PRODUCTION/OPERATIONS MANAGEMENT SIXTH EDITION WILLIAM J. STEVENSON Rochester Institute of Technology Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1999

INTRODUCTION PART ONE Chapter One Production and Operations Management Chapter Two Productivity, Competitiveness, and Strategy Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 1999

Operations Management Operations function consists of all activities directly  related to producing goods or providing services. Organization Finance Production/ Operations Marketing

Business Operations Overlap Marketing Production/ Operations Finance

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

Value-Added Value added • The difference between the cost of inputs and the value or price of outputs. Value added Inputs Outputs Transformation/ Land Goods Conversion Labor Services process Capital Feedback Control Feedback Feedback

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 Healthy patients Hospital Surgery Medical Supplies Monitoring Equipment Medication Laboratories Therapy

Operations Interfaces

Decision Making System Design • – capacity location arrangement of departments product and service planning acquisition and placement of equipment

Decision Making System operation • – personnel inventory scheduling project management quality assurance

Major Characteristics of Production Systems • Degree of standardization Type of operation – project job shop repetitive production continuous processing

Manufacturing or Service? Tangible Act

These differences are beginning to fade in many cases Key Differences • Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Quality assurance These differences are beginning to fade in many cases

Manufacturing vs Service Characteristic Manufacturing Service Output Tangible Low High Easy Intangible High Low Difficult Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Opportunity to correct quality problems High

Operations Management Responsibilities of Operations Management • Planning – Capacity Location Make or buy Layout Projects Scheduling Controlling Inventory Quality • Organizing – Degree of centralization – Subcontracting Products and services • Staffing – Hiring/laying off – Use of Overtime • Directing – Incentive plans – Issuance of work orders – Job assignments

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

“The whole is greater than the sum of the parts.” Systems Approach “The whole is greater than the sum of the parts.” Suboptimization

Quantitative Approaches • Linear programming Queuing Techniques Inventory models Project models Statistical models

How do we identify the vital few? Pareto Phenomenon • A vital few things are important for reaching an objective or solving a problem. • 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few?

Recent Trends • Global competition Operations strategy Total quality management (TQM) Flexibility Time reduction Technology

Recent Trends (Continued) • Worker involvement Reengineering Environmental issues Service