Session 1 Introduction to Operations Management Objectives Introduce and define operations management (OM)in terms of its contribution and the activities it involves. Describe how operations contributes to the overall betterment of society. Present operations as a function that addresses issues in both manufacturing and services. Show how operations management is gaining more recognition both internally and externally to an organization. Demonstrate how the operations management function interacts with the other functional areas within an organization. Present a brief history of operations management as a field and its evolution to its current role in an organization. Operations Management 5 1
1 Introduction to Operations Management Session 1 Operations Management 1–2 Objectives Objectives Objectives • Introduce and define operations management (OM) in terms of its contribution and the activities it involves. • Describe how operations contributes to the overall betterment of society. • Present operations as a function that addresses issues in both manufacturing and services. • Show how operations management is gaining more recognition both internally and externally to an organization. • Demonstrate how the operations management function interacts with the other functional areas within an organization. • Present a brief history of operations management as a field and its evolution to its current role in an organization
What Is Operations Management? Operations Management -Management of the conversion process which transforms inputs such as raw material and labor into outputs in the form of finished goods and services. External factors Inputs Adjust Measure Outputs Transformation process ☒ (Materials and/or (Goods and customers) Services) Components Feedback Operations Management Role of OM within an Organization Marketplace Corporate strategy Marketing strategy Operations strategy Finance strategy Operations Management 4 2
2 Operations Management 1–3 What Is Operations Management? What Is Operations Management? What Is Operations Management? • Operations Management –Management of the conversion process which transforms inputs such as raw material and labor into outputs in the form of finished goods and services. Operations Management 1–4 Role of OM within Role of OM within an Organization an Organization
An Operational-Level OM Perspective OM's function focuses on adding value through the transformation process (technical core)of converting inputs into outputs. -Physical:manufacturing -Locational:transportation -Exchange:retailing -Storage:warehousing -Physiological:health care -Informational:telecommunications -Distance:Logistics Operations Management 5 Input-Transformation-Output Relationships for Typical Systems Input-Transformation-Output Relationships for Typical Systems Primary Transformation System Inputs Components Function(s) Hospital Patients,medical MOs,nurses. Health care (physiciogicall Healthy individuals supples equioment Restaurant Hungry customers. Chet,watress Well-prepared tood,well served: Satstied customers food erwironment agreeable ervironment (physical and eochange) Automobie Sheet steel, Tools,equpment. Fabrication and assembly High-qualty cars factory engine parts workers of cars (physical) College or High school Teachers, Imparting knowedge and sklls Educated graduates,books (nformationa) individuals Department Shoppers,stock Displays,salesclerks Attract shoooers promote Sales to satisfied store of goods products,fil orders (exchange) customers Distribution Stockkeeping Storage bins, Storage and redistribution Fast delivery. center units (SKU) stockpickers availabiity of SKUs Operations Management 1-6 3
3 Operations Management 1–5 An Operational An Operational An Operational-Level OM Perspective -Level OM Perspective Level OM Perspective • OM’s function focuses on adding value through the transformation process (technical core) of converting inputs into outputs. –Physical: manufacturing –Locational: transportation –Exchange:retailing –Storage: warehousing –Physiological: health care –Informational: telecommunications –Distance: Logistics Operations Management 1–6 Input-Transformation-Output Relationships for Typical Systems Input-Transformation-Output Relationships for Typical Systems Relationships for Typical Systems
OM's Contributions to Society Higher Standard of Living -Ability to increase productivity -Lower cost of goods and services Better Quality Goods and Services -Competition increases quality Concern for the Environment -Recycling and concern for air and water quality Improved Working Conditions -Better job design and employee participation Operations Management Productivity Contribution:Wal-Mart (VIDEO LINK) (FINANCING) (Organizationa WAL-MAT Learning) (Point-of-sale data) satellite -ofsale data) Retail Outlet SUPPORT) Distribution Center Operations Management 1-8 4
4 Operations Management 1–7 OMOM’s Contributions to Society ’s Contributions to Society s Contributions to Society • Higher Standard of Living –Ability to increase productivity –Lower cost of goods and services • Better Quality Goods and Services –Competition increases quality • Concern for the Environment –Recycling and concern for air and water quality • Improved Working Conditions –Better job design and employee participation Operations Management 1–8 Productivity Contribution: Wal Productivity Contribution: Wal Productivity Contribution: Wal-Mart -Mart (COMMUNICATIONS SUPPORT) Distribution Center Suppliers Payment WAL-MAT (FINANCING) satellite communications Retail Outlet (Point-of-sale data) (Organizational Learning) （VIDEO LINK） (Point-of-sale data)
Differences Between Goods and Services ·Goods ·Services -Tangible -Intangible -Can be inventoried -Cannot be -No interaction inventoried between customer -Direct interaction and process between customer and process Exhibit 1.7 Operations Management g Most Products Are a "Bundle" of Goods and Services 100% 100% goods services Percent Consulting goods Hotels Restaurants Autos Percent services Groceries Operations Management 1-10 J
5 Operations Management 1–9 1-6 Differences Between Goods and Services Differences Between Differences Between Goods and Services Goods and Services • Goods –Tangible –Can be inventoried –No interaction between customer and process • Services –Intangible –Cannot be inventoried –Direct interaction between customer and process Exhibit 1.7 Operations Management 1–10 Most Products Are a “Bundle” of Goods and Services Most Products Are a Most Products Are a “Bundle” of Goods and Services of Goods and Services
Line and Staff Jobs in OM Organizational Level Manufacturing Industries Service Industries Upper Vice president of manufacturing Vice president of operations (airline) Regional manager of Chief administrator (hospital) manufacturing Middle Plant manager Store manager(department store) Program manager Facilities manager (wholesale distributo） Lower Department supervisor Branch manager(bank) Foreman Department supervisor (insurance Crew chief company) Assistant manager (hotel) Staff Production controller Systems and procedures analyst Materials manager Purchasing agent Cuality manager Inspector Purchasing agent Dietician (hospital) Work methods analyst Customer service manager Process engineer Operations Management 111 The Value Chain and Its Support Functions Environment The Firm Purchasing Marketing Suppliers Transformation process Customers Finance Human resources Operations Management 1-12 6
6 Operations Management 1–11 Line and Staff Jobs in OM Line and Staff Jobs in OM Line and Staff Jobs in OM Operations Management 1–12 The Value Chain and Its Support Functions The Value Chain and Its Support Functions The Value Chain and Its Support Functions
Inputs Provided by OM to Other Functional Areas Processes Performed Inputs Provided Functional Area by That Area by OM Area Accounting Asset valuation On-hand inventory Financial statements Labor and material costs Finance Capital investment analysis Capacity utilization Cash flow management Make-or-buy decisions Marketing New product introduction New process requirements Customer orders Delivery dates Human resources Hiring Job descriptions Training Worker skils requirement MIS Software evaluation Data requirement Hardware requirements analysis Terminal requirements Operations Management 0 Historical Development of OM ·Prior to1900 -Cottage industry produced custom-made goods. -Watt's steam engine in 1785. -Whitney's standardized gun parts in 1801. -Industrial Revolution began at mid-century. Operations Management 1-14 7
7 Operations Management 1–13 Inputs Provided by OM to Other Functional Areas Inputs Provided by OM to Other Functional Areas Other Functional Areas Operations Management 1–14 Historical Development of OM Historical Development of OM • Prior to 1900 –Cottage industry produced custom-made goods. –Watt’s steam engine in 1785. –Whitney’s standardized gun parts in 1801. –Industrial Revolution began at mid-century
Historical Development of OM(cont. Scientific Management(Frederick W.Taylor) -Systematic approach to increasing worker productivity through time study,standardization of work,and incentives. -Viewed workers as an interchangeable asset. Other Management Pioneers -Frank and Lillian Gilbreth Motion study and industrial psychology -Henry L.Gantt Scheduling and the Gantt chart Operations Management 1-15 Historical Development of OM(cont.) Moving Assembly Line(1913) -Labor specialization reduced assembly time. ·Hawthorne Studies -Yielded unexpected results in the productivity of Western Electric plant workers after changes in their production environment. -Led to recognition of the importance of work design and employee motivation. Operations Management 1-16 8
8 Operations Management 1–15 Historical Development of OM (cont.) Historical Development of OM (cont.) Historical Development of OM (cont.) • Scientific Management (Frederick W. Taylor) –Systematic approach to increasing worker productivity through time study, standardization of work, and incentives. –Viewed workers as an interchangeable asset. • Other Management Pioneers –Frank and Lillian Gilbreth • Motion study and industrial psychology –Henry L. Gantt • Scheduling and the Gantt chart Operations Management 1–16 Historical Development of OM (cont.) Historical Development of OM (cont.) Historical Development of OM (cont.) • Moving Assembly Line (1913) –Labor specialization reduced assembly time. • Hawthorne Studies –Yielded unexpected results in the productivity of Western Electric plant workers after changes in their production environment. –Led to recognition of the importance of work design and employee motivation
Historical Development of OM(cont. Operations Research(Management Science) -Outgrowth of WWll needs for logistics control and weapons-systems design. -Seeks to obtain mathematically optimal(quantitative) solutions to complex problems. ·OM Emerges as a Field -1950-1960,OM moved beyond industrial engineering and operations research to the view of the production operation as a system. Operations Management 1-7 Historical Development of OM(cont.) ·OM Emerges as a Field -1950-1960,OM moved beyond industrial engineering and operations research to the view of the production operation as a system. The Marriage of OM and IT -Integrated solutions approaches Business process reengineering Supply chain management Systems integration(SAP) Operations Management 1-18 9
9 Operations Management 1–17 Historical Development of OM (cont.) Historical Development of OM (cont.) Historical Development of OM (cont.) • Operations Research (Management Science) –Outgrowth of WWII needs for logistics control and weapons-systems design. –Seeks to obtain mathematically optimal (quantitative) solutions to complex problems. • OM Emerges as a Field –1950–1960, OM moved beyond industrial engineering and operations research to the view of the production operation as a system. Operations Management 1–18 Historical Development of OM (cont.) Historical Development of OM (cont.) Historical Development of OM (cont.) • OM Emerges as a Field –1950–1960, OM moved beyond industrial engineering and operations research to the view of the production operation as a system. • The Marriage of OM and IT –Integrated solutions approaches • Business process reengineering • Supply chain management • Systems integration (SAP)
Historical Development of OM (cont.) Operations Management in Services -OM concepts can apply to both manufacturing and service operations. Integration of Manufacturing and Services -Conducting world class operations requires compatible manufacturing and service operations. Operations Management 9 10
10 Operations Management 1–19 Historical Development of OM (cont.) Historical Development of OM (cont.) Historical Development of OM (cont.) • Operations Management in Services –OM concepts can apply to both manufacturing and service operations. • Integration of Manufacturing and Services –Conducting world class operations requires compatible manufacturing and service operations