OPERATIONS MANAGEMENT The management of processes or systems that create goods and/or provide services. Why study OM? --U.S. Experience of the 70’s and 80’s --Lessons from the Japanese about the mgmt. of operations --Core business function; interrelationships with functional areas --50% or more of all jobs in OM related areas

DIFFERENTIATING FEATURES OF PRODUCTIVE SYSTEMS Degree of Standardization highly standardized vs. highly customized Type of Operation project, job shop, batch, repetitive, continuous Manufacturing vs. Service

OM: An Evolutionary Perspective Managers in OM use some methods that were developed by other managers who preceded them decades and centuries ago. Today’s managers in OM also face new problems that affect the ways that they manage. Therefore, old ways must be modified.

HISTORICAL PERSPECTIVE PRE-INDUSTRIAL REVOLUTION INDUSTRIAL REVOLUTION New power sources--Watt, steam engine Division of labor---Adam Smith Interchangeable parts--Eli Whitney

HISTORICAL PERSPECTIVE MODERN MOVEMENT I. Post-Civil War ( ) Mass exodus of farm laborers-labor pool Modern capital formation-joint stock co. Entrepreneurial ideas-Morgan,etc. Rapid expansion of West-railroad ----Great Productive Explosion----

HISTORICAL PERSPECTIVE MODERN MOVEMENT II. Scientific Management ( ) F.W. Taylor--efficiency and productivity F. Gilbreth--motion studies L. Gilbreth--fatigue studies H. Gantt--scheduling charts H. Ford--auto assembly

HISTORICAL PERSPECTIVE MODERN MOVEMENT II. Scientific Management ( ) “Systematic Planning”--management responsibility that precludes production “Control Systems”--sensing mechanism to maintain standards “Scientific or Analytical Investigation” “Standards as Benchmarks” -Thrust aimed at lower level of org.-

HISTORICAL PERSPECTIVE MODERN MOVEMENT III. Operations Research (1940--) “Total System” perspective “Interdisciplinary” “Model-building” “Mathematical manipulation” --Thrust at top-of-the-organization--

HISTORICAL PERSPECTIVE MODERN MOVEMENT IV. Advent of Computers (1955--) -clerical duties -analysis and optimization studies -massive data storage, retrieval, and manipulation Today, the OM manager is a computer- system user who uses this tool to better manage the organization.

INFLUENCE OF JAPANESE MANUFACTURERS Quality revolution of 80’s and 90’s Emphasis on quality, continual improvement, worker teams and empowerment, and achieving customer satisfaction Just-in-Time manufacturing Taiichi Ohno--Toyota JIT plant Genichi Taguchi--parameter design

RECENT TRENDS Internet and e-business Supply chain management Global Competition Operations Strategy Total Quality Management New forms of Competition Flexibility Time Reduction Technology

RECENT TRENDS Worker Involvement Environmental Issues Corporate downsizing Reengineering Lean Production craft--mass--lean progression

PRODUCTIVITY OUTPUT per unit of INPUT output / input Numerous measures--labor, multifactor,etc. U.S. % increases have lagged in 70s and 80s but did improve in late 90s Key measure of the effectiveness of mgmt. Closely associated with standard of living, and inflation

PRODUCTIVITY Numerous factors determine it Methods Capital Quality Technology Management

STRATEGY Mission Goals Strategies Organizational Operations Tactics Distinctive competencies, Environmental Scanning

CONTRAST--TOP EXECS AND OM MANAGERS TOP OM A. Goals & Object. “Global” “Well-defined” satisficing optimization B. Planning Horizonlong termshort term C. Daily Routinevariedpredictable D. View of Ext.openclosed Environment

CONTRAST--TOP EXECS AND OM MANAGERS TOP OM E. Decision Makinguniquerecurring long-runshort-run complexeasier JudgmentComputat.

SYSTEMS AGE Discovery Micro Macro “parts analysis”“synthesis & integration” system--an organized complex of interdependent components or subsystems designed to achieve objectives.

SYSTEMS AGE closed system--a system that does not interact with its external environment. open system--a system that has a continuous action and reaction with its external environment. suboptimality--the condition that exists when the extreme optimization of one component or subsystem results in less than optimal performance of the larger system and vice- versa.

PRODUCTIVE SYSTEM MODEL INPUTS TRANSFORM OUTPUTS Environmental Physical Goods Market Locational Services Primary Res. Exchange Storage General CONTROL