Introduction to Production & Operations Management Mod I

8/2/2019 Introduction to Production & Operations Management Mod I

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Introduction to Production &

Operations Management


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What is POM?

Production is the creation of goods and

services

Production and/or Operations Management

are the activities that transform resources into

goods and services


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Why Study POM?

It is one of the 3 critical parts of any organization:

Marketing generates demand

Operations creates the product

Finance/accounting tracks organizational performance,pays bills, collects money

It shows us how goods and services are produced

It shows us what POM managers do

It is the most costly part of any organization


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Jobs in POM

Less than 20% of all jobs are in manufacturing

(and they are declining)

Almost 60% of jobs are in the service sector

(and they are increasing)

Nearly half of all jobs are in POM

Most POM jobs are professional and/ormanagerial


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The Critical Decisions

Quality management

Who is responsible for quality?

How do we define quality?

Service and product design

What product or service should we offer?

How should we design these products and

services?


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The Critical Decisions - Continued

Process and capacity design

What processes will these products require andin what order?

What equipment and technology is necessaryfor these processes?

Location

Where should we put the facility

On what criteria should we base this locationdecision?


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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 toproduce?


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Supply chain management

Should we make or buy this item?

Who are our good suppliers and how many

should we have?

Inventory, material requirements planning,

How much inventory of each item should we

have? When do we re-order?


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Intermediate, short term, and projectscheduling Is subcontracting production a good idea?

Are we better off keeping people on the payrollduring slowdowns?

Maintenance

Who is responsible for maintenance?

When do we do maintenance?


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Significant Events in POM

Division of labor (Adam Smith, The Wealth of

Nations, 1776)

Industrial Revolution

Standardization of parts (Eli Whitney, 1765 - 1825) Cotton Gin (1792)

Contract with U.S. for muskets (1798)

Some doubt about true interchangeability

Simeon North (Middletown)

John Hall (Harpers Ferry)


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Significant Events in POM (cont.)

Scientific management (Frederick Taylor

1865 - 1915)

The Principles of Scientific Management, 1911

Match employees to jobs

Provide the proper training

Provide the proper methods and tools

Establish legitimate incentives


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Taylors 4 Principles of Scientific Management: Replace rule-of-thumb work methods with methods based on a

scientific study of the tasks

Scientifically select, train, and develop each worker rather thanpassively leaving them to train themselves

Cooperate with the workers to ensure that the scientificallydeveloped methods are being followed

Divide work nearly equally between managers and workers, so thatthe managers apply scientific management principles to planningthe work and the workers actually perform the tasks


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Coordinated assembly line (Henry Ford 1863 -1947)

Gantt charts (Henry Gantt 1861-1919)

Motion studies (Frank and Lillian Gilbreth, 1922)

Quality control (Shewhart, Juran, Feigenbaum,Deming, Taguchi, etc.)

CAD

Flexible manufacturing systems (FMS)

Computer integrated manufacturing (CIM)


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New Challenges in OM

Local or national focus

Batch shipments

Low bid purchasing Lengthy product

development cycles

Standardized products

Job specialization

Global focus

Just-in-time

Supply chain

partnering Rapid product

development

Strategic alliances

Mass customization Empowered

employees

Teams

From To


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Goods vs. Services


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Characteristics of Goods

Tangible product

Consistent productdefinition

Production usuallyseparate fromconsumption

Can be inventoried Low customer

interaction 1995 Corel Corp.


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Characteristics of Services

Intangible product

Produced & consumed atsame time

Often unique

High customer interaction

Inconsistent productdefinition

Often knowledge-based Frequently dispersed

1995 Corel Corp.


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Goods vs. Services

Can be resold

Can be inventoried

Some aspects ofquality measurable

Selling is distinct

from production

Reselling unusual

Difficult to

inventoryQuality difficult to

measure

Selling is part ofservice

Goods Service


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Goods vs. Services - Continued

Product istransportable

Site of facilityimportant for cost

Often easy to automate

Revenue generated

primarily from tangibleproduct

Provider, not productis transportable

Site of facilityimportant forcustomer contact

Often difficult toautomate

Revenue generatedprimarily fromintangible service

Goods Service


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Goods Contain Services / Services ContainGoods

0 25 50 75 100255075100

AutomobileComputerInstalled Carpeting

Fast-food MealRestaurant Meal

Auto RepairHospital Care

Advertising AgencyInvestment Management

Consulting ServiceCounseling

Percent of Product that is a Good Percent of Product that is a Service


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New Challenges in Operations

Management


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Changing Challenges for theOperations Manager

Past Causes FutureLocal ornationalfocus

Low-cost, reliable worldwidecommunication andtransportation networks

Global Focus

Batch (large)

shipments

Cost of capital puts pressure on

reducing investment ininventory

Just-in-time

shipments

Low-bidpurchasing

Quality emphasis requires thatsuppliers be engaged in productimprovement

Supply-chainpartners

Lengthy

productdevelopment

Shorter life cycles, rapid

international communication,computer-aided design, andinternational collaboration

Rapid product

development,alliances,collaborativedesigns


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Changing Challenges for theOperations Manager


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The Productivity Challenge


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The Economic System TransformsInputs to Outputs

The economic system

transforms inputs to outputs

at about an annual 2.5%increase in productivity

(capital 38% of 2.5%), labor

(10% of 2.5%), management

(52% of 2.5%)

Land, Labor,

Capital,

Management

Goods and

Services

Feedback loop

Inputs Process Outputs


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Measure of process improvement

Represents output relative to input

Only through productivity increases can

our standard of living improve

Productivity

Productivity UnitsproducedInput used=


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Adam Smith on Productivity

He asserted that ten workers could produce

48,000 pins per day if each of eighteen

specialized tasks was assigned to particular

workers. Average productivity: 4,800 pins perworker per day. But absent the division of

labor, a worker would be lucky to produce

even one pin per day.


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Henry Ford on Productivity

In 1907, Henry Ford announced his goal for the FordMotor Company: to create "a motor car for the greatmultitude." At that time, automobiles were expensive,custom-made machines.

Ford realized he'd need a more efficient way to producethe Model T in order to lower the price. He and his teamlooked at other industries and found four principles thatwould further their goal: Interchangeable parts

Continuous flow

Division of labor

Reducing wasted effort


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Frank Gilbreth on Productivity

improved a five-thousand-year-old job and

had enabled bricklayers to lay brick faster with

less effort and fatigue. On one particularly

difficult type of wall, where the previousrecord had been 120 bricks per hour, his

methods allowed them to lay 350 bricks, an

increase in productivity of over 190%.


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Walter Shewhart on Productivity

the original notions of Total Quality Management

and continuous improvement trace back to a former

Bell Telephone employee named Walter

Shewhart. One of W. Edwards Deming's teachers, hepreached the importance of adapting management

processes to create profitable situations for both

businesses and consumers, promoting the utilization

of his own creation: the SPC chart.


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Impact of Quality Improvement

Parts per man hour

95

100

105

110

115

Year A Year B Year C

Cost per unit decreased

$1.50

$1.75

$2.00

$2.25


Average worker's annual cash

compensation increased

24000

25000

26000

27000


Productivity improved Costs were pared Wages increased


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Measurement Problems

Qualitymay change while the quantity of

inputs and outputs remains constant

External elements may cause an increase or

decrease in productivity

Precise units of measure may be lacking


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Productivity Increase

Labor- contributes about 10% of the annual

increase

Capital- contributes about 32% of the annual

increase

Management- contributes about 52% of the

annual increase


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Key Variables for Improved LaborProductivity

Basic education appropriate for the labor force

Diet of the labor force

Social overhead that makes labor available

Maintaining and enhancing skills in the midst

of rapidly changing technology and knowledge


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Comparison of Productivity


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Service Productivity

Typically labor intensive

Frequently individually processed

Often an intellectual task performed by

professionals

Often difficult to mechanize

Often difficult to evaluate for quality


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Current Trends

U.S. is becoming more of a knowledge

intensive service economy

Globalization

Total Quality Control

Need for flexibility and innovation

Documents

Introduction to Production & Operations Management Mod I