PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Operations Management Operations and Productivity Chapter 1

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Outline  Global company profile: Whirlpool  What is Operations Management?  The heritage of Operations Management  Why study OM?  What Operations Managers do  Organizing to produce goods and services  Where are the OM jobs?  Exciting new trends in Operations Management  Operations in the service sector  The Productivity challenge

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Learning Objectives When you complete this chapter, you should be able to:  Identify or Define :  Production and productivity  Operations Management (OM)  What operations managers do  Services  Describe or Explain:  A brief history of operations management  The future of the discipline  Measuring productivity

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Whirlpool Case Example  Change in attitude - employees “live quality”  Training - “use your heads as well as your hands”  Flexible work rules  Gain-sharing  Global procurement  Role of information/information technology  Adoption of a Worldwide strategy

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J What Is Operations Management?  Operations management is the set of activities or business functions that creates goods and services by transforming raw materials and human inputs into outputs of higher value.  Production is the creation of goods and services; it involves the responsibility of ensuring that business operations are efficient and effectivebusiness operationsefficient effective

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Origins  The origins of Operations Management can be traced back to the Industrial Revolution, the same as Scientific Management and Operations Research. Adam Smith treats the topic of the division of labor when opening his 1776 masterpiece: An Inquiry into the Nature and Causes of the Wealth of Nations also commonly known as The Wealth of Nations. The first documented effort to solve operation management issues comes from Eli Whitney back in 1798, leading to the birth of the American System of Manufacturers (ASM) by the mid- 1800s. It was not until the late 1950's that the scholars noted the importance of viewing production operations as systems. Industrial RevolutionScientific Management Operations ResearchAdam Smith An Inquiry into the Nature and Causes of the Wealth of Nations The Wealth of NationsEli Whitney  Historically, the body of knowledge stemming from industrial engineering formed the basis of the first MBA programs, and is central to operations management as used across diverse business sectors, industry, consulting and non-profit organizations.industrial engineeringMBA

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Significant Events in OM  Division of labor (Smith, 1776)  Standardized parts (Whitney, 1800)  Scientific management (Taylor, 1881)  Coordinated assembly line (Ford 1913)  Gantt charts (Gantt, 1916)  Motion study (the Gilbreths, 1922)  Quality control (Shewhart, 1924)

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Significant Events in OM  Division of labor (Smith, 1776) Division of labour is the specialisation of cooperative labour in specific,circumscribed tasks and roles, intended to increaselabour efficiencyefficiency of output  Standardized parts (Whitney, 1800) Eli WhitneyEli Whitney saw the potential benefit of developing "interchangeable parts", he built ten guns, all containing the same exact parts and mechanisms.

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Significant Events in OM-Continued  Scientific management (Taylor, 1881)  Scientific management, also called Taylorism, is a theory of management that analyzes and synthesizes processes, improving labor productivity. Taylor believed that decisions based upon tradition and rules of thumb should be replaced by precise procedures developed after careful study of an individual at work.rules of thumb  Coordinated assembly line (Ford 1913)  At first several groups of two or three men worked on each car from components made to order by other companies; Henry changed this way to work: each group made a part of the car the all time.  Gantt charts (Gantt, 1916)  Is a common technique for representing the phases and activities of a project.

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J  Motion study (the Gilbreths, 1922)  Quality control (Shewhart, 1924) quality control and quality engineering are involved in developing systems to ensure products or services are designed and produced to meet or exceed customer requirements. These systems are often developed in conjunction with other business and engineering disciplines using a cross-functional approach.productsservices Significant Events in OM-Continued

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Significant Events - Continued  CPM/PERT (Dupont, 1957)  MRP (Orlicky, 1960)  CAD  Flexible manufacturing systems (FMS)  Manufacturing automation protocol (MAP)  Computer integrated manufacturing (CIM)

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Why Study OM?  OM is one of three major functions ( marketing, finance, and operations ) of any organization  We want ( and need ) to know how goods and services are produced  We want to know what operations managers do  OM is such a costly part of an organization

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J What Operations Managers Do  Control by creating and maintaining a positive flow of work by utilizing what resources and facilities are available  Lead by developing and cascading the organizations strategy/mission statement to all staff  Organize resources such as facilities and employees so as to ensure effective production of goods and services  Plan by prioritizing customer, employee and organizational requirements  Maintaining and monitoring staffing, levels,Knowledge-Skill- Attitude (KSA), expectations and motivation to fulfill organizational requirements  Performance Measures for the measurement of performance and consideration of efficiency versus effectiveness

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Ten Critical Decisions  Service, product design - What product or service should we offer? How should we design these products and services?  Quality management- Who is responsible for quality? - How do we define quality?  Process, capacity design- What processes will these products require and in what order? What equipment and technology is necessary for these processes?  Location - Where should we put the facility? On what criteria should we base this location decision?  Layout design - How should we arrange the facility? - How large a facility is required?

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Ten Critical Decisions- Continued  Human resources and job design - How do we provide a reasonable work environment? How much can we expect our employees to produce?  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, JIT “just-in-time” inventory - How much inventory of each item should we have? When do we re-order?  Intermediate, short term, and project scheduling - Is subcontracting production a good idea? Are we better off keeping people on the payroll during slowdowns?  Maintenance - Who is responsible for maintenance?

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Organizational Functions  Marketing  Gets customers  Marketing is a societal process that is needed to discern consumers' wants; focusing on a product/service to those wants, and to mold the consumers toward the products/services. Marketing tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers' future needs and wants, often through market research. productserviceadvertisingdistributionselling

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Organizational Functions- Continued  Operations  Creates product or service  Operations encompasses three fundamental management imperatives 1. Generate recurring income.income 2. Increase the value of the business. 3. Secure the income and value of the business.

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Organizational Functions- Continued  Finance/Accounting  Obtains funds  Tracks money  Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. The term "finance" may thus incorporate any of the following: businessesresourcesrisks  The study of money and other assets;moneyassets  The management and control of those assets;  Profiling and managing project risks;  The science of managing money;

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Where Are the OM Jobs?  Technology/methods  Facilities/space utilization  Strategic issues  Response time  People/team development  Customer service  Quality  Cost reduction  Inventory reduction  Productivity improvement

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J New Challenges in OM  Local or national focus  Batch shipments  Low bid purchasing  Lengthy product development  Standard products  Job specialization  Global focus  Just-in-time  Supply chain partnering  Rapid product development, alliances  Mass customization  Empowered employees, teams FromTo From To

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Future Challenges  Marketplace Challenges Market fragmentation: Vocal customers: The customer is your partner It’s a Wired World:  Factors of Production Challenges Employee diversity: Human resource scarcity: The global workforce: Declining raw material prices  Technological Challenges Technological change Bio-genetic Miniaturization

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Future Challenges  Societal Challenges The environment: Intellectual property Financial Reporting  Geopolitical Challenges China Japan Mexico Post-WTC Trauma:

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Characteristics of Goods  Tangible product – Bic Mac ®  Consistent product definition  Production usually separate from consumption  Can be inventoried  Low customer interaction

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Characteristics of Service  Intangible product – Medical consultation  Produced & consumed at same time  Often unique  High customer interaction  Inconsistent product definition  Often knowledge-based  Frequently dispersed

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Goods Versus Services  Can be resold  Can be inventoried  Some aspects of quality measurable  Selling is distinct from production  Reselling unusual  Difficult to inventory  Quality difficult to measure  Selling is part of service GoodsService Goods Service

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Goods Versus Services - Continued  Product is transportable  Site of facility important for cost  Often easy to automate  Revenue generated primarily from tangible product  Provider, not product is transportable  Site of facility important for customer contact  Often difficult to automate  Revenue generated primarily from intangible service. GoodsService Goods Service

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Percent United States Canada France Italy Britain Japan W Germany Services Industry Farming % U.S. Employment, % ShareServices as a Percent of GDP U.S. Exports of Services In Billions of Dollars Year 2000 data is estimated Development of the Service Economy

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J The Economic System Transforms Inputs to Outputs The economic system transforms inputs to outputs at about an annual 1.7% increase in productivity (capital 38% of 1.7%), labor (10% of 1.7%), management (52% of 1.7%) Land, Labor, Capital, Management Goods and Services Feedback loop InputsProcessOutputs

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J  Measure of process improvement  Represents output relative to input  Productivity increases improve standard of living  From 1889 to 1973, U.S. productivity increased at a 2.5% annual rate Productivity ProductivityProductivity Units produced Input used ==

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Measurement Problems  Quality may change while the quantity of inputs and outputs remains constant. It’s the conformance to requirements  External elements may cause an increase or decrease in productivity  Precise units of measure may be lacking. NASA wanted to launch a rocket. They didn’t use the international units and they failed. The rocket crashed !!!

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Productivity Variables  Labor - contributes about 10% of the annual increase  Capital - contributes about 32% of the annual increase  Management - contributes about 52% of the annual increase

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Jobs in the U.S

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J Productivity Growth Whole EconomyManufacturing % per yearLabor

PowerPoint Presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J 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