1. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Slides prepared by Laurel Donaldson Douglas College Introduction to Operations Management 1

2. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives Define the term operations management and identify operations management jobs. Identify the three major functional areas of organizations and describe how they interrelate. Describe the scope of operations management, and differentiate between design and operations decisions. Compare goods versus services. Discuss the operations manager’s job. Describe key aspects of operations mgmt decision making. Briefly describe the historical evolution of operations mgmt Identify current trends that affect operations management Define the term operations management and identify operations management jobs. Identify the three major functional areas of organizations and describe how they interrelate. Describe the scope of operations management, and differentiate between design and operations decisions. Compare goods versus services. Discuss the operations manager’s job. Describe key aspects of operations mgmt decision making. Briefly describe the historical evolution of operations mgmt Identify current trends that affect operations management LO 1 LO 3 LO 2 LO 4 LO 5 LO 6 LO 7 LO 8 2

3. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Outline  What is Operations Management (OM)?  Three basic functions within organizations  The scope of Operations Management  Differentiating goods and services  Operations Manager’s job  Operations Manager and decision making  The historical evolution of Operations Management  Major trends 3

4. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 Process = series of linked actions, changes or functions Core (operational) SupportManagerial OM is the management of processes or systems that create goods and/or provide services. What is Operations Management?  Companies use OM to improve:  efficiency (minimize cost and time) and  effectiveness (achieving intended goals) 4

5. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 OM ActivitiesAirline company (services) Bicycle factory (goods) Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Where to locate facilities Detail the following OM activities for each company What is Operations Management? 5

6. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 1 Why study Operations Management? 1. A large percentage of a company’s expenses occur in OM area (improvements = more profits) 2. A large number of all jobs are in OM area (purchasing, quality, planning, scheduling, inventory, etc) 3. Activities in all other areas( finance, marketing) are interrelated with OM activities 6

7. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Three Basic Functions 1.Operations: create goods and services 2.Finance: provide funds and the economic analysis of investment proposals 3.Marketing: assess customer wants and needs and communicate them to others Operations Finance/ Accounting Marketing Ground Support Flight Operations Facility Maintenance Catering Airline Company 7

8. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Three Basic Functions  Is OM function adding value during the transformations process?  Is there any overlapping between the main functions? Finance Marketing Operations 8

9. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Inputs: Land Labour Capital Transformation Process Outputs: Goods Services Control Feedback Value Added Operations function 9

10. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 What is added value? 10

11. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Types of Operations Operations Examples 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 11

12. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Transformation Process at a Food Processor 12

13. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Transformation Process at a Hospital 13

14. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 2 Logistics Accounting Product Design Operations Maintenance Personnel Purchasing Manufacturing Engineering MIS Operations Interfaces 14

15. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 The Scope of Operations Management capacity, location, equipment Designing Decisions planning execution controlling Operating Decisions 15

16. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 3 Decision areaBasic questionChapter ForecastingWhat will the demand be?3 Product/ service designWhat customers want? How to improve products/services?4 CapacityHow much capacity will be needed?5 ProcessWhat processes should be used?6 LayoutWhat is the best arrangement for the departments?6 LocationWhat is the best location for our next hotel?8 QualityHow to define quality? How to improve it?9 Supply Chain ManagementWhich supplier to choose?11 InventoryHow much to order?12 Aggregate planningHow much capacity will be needed over the medium term?13 JIT systemsHow to coordinate production and purchasing?15 SchedulingHow to schedule jobs, staff?16 Which decision is design type and which is operation type? The Scope of Operations Management 16

17. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 4 Goods vs. Services 17

18. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 4 Goods or Service? Tangible Act Most systems are a blend of both good & service. Service sector accounts for > 70% of jobs in Canada. 18

19. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 5 The Operations Manager’s Job 19

20. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 5 Level of Job Satisfaction 20

21. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 6 Operations Managers and Decision Making Models Quantitative approaches Analysis of trade- offs Systems approach Establishing Priorities Ethics 21

22. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 6 A model is an abstraction of reality. Physical SchematicMathematical Models 22

23. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 6 Quantitative Approaches Linear programming Queuing techniques Inventory techniques Project techniques Statistical techniques Linear programming Queuing techniques Inventory techniques Project techniques Statistical techniques 23

24. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 6 Analysis of Trade-Offs  Decision on amount of inventory to stock  Increased cost of holding inventory vs.  Level of customer service 24

25. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 6 Establishing Priorities Pareto Phenomenon A few factors account for a high percentage of the occurrence of some event(s). 80/20 Rule - 80% of problems are caused by 20% of the activities. Pareto Phenomenon A few factors account for a high percentage of the occurrence of some event(s). 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few? 25

26. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 6 Ethical Issues Financial statements Worker safety Product safety QualityEnvironment Community Hiring/firing workers 26

27. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 7 The Historical Evolution of OM Earliest days Craft production (no economies of scale), Mercant- ilism Industrial revolution Interchangeable Parts (Eli Whitney, 1700) Division of Labour (Adam Smith, 1776) Scientific Management (1920s, Frederick Taylor, Frank and Lillian Gilbreth, Henry Gantt, Henry Ford) Human relations Movement Improve Productivity (Elton Mayo, 1930) Motivational Theories (Abraham Maslow), 1940s Employee Problem Solving (William Ouchi), 1970s Decision Models and Computer (1960+) Manage- ment Science, EDI,ERP Japanese Manufact urers (1980+) TQM revolution lean production 27

28. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 8 Trends in Business The Internet and e-commerceManagement technologyGlobalization Outsourcing Management of supply chains 28

29. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. LO 8 Supply Chain  Supply Chain: A sequence of activities and organizations involved in producing and delivering a good or service 29

30. Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Checklist  Define the term operations management and describe what an operation manager might do.  Identify the three major functional areas of organizations and describe how they interrelate.  Differentiate between design and operations decisions.  Compare goods versus services.  Describe key aspects of operations management decision making.  Briefly describe the historical evolution of operations management.  Identify current trends that affect operations management. 30