1-1Introduction to Operations Management William J. Stevenson Operations Management 8 th edition

1-2Introduction to Operations Management GHANA INSTITUTE OF MANAGEMENT AND PUBLIC ADMINISTRATION [GIMPA] POST-GRADUATE PROGRAMMES MANAGING OPERATIONS Instructor: Samuel Famiyeh., [Ph. D., MBA., BSc. MGhIG] Tel: Room : D-BLOCK ROOM 14

1-3Introduction to Operations Management Course Description The way every organization manage productive resources is very critical to its strategic growth and competitiveness. If productive resources are not well managed, organizations are not able to grow in the long run and hence not competitive and eventually get out of business in this global economy. Operations management is the effective and efficient management of these productive resources. It entails the design and control of systems responsible for the productive use of raw materials, human resources, equipment and facilities in the development of a product or service.

1-4Introduction to Operations Management Course Description Hence this course focuses on the operational processes involved in managing the value chain for a company. Emphasis is placed on the managerial approach to acquiring resource inputs and converting them into value added inputs. The aim here is to cover some of the most important issues facing operation managers, as well as the basic tools and techniques in dealing with these issues.

1-5Introduction to Operations Management Course Description The course examines activities such as: Introduction to operations management Competitiveness, Strategy and Productivity Forecasting, Designing products and services, Process selection and facility Layout Inventory, Capacity and location planning Project management, Assuring and improving quality are addressed.

1-6Introduction to Operations Management CHAPTER 1 Introduction to Operations Management McGraw-Hill/Irwin Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

1-7Introduction to Operations Management Operations Management Highlights of the chapter include the following: 1.Operations as one of the three main functional concerns of most organizations. 2.The role and job of the operations manager as a planner and decision-maker. 3.Different ways of classifying (and understanding) production systems. 4.System design versus system operation. 5.Major characteristics of production systems. 6.Contemporary issues in operations management. 7. Operations as essentially managerial (planning, staffing, etc.) 8. Manufacturing operations versus service operations.

1-8Introduction to Operations Management Figure 1-1 The management of systems or processes that create goods and/or provide services

1-9Introduction to Operations Management Value added Figure 1-2 The difference between the cost of inputs and the value or price of outputs.

1-10Introduction to Operations Management Food Processor InputsProcessing Outputs Raw VegetablesCleaning Canned vegetables Metal SheetsMaking cans WaterCutting EnergyCooking LaborPacking BuildingLabeling Equipment Table 1.2

1-11Introduction to Operations Management Hospital Process InputsProcessingOutputs Doctors, nursesExaminationHealthy patients HospitalSurgery Medical SuppliesMonitoring EquipmentMedication LaboratoriesTherapy Table 1.2

1-12Introduction to Operations Management Value added Figure 1-8

1-13Introduction to Operations Management Steel production Automobile fabrication Home remodeling Retail sales Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing High percentage goods Low percentage service Goods-service Continuum Low percentage goods High percentage service Figure 1.3

1-14Introduction to Operations Management Manufacturing or Service? Tangible Act

1-15Introduction to Operations Management Production of Goods vs. Delivery of Services  Production of goods – tangible output  Delivery of services – an act  Service job categories  Government  Wholesale/retail  Financial services  Healthcare  Personal services  Business services  Education

1-16Introduction to Operations Management Key Differences 1. Customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity 6. Production and delivery 7. Quality assurance 8. Amount of inventory

1-17Introduction to Operations Management Manufacturing vs Service CharacteristicManufacturingService Output Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Opportunity to correct Tangible Low High Low High Easy High Intangible High Low High Low Difficult Low quality problems High

1-18Introduction to Operations Management  Operations Management includes:  Forecasting  Capacity planning  Scheduling  Managing inventories  Assuring quality  Motivating employees  Deciding where to locate facilities  And more... Scope of Operations Management

1-19Introduction to Operations Management Types of Operations Table 1.4 OperationsExamples Goods ProducingFarming, mining, construction, manufacturing, power generation Storage/TransportationWarehousing, trucking, mail service, moving, taxis, buses, hotels, airlines ExchangeRetailing, wholesaling, banking, renting, leasing, library, loans EntertainmentFilms, radio and television, concerts, recording CommunicationNewspapers, radio and television newscasts, telephone, satellites

1-20Introduction to Operations Management Figure 1.4

1-21Introduction to Operations Management Responsibilities of Operations Management Products & services Planning – Capacity – Location – – Make or buy – Layout – Projects – Scheduling Controlling/Improving – Inventory – Quality Organizing – Degree of centralization – Process selection Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments – Costs – Productivity Table 1.6

1-22Introduction to Operations Management Key Decisions of Operations Managers  What What resources/what amounts  When Needed/scheduled/ordered  Where Work to be done  How Designed  Who To do the work

1-23Introduction to Operations Management Decision Making System Design – capacity – location – arrangement of departments – product and service planning – acquisition and placement of equipment System operation – personnel – inventory – scheduling – project management – quality assurance

1-24Introduction to Operations Management Decision Making  Models  Quantitative approaches  Analysis of trade-offs  Systems approach

1-25Introduction to Operations Management Models A model is an abstraction of reality. – Physical – Schematic – Mathematical What are the pros and cons of models? Tradeoffs

1-26Introduction to Operations Management Models A model is an abstraction of reality. Models are sometimes classified as physical, schematic, or mathematical: Physical Models: these looks like their real life counterparts. Examples include miniature cars, toy animals, scale-model buildings. Advantages are visual correspondence of reality. Schematic models: there are more abstract than their physical counterparts: i.e. less resemblance to the physical reality. E.g. graphs, charts, blueprints, pictures and drawings. Mathematical models: these do not look at all like their real-life counterparts. E.g. numbers, formulas, and symbols. These models are the easiest to manipulate, and are important forms of inputs for computers and calculators.

1-27Introduction to Operations Management Models Are Beneficial  Easy to use, less expensive  Require users to organize  Systematic approach to problem solving  Increase understanding of the problem  Enable “what if” questions  Specific objectives  Consistent tool  Power of mathematics  Standardized format

1-28Introduction to Operations Management Analysis of Trade-Offs Operation Managers encounter decisions that can be described are trade-off decisions. For e.g. in deciding on the amount of inventory to stock, the manager must take into account the trade-off between the increased level of customer service that the additional inventory would yield and the increased costs required to stock that inventory. Also in scheduling of overtime to increase output, the manager must weigh the value of increased output against the higher cost of overtime.

1-29Introduction to Operations Management A Systems Approach A system can be defined as a set of interrelated parts that must work together. In any business organization, the organization can be thought of as a system composed of subsystems (marketing subsystems, operations subsystems, finance subsystems etc). The system approach emphasizes interrelationships among subsystems, but its main theme is that the whole is greater than the sum of its individual parts.

1-30Introduction to Operations Management Systems Approach “The whole is greater than the sum of the parts.” Suboptimization

1-31Introduction to Operations Management Establishing Priorities In virtually every situation, managers discover that certain elements are more important than others. Recognizing this fact of life enables the managers to direct their efforts to where they will do the most good to avoid wasting time and energy on insignificant elements. Consider owing a car; Engine, Tires, Brakes, Electrical System, Cooling System Scratches, Dents, Piece Of Mould, Seat Covers etc.

1-32Introduction to Operations Management Business Operations Overlap Operations Finance Looks more like a system than separate components Marketing

1-33Introduction to Operations Management Operations Interfaces Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS Legal

1-34Introduction to Operations Management Ethics Operations Managers, like all managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects of operations managers including: Worker safety; Product safety; Quality; CSR; Decommissioning.

1-35Introduction to Operations Management Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer Simple Product Supply Chain Figure 1.7 Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service

1-36Introduction to Operations Management Stage of Production Value Added Value of Product Farmer produces and harvests wheat$0.15 Wheat transported to mill$0.08$0.23 Mill produces flour$0.15$0.38 Flour transported to baker$0.08$0.46 Baker produces bread$0.54$1.00 Bread transported to grocery store$0.08$1.08 Grocery store displays and sells bread$0.21$1.29 Total Value-Added$1.29 A Supply Chain for Bread

1-37Introduction to Operations Management Discussions 1. Briefly describe the term operations management 2. Identify the three major functional areas of business organizations and briefly describe how they interrelate 3. Describe the operations function and the nature of operation manager’s job. 4. List five important differences between goods and service operations.