1. Introduction to Operations Management1
PowerPoint presentation to accompany
Heizer and Render
Operations Management, 10e, Global Edition
Principles of Operations Management, 8e, Global Edition
PowerPoint slides by Jeff Heyl
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2. Organizing to Produce Goods and Services
Essential functions:
Marketing – generates demand
Production/operations – creates the product
Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
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3. Organizational Charts
Commercial Bank
Operations
Teller Scheduling
Check Clearing
Collection
Transaction processing
Facilities design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust Department
Figure 1.1(A)
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4. Organizational Charts
Airline
Operations
Ground support equipment
Maintenance
Ground Operations
Facility maintenance Catering
Flight Operations
Crew scheduling Flying Communications Dispatching
Management science
Finance/ accounting
Accounting
Payables Receivables General Ledger
Finance
Cash control International exchange
Marketing
Traffic administration
Reservations Schedules Tariffs (pricing)
Sales
Advertising
Figure 1.1(B)
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5. Organizational Charts
Manufacturing
Operations
Facilities Construction; maintenance
Production and inventory control Scheduling; materials control
Quality assurance and control
Supply-chain management
Manufacturing Tooling; fabrication; assembly
Design Product development and design Detailed product specifications
Industrial engineering Efficient use of machines, space, and personnel
Process analysis Development and installation of production tools and equipment
Finance/ accounting
Disbursements/ credits
Receivables Payables General ledger
Funds Management
Money market International exchange
Capital requirements
Stock issue Bond issue and recall
Marketing
Sales promotion
Advertising
Sales
Market research
Figure 1.1(C)
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6. Why Study OM?
OM is one of three major functions of any organization, we want to study how people organize themselves for productive enterprise
We want (and need) to know how goods and services are produced
We want to understand what operations managers do
OM is such a costly part of an organization
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7. What Operations Managers Do
Basic Management Functions
Planning
Organizing
Staffing
Leading
Controlling
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8. Ten Critical Decisions
Ten Decision Areas Chapter(s)
Design of goods and services 5
Managing quality 6, Supplement 6
Process and capacity 7, Supplement 7 design
Location strategy 8
Layout strategy 9
Human resources and job design
Supply-chain 11, Supplement management
Inventory, MRP, JIT 12, 14, 16
Scheduling 13, 15
Maintenance 17
Table 1.2
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9. The Critical Decisions
Design of goods and services
What good or service should we offer?
How should we design these products and services?
Managing quality
How do we define quality?
Who is responsible for quality?
Table 1.2 (cont.)
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10. The Critical Decisions
Process and capacity design
What process and what capacity will these products require?
What equipment and technology is necessary for these processes?
Location strategy
Where should we put the facility?
On what criteria should we base the location decision?
Table 1.2 (cont.)
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11. The Critical Decisions
Layout strategy
How should we arrange the facility?
How large must the facility be to meet our plan?
Human resources and job design
How do we provide a reasonable work environment?
How much can we expect our employees to produce?
Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.
Table 1.2 (cont.)
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12. The Critical Decisions
Supply-chain management
Should we make or buy this component?
Who should be our suppliers and how can we integrate them into our strategy?
Inventory, material requirements planning, and JIT
How much inventory of each item should we have?
When do we re-order?
Table 1.2 (cont.)
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13. The Critical Decisions
Intermediate and short–term scheduling
Are we better off keeping people on the payroll during slowdowns?
Which jobs do we perform next?
Maintenance
How do we build reliability into our processes?
Who is responsible for maintenance?
Table 1.2 (cont.)
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14. Where are the OM Jobs? Technology/methods Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
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15. Opportunities
Figure 1.2
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16. Certifications
APICS, the American Production and Inventory Control Society
American Society of Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Council of Supply Chain Management Professionals
Charter Institute of Purchasing and Supply (CIPS)
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17. Significant Events in OM
Figure 1.3
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18. The Heritage of OM
Division of labor (Adam Smith 1776; Charles Babbage 1852)
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Coordinated assembly line (Ford/ Sorenson 1913)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian Gilbreth 1922)
Quality control (Shewhart 1924; Deming 1950)
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19. The Heritage of OM Computer (Atanasoff 1938)
CPM/PERT (DuPont 1957, Navy 1958)
Material requirements planning (Orlicky 1960)
Computer aided design (CAD 1970)
Flexible manufacturing system (FMS 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization (1992)
Internet (1995)
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20. Eli Whitney
Born 1765; died 1825
In 1798, received government contract to make 10,000 muskets
Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket
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21. Frederick W. Taylor Born 1856; died 1915
Known as ‘father of scientific management’
In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first motion and time studies
Created efficiency principles
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22. Taylor’s Principles Management Should Take More Responsibility for:
Matching employees to right job
Providing the proper training
Providing proper work methods and tools
Establishing legitimate incentives for work to be accomplished
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23. Frank & Lillian Gilbreth
Husband-and-wife engineering team
Further developed work measurement methods
Applied efficiency methods to their home and 12 children!
Book & Movie: “Cheaper by the Dozen,” “Bells on Their Toes”
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24. Henry Ford Born 1863; died 1947 In 1903, created Ford Motor Company
In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station
Paid workers very well for 1911 ($5/day!)
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25. W. Edwards Deming Born 1900; died 1993 Engineer and physicist
Credited with teaching Japan quality control methods in post-WW2
Used statistics to analyze process
His methods involve workers in decisions
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26. New Challenges in OM From To Local or national focus Global focus
Batch shipments
Low bid purchasing
Lengthy product development
Standard products
Job specialization
Global focus
Just-in-time
Supply-chain partnering
Rapid product development, alliances
Mass customization
Empowered employees, teams To
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27. Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
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28. Characteristics of Service
Intangible product
Produced and consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
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29. Restaurant meal/auto repair investment management
Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
Percent of Product that is a Good Percent of Product that is a Service
100% %
| | | | | | | | |
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30. Changing Challenges Traditional Approach Reasons for Change
Current Challenge
Ethics and regulations not at the forefront
Public concern over pollution, corruption, child labor, etc.
High ethical and social responsibility; increased legal and professional standards
Local or national focus
Growth of reliable, low cost communication and transportation
Global focus, international collaboration
Lengthy product development
Shorter life cycles; growth of global communication; CAD, Internet
Rapid product development; design collaboration
Figure 1.5
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31. Changing Challenges Traditional Approach Reasons for Change
Current Challenge
Low cost production, with little concern for environment; free resources (air, water) ignored
Public sensitivity to environment; ISO standard; increasing disposal costs
Environmentally sensitive production; green manufacturing; sustainability
Low-cost standardized products
Rise of consumerism; increased affluence; individualism
Mass customization
Figure 1.5
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32. Changing Challenges Traditional Approach Reasons for Change
Current Challenge
Emphasis on specialized, often manual tasks
Recognition of the employee's total contribution; knowledge society
Empowered employees; enriched jobs
“In-house” production; low-bid purchasing
Rapid technological change; increasing competitive forces
Supply-chain partnering; joint ventures, alliances
Large lot production
Shorter product life cycles; increasing need to reduce inventory
Just-In-Time performance; lean; continuous improvement
Figure 1.5
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33. New Trends in OM Ethics Global focus
Environmentally sensitive production
Rapid product development
Mass customization
Empowered employees
Supply-chain partnering
Just-in-time performance
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34. Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output only and not a measure of efficiency
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35. Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
New espresso machines
Saved 12 seconds per shot
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36. Productivity Units produced Input used Productivity =
Measure of process improvement
Through productivity increases can our standard of living improve
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37. Productivity Calculations
Labor Productivity
Productivity =
Units produced
Labor-hours used
= = 4 units/labor-hour
1,000
250
One resource input  single-factor productivity
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38. Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
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39. Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
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40. Service Productivity Typically labor intensive
Often difficult to evaluate for quality
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41. Printed in the United States of America.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.
Printed in the United States of America.
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