AIMS 3770: Production Operations Analysis Dr. Linda Leon Spring 2015 http://myweb.lmu.edu/lleon/aims3770/

What Is Operations Management? Production is the creation of goods and services Operations management is the set of activities that creates goods and services by transforming inputs into outputs

Why Study OM? OM is one of three major functions (marketing, finance, and operations) of any organization You need to know how goods and services are produced OM is a costly part of an organization

Options for Increasing Contribution

Functions - Bank Commercial Bank Operations Finance/ Accounting Marketing Facilities Layout Teller Scheduling Transactions Processing Security Commercial Bank © 1984-1994 T/Maker Co. Functions - Bank

Functions - Airline Airline Operations Finance/ Accounting Marketing Ground Support Flight Aircraft Maintenance Catering Airline © 1984-1994 T/Maker Co.

Functions - Manufacturer Operations Finance/ Accounting Marketing Production Control Facilities Quality Supply Chain Management Manufacturing

Efficiency = Value added to good or service Productivity = Output/Input where inputs are Labor + material + energy + capital + time + information

Location Strategy & Labor Cost Example Employees earn $12/hour and produce 1.25 units per hour Location 2: Employees earn $10/hour and produce 1.0 units per hour Measure of Productivity = Labor Cost per Unit

Productivity Increases Productivity increases when output increases more than input or when input decreases more than output. Increases in productivity measure process improvement and are correlated with improved standard of living Since 1869, U.S. productivity increased at an average rate of 2.5% per year. In 21st century, U.S. productivity has been slightly lower than 2.5 % per year on average

Variables that Create Productivity Increases Labor (10%) Capital (38%) Management (52%) Examples of changes identified by Starbuck’s management: larger scooper size for ice, espresso machines that grind and brew, credit card signatures

Operations Course Objectives To understand the common principles of production and operations management To apply strategies dealing with various problems encountered in the production of goods and services To be aware of current issues and trends encountered in the production of goods and services To communicate persuasively in written form an effective strategy for managing a company’s operations

New Challenges in OM Local or national focus Batch shipments From To Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Short-term low costs Global focus Just-in-time Supply chain partnering Rapid product development, alliances Mass customization Sustainability

CBA Core Outcomes To utilize quantitative techniques to model and evaluate business decisions To effectively utilize information technology and productivity software to analyze a business problem, recommend possible solutions, and communicate results to the appropriate audience To demonstrate critical thinking skills by defining, modeling, analyzing and evaluating complex business problems