Chapter 1 Introduction

The 3 Dimensions of Operations

The Realm of Operations

The Operations Function MarketingOperationsFinance -Creating Demand-Production of goods -Acquisition and -Generating Sales & services, 80% of allocation of both physical & capital human resources

Manufacturing Service Tangible Act  Production of goods – tangible output  Delivery of services – an act

vs Goods vs Service 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 Low percentage goods High percentage service

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

An Operation As A Productive System Transformation (Conversion) Process Goods or Services InputsOutputs Energy Materials Labor Capital Information Feedback information for control of process inputs and process technology

What is Operations Mgmt.?  Creation and Distribution of Goods and Services  Procurement of Required Materials

What is Operations Mgmt.? The Traditional Model OM transforms factors of production into goods or services of higher value The Business Process Model of the Firm OM is involved in doing or supporting the four core sets of business processes Determining customer needs Developing product strategy (product innovation) Managing the entire supply chain Managing non-value adding support activities

Implications of the Business Process Perspective Operations Managers Must Maintain a Cross- functional perspective Concern about pleasing the customer is paramount A resource balancing act: things, humans and information The Operations Manager must wear many hats Profit = MS 1 x MS 2 x MS 3 = market size x market share x margin on sales where margin on sales = price – cost

Managing the Operations Subsystem Functions of the operations manager: Planning Product Planning Facilities Design Organizing Determines the activities required to achieve the operations subsystem ’ s goals. Assign authority for carrying them out. Controlling Measure the outputs to see if theyconform to what has been planned.

Functions of the operations manager Planning & Organizing Inputs -Management -Labor -Capital -Land Planning & Organizing The Conversion Process Outputs -Goods -Services Feedback to enhance control

General Model for Production/ Operations Management

Tactical & Strategic Decisions

Operations Management Decisions Work Force Quality Process Capacity Inventory Job Design Work Measure Managing Work Force Planning Quality Quality Control -Process Selection -Choice of Tech. -Layout Facilities Decision Sched. Oper. Proj. Sched. Indep. Demand Materials Requirement Planning

Criteria for Operations Decisions Cost Quality Concerned with the quality of product or service produced by operations Dependability May be measured by: Percentage of stockout Percentage of delivery promises met

Criteria for Operations Decisions Flexibility Involves the ability of operations to make changes in product design or in the volume of product delivery

Strategy Operations Management Evolution of Strategy Know thy enemy/Know the customer Forces impacting strategy Information technology/e-commerce Increase customer participation/demands Market growth opportunities may be limited Your markets might be maturing Geographic expansion opportunities may be limited Two Basic Approaches Focus on your core competencies (stick to your knitting) Demand innovation — investigate your customers ’ total needs and expand your product offering scope

POM: An Evolutionary Perspective

Common Market Moslem World Eastern Block Remants U.S.A. China Japan/Korea A More Complicated World Other Southern Hemisphere States CA.

The Impact of Pace Dimensions of Pace Rate of new product introductions Rate of new process technology introductions Rate of new players — often global, introductions Consequences thereof on: Organization structure Strategic processes Manufacturing processes

Future Challenges To the OM function Scarcity of worthwhile human resources Deflation, inflation and/or currency fluctuations A wired supply chain (is B2B still valid?) Increased customer involvement New product/process technologies The Intellectual Property Challenge Globalism China / Japan / Europe / Mexico /So-called 3 rd world