the processes that transform resources into finished products; managing the transformation process; ensuring high quality of finished goods.

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FHF

Operations ManagementOperations ManagementOperations ManagementOperations Management

• Manufacturing – activities and processes used in making tangible products (also called production)

• Production – activities and processes used in making tangible products (also called manufacturing)

• Operations – the activities and processes used in making both tangible and intangible products

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FHF

Transformation Processes of Transformation Processes of Operations ManagementOperations Management

Transformation Processes of Transformation Processes of Operations ManagementOperations Management

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FHF

Services Are...Services Are...Services Are...Services Are...

Generally intangible Perishable Demand can be variable Cannot be saved, stored, resold, or packaged

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FHF

Service Businesses –Service Businesses –

• Airlines

• Universities

• Hotels

• Restaurants

• Nonprofit organizations

• Over 70% of all employment in developed economies; fastest growth of jobs

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FHF

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Manufacturing Service

Tangible Intangible

Uniform inputs Customized inputs

Uniform outputs Customized outputs

Less labor intensive More labor intensive

Easy to measure productivity

More difficult to measure productivity (due to variations in demand, service, requirements and intangibility)

Manufacturing and Service Manufacturing and Service ComparedCompared

Manufacturing and Service Manufacturing and Service ComparedCompared

FHF

Designing Operations ProcessDesigning Operations ProcessDesigning Operations ProcessDesigning Operations Process

What is the appropriate method of transformation?

• A. Standardization – the making of identical interchangeable components or products. Faster, reduces production costs

• Televisions, Ballpoint pens, Tortilla chips etc.

• B. Modular Design – creation of an item in self-contained units that can be combined or interchanged to create different products

• Personal computers -- CPU’s, motherboards, monitors, Automobiles

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FHF

Designing Operations ProcessDesigning Operations ProcessDesigning Operations ProcessDesigning Operations Process

• C. Customization – making products to meet a particular customer’s needs or wants

• Repair services

• Photocopy services

• Custom artwork

• Bridges

• Ships

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FHF

Designing Operations ProcessDesigning Operations ProcessDesigning Operations ProcessDesigning Operations Process

• Mass Customization – making products to meet needs or wants of a large number of individual customers.

• Customer selects

• Model, size, color, style, design

• Dell Computer

• Fitness program

• Travel packages

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FHF

Planning FacilitiesPlanning FacilitiesPlanning FacilitiesPlanning Facilities Facility location

• High costs involved

• Permanent

Pay attention to• Proximity to market

• Availability of raw materials, transportation, power, labor

Climatic influences• Community

characteristics

• Taxes and inducements

• Once the company knows the process it will use to create its products, then they need to decide on;

• Facility location

• Physical layout

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FHF

Facilities LayoutFacilities Layout•Fixed-Position Layout--Project organization

– All resources needed for the product are brought to a central location.

– Unique product e.g., construction, exploration

• A company using a fixed position layout is called a project organization

•Process Layout-- Intermittent organization

– Layout is organized into departments that group related processes

– Produce products to customers’ specifications, e.g.,hospital

•Product Layout--Continuous manufacturing org

– Production is broken down into relatively simple tasks assigned to workers positioned along an assembly line.

– E.g., automobiles, TV

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FHF

Sustainability and Sustainability and ManufacturingManufacturing

Sustainability and Sustainability and ManufacturingManufacturing

Pressure has increased for manufacturing and production systems to reduce waste and improve sustainability

Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas)

Consumers prefer to purchase goods that were manufactured in an environmentally-friendly facility

Conservation, recycling, alternative energy use, reduction of pollution (greenhouse gas)

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[ ]FHF

SUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MANAGEMENTSUPPLY CHAIN MANAGEMENT

Connecting and integrating all parties or members of the distribution system in order to satisfy customers

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Also called Logistics: includes all the activities involved in obtaining and managing raw materials and component parts, managing finished products, packaging them and getting them to customers.

FHF

PurchasingPurchasingPurchasingPurchasing

Buying of all materials needed by the organizationDesired quality

Correct quantities

Lowest cost

Otherwise known as Procurement

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FHF

InventoryInventoryInventoryInventory

All raw materials, components, completedor partially completed products, and pieces of equipment that a firm uses

Inventory Control• Process of determining how many supplies and

goods are needed and keeping track of quantities on hand, where each item is and who is responsible for it

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FHF

OutsourcingOutsourcingOutsourcingOutsourcing

Increasingly a part of supply chain management in operations

Outsource aspects of operations to companies that provide products more efficiently, at lower cost, greater customer satisfaction.

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FHF

Routing & SchedulingRouting & SchedulingRouting & SchedulingRouting & Scheduling

After all materials have been procured managers must then consider

RoutingSequence of operations through which the product must pass

SchedulingThe assignment of required tasks to departments or specific machines, workers, or teams.

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[ ]FHF

Program Evaluation and Program Evaluation and Review Technique (PERT)Review Technique (PERT)Program Evaluation and Program Evaluation and Review Technique (PERT)Review Technique (PERT)

Identifies major activities required to complete a project, determines the critical path and estimates time needed to finish

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FHF

QualityQualityQualityQuality

Degree to which a good or service meets the demands and requirements of customers

A critical element of operations management

Determining quality can be difficult

Subjective based on consumers’ expectations and perspectives

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FHF

Managing QualityManaging QualityManaging QualityManaging Quality

Quality Control Processes an organization uses to maintain its established quality standards.

Total Quality Management (TQM) Philosophy that uniform commitment to quality will promote a culture that meets customers’ perceptions of quality

Statistical Process ControlSystem to collect and analyze information about production processed to pinpoint quality problems in the system

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FHF

International Organization International Organization for Standardizationfor Standardization

International Organization International Organization for Standardizationfor Standardization

(ISO) system of quality management standards designed to ensure the customer’s quality standards are met

ISO 9000: Quality assurance standards for product quality under many conditions

ISO 14000: Uniform environmental standards for use by global corporations to help businesses be cleaner, safer and less wasteful

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FHF

Inspection and SamplingInspection and SamplingInspection and SamplingInspection and Sampling

InspectionReveals whether a product meets quality standards.

SamplingHow many items should be inspected.

Depends on potential costs of product flaws in terms of human lives and safety.

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