Introduction to Operations Management

Operations Management Introduction to Operations Management Operations Management Organization Finance Operations Marketing The management of systems or processes that create goods and/or provide services

Operations Management includes: Introduction to Operations Management Operations Management includes: Forecasting Capacity planning Scheduling（时间进度安排） Managing inventories Assuring quality Motivating employees And more . . .

Business Operations Overlap Introduction to Operations Management Business Operations Overlap Marketing Operations Finance

Stage of Production Value Added Value of Product Introduction to Operations Management Stage of Production Value Added Value of Product Farmer produces and harvests wheat $0.15 Wheat transported to mill磨坊 $0.08 $0.23 Mill produces flour面粉 $0.38 Flour transported to baker面包厂 $0.46 Baker produces bread $0.54 $1.00 Bread transported to grocery store $1.08 Grocery store displays and sells bread $0.21 $1.29 Total Value-Added

Types of Operations Operations Examples Goods Producing Introduction to Operations Management Types of Operations Operations Examples Goods Producing Farming, mining, construction , manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites

Food Processor Inputs Processing Outputs Raw Vegetables Cleaning Introduction to Operations Management Food Processor Inputs Processing Outputs Raw Vegetables Cleaning Canned vegetables Metal Sheets Making cans Water Cutting Energy Cooking Labor Packing Building Labeling Equipment

Hospital Process Inputs Processing Outputs Doctors, nurses Examination Introduction to Operations Management Hospital Process Inputs Processing Outputs Doctors, nurses Examination Healthy patients Hospital Surgery Medical Supplies Monitoring Equipment Medication Laboratories Therapy

Decision Making System Design – Capacity生产能力 Location选址 Introduction to Operations Management Decision Making System Design – Capacity生产能力 Location选址 arrangement of departments部门设置 product and service planning acquisition and placement of Equipment设备采购和布置

Decision Making System operation – personnel inventory scheduling Introduction to Operations Management Decision Making System operation – personnel inventory scheduling project management quality assurance

Tradeoffs Models A model is an abstraction of reality. Introduction to Operations Management Models A model is an abstraction of reality. – Physical Schematic Mathematical Tradeoffs What are the pros and cons of models?

Quantitative Approaches Introduction to Operations Management Quantitative Approaches • Linear programming Queuing Techniques Inventory models Project models Statistical models

Recent Trends The Internet E-Business Supply Chain Management Introduction to Operations Management Recent Trends The Internet E-Business Supply Chain Management

Simple Product Supply Chain Introduction to Operations Management Simple Product Supply Chain Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer

Continuing Trends • Quality and process improvement Technology Introduction to Operations Management Continuing Trends • Quality and process improvement Technology Globalization Operations strategy Environmental issues

Competitiveness, Strategy, and Productivity Chapter 2 Competitiveness, Strategy, and Productivity

Competitiveness: How effectively an organization meets the needs of customers relative to others that offer similar goods or services

Competitiveness Quality Price Time Flexibility Differentiation Service

Examples of Distinctive Competencies Banks, ATMs Convenience Location Disneyland Nordstroms Superior customer service Service Burger King Supermarkets Variety Volume Flexibility Express Mail One-hour photo Rapid delivery On-time delivery Time Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola High-performance design or high quality Consistent quality Quality U.S. first-class postage Motel-6, Red Roof Inns Low Cost Price

Economic conditions Political conditions Legal environment Technology Key External Factors Economic conditions Political conditions Legal environment Technology Competition Markets

Facilities and equipment Financial resources Customers Key Internal Factors Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers

Measures of Productivity Table 2-4 Partial Output Output Output Output measures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them

Examples of Partial Productivity Measures Table 2-5 Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Energy Productivity Units of output per dollar input Dollar value of output per dollar input Capital Productivity Units of output per machine hour machine hour Machine Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Labor Productivity

Example--Labor Productivity 10,000 units/500hrs = 20 units/hour or we can arrive at a unitless figure (10,000 unit* $10/unit)/(500hrs* $9/hr) = 22.22 Can you think of any advantages or disadvantages of each approach?

Factors Affecting Productivity Capital Quality Technology Management

Factors Affecting Productivity Standardization Use of Internet Computer viruses Searching for lost or misplaced items Scrap rates New workers Cuts in health benefits

Factors Affecting Productivity Safety Shortage of IT workers Layoffs Labor turnover Design of the workspace Incentive plans that reward productivity

Improving Productivity Develop productivity measures Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Get management support Measure and publicize improvements Don’t confuse productivity with efficiency

Introduction to Quality Chapter 9 Introduction to Quality

What does the term quality mean? Quality Management What does the term quality mean? Quality is the ability of a product or service to consistently meet or exceed customer expectations.

Performance - main characteristics of the product/service Dimensions of Quality Performance - main characteristics of the product/service Aesthetics - appearance, feel, smell, taste Special features - extra characteristics Conformance - how well product/service conforms to customer’s expectations Safety - Risk of injury Reliability - consistency of performance

Dimensions of Quality (Cont’d) Durability - useful life of the product/service Perceived Quality - indirect evaluation of quality (e.g. reputation) Service after sale - handling of customer complaints or checking on customer satisfaction

Examples of Quality Dimensions Table 9-1

Examples of Quality Dimensions (Cont’d) Table 9-1

The Consequences of Poor Quality Loss of business Liability Productivity Costs

Responsibility for Quality Top management Design Procurement Production/operations Quality assurance Packaging and shipping Marketing and sales Customer service

Internal Failure Costs Costs of Quality Failure Costs - costs incurred by defective parts/products or faulty services. Internal Failure Costs Costs incurred to fix problems that are detected before the product/service is delivered to the customer. External Failure Costs All costs incurred to fix problems that are detected after the product/service is delivered to the customer.

Costs of Quality (continued) Appraisal Costs All product and/or service inspection costs. Prevention Costs All TQ training, TQ planning, customer assessment, process control, and quality improvement costs to prevent defects from occurring

Key Contributors to Quality Management Table 9-6

Malcolm Baldrige National Quality Award Table 9-7 1.0 Leadership 2.0 Strategic Planning 3.0 Customer and Market Focus 4.0 Information and Analysis 5.0 Human Resource Development and Management 6.0 Process Management 7.0 Business Results

Honoring W. Edwards Deming Japan’s highly coveted award The Deming Prize Honoring W. Edwards Deming Japan’s highly coveted award Main focus on statistical quality control

Chapter 10 Quality Control

Centralized vs. On-site Inspection Figure 10-2 How Much/How Often Where/When Centralized vs. On-site Inputs Transformation Outputs Acceptance sampling Process control

Examples of Inspection Points Table 10-1

Statistical Process Control: Statistical evaluation of the output of a process during production

Statistical Process Control The Control Process Define Measure Compare to a standard Evaluate Take corrective action Evaluate corrective action

Statistical Process Control Variations and Control Random variation: Natural variations in the output of process, created by countless minor factors Assignable variation: A variation whose source can be identified

Sampling Distribution Figure 10-4 Sampling distribution Process distribution Mean

Figure 10-5 Mean     95.44% 99.74% Standard deviation Normal Distribution Figure 10-5 Mean     95.44% 99.74% Standard deviation

Figure 10-6 Sampling distribution Process distribution Mean Control Limits Figure 10-6 Sampling distribution Process distribution Mean Lower control limit Upper control limit

Figure 10-8 UCL LCL 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Out of control Control Chart 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 UCL LCL Sample number Mean Out of control Normal variation due to chance Abnormal variation due to assignable sources Figure 10-8

Control Chart for Attributes p-Chart - Control chart used to monitor the proportion of defectives in a process c-Chart - Control chart used to monitor the number of defects per unit

When observations can be placed into two categories. Use of p-Charts Table 10-3 When observations can be placed into two categories. Good or bad Pass or fail Operate or don’t operate When the data consists of multiple samples of several observations each

Use of c-Charts Table 10-3 Use only when the number of occurrences per unit of measure can be counted; non-occurrences cannot be counted. Scratches, chips, dents, or errors per item Cracks or faults per unit of distance Breaks or Tears per unit of area Bacteria or pollutants per unit of volume Calls, complaints, failures per unit of time