McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-1

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-2 INTRODUCTION PART ONE Chapter One Introduction to Operations Management Chapter Two Competitiveness, Strategy, and Productivity

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-3 Chapter One Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-4 Operations Management Organization Finance Operations Marketing The management of systems or processes that create goods and/or provide services Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-5 Operations Management includes: –Forecasting –Capacity planning –Scheduling –Managing inventories –Assuring quality –Motivating employees –And more... Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-6 Business Operations Overlap Marketing Operations Finance Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-7 Steel production Automobile fabrication House building Road construction Dressmaking Farming Auto Repair Appliance repair Maid Service Manual car wash Teaching Lawn mowing Low service content High goods content High service content Low goods content Increasing goods content Increasing service content Goods-service continuum Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-8 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 Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved. 1-9 Types of Operations 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 Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Value-Added The difference between the cost of inputs and the value or price of outputs. Inputs Land Labour Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Value added Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Food Processor InputsProcessing Outputs Raw VegetablesCleaning Canned vegetables Metal SheetsMaking cans WaterCutting EnergyCooking LabourPacking BuildingLabeling Equipment Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Hospital Process InputsProcessingOutputs Doctors, nursesExaminationHealthy patients HospitalSurgery Medical SuppliesMonitoring EquipmentMedication LaboratoriesTherapy Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Operations Interfaces Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Decision Making System Design – capacity – location – arrangement of departments – product and service planning – acquisition and placement of equipment Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Decision Making System operation – personnel – inventory – scheduling – project management – quality assurance Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Major Characteristics of Production Systems Degree of standardization Type of operation – project – job shop – repetitive production – continuous processing Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Manufacturing or Service? Tangible Act Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Key Differences Customer contact Uniformity of input Labour content Uniformity of output Measurement of productivity Quality assurance These differences are beginning to fade in many cases Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Manufacturing vs Service Characteristic Output Customer contact Uniformity of input Labour content Uniformity of output Measurement of productivity Opportunity to correct Manufacturing Tangible Low High Low High Easy High Service Intangible High Low High Low Difficult Low quality problems High Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Responsibilities of Operations Management Products & services Planning – Capacity – Location – – Make or buy – Layout – Projects – Scheduling Controlling – Inventory – Quality Organizing – Degree of centralization – Subcontracting Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Models A model is an abstraction of reality. – Physical – Schematic – Mathematical What are the pros and cons of models? Tradeoffs Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Systems Approach “The whole is greater than the sum of the parts.” Suboptimization Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Quantitative Approaches Linear programming Queuing Techniques Inventory models Project models Statistical models Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved 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? Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved The Internet E-Business Supply Chain Management Recent Trends Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer Simple Product Supply Chain Introduction to Operations Management

McGraw-Hill Ryerson Operations Management, 2 nd Canadian Edition, by Stevenson & Hojati Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Continuing Trends Quality and process improvement Technology Globalization Operations strategy Environmental issues Introduction to Operations Management