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Introduction to Operations Management
1 Introduction to Operations Management
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Learning Objectives Define the term operations management.
Compare and contrast service and manufacturing operations. Describe the operations function and the nature of the operations manager’s job. Differentiate between design and operation of production systems. Describe the key aspects of operations management decision making.
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Learning Objectives Briefly describe the historicalevolution of operations management. Definition of Supply Chain and value generation through supply chain. Identify current trends that impact operations management.
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Operations Management
Operations Management is: The management of systems or processes that create goods and/or provide services Operations Management affects: Companies’ ability to compete Nation’s ability to compete internationally
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The operations function involves the conversion of inputs into outputs
Value-Added Process Figure 1.2 The operations function involves the conversion of inputs into outputs Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Value added
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Goods-service Continuum
Figure 1.3 Goods Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile Repair, fast food Home remodeling, retail sales Automobile assembly, steel making
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Key Differences 1. Customer contact 2. Uniformity of input
3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity
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Key Differences 6. Production and delivery 7. Quality assurance
8. Amount of inventory 9. Evaluation of work 10. Ability to patent design
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Goods vs Service Characteristic Goods Service Customer contact Low
High Uniformity of input Labor content Uniformity of output Output Tangible Intangible Measurement of productivity Easy Difficult Opportunity to correct problems Inventory Much Little Evaluation Easier Patentable Usually Not usual
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Figure 1.4
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Employment in Turkish Industry
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Decline in Manufacturing Jobs
Productivity Increasing productivity allows companies to maintain or increase their output using fewer workers Outsourcing Some manufacturing work has been outsourced to more productive companies
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Operations Management Decision Making
Models Quantitative approaches Analysis of trade-offs Systems approach Establishing priorities Ethics
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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
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Decision Making System Design – capacity location
arrangement of departments product and service planning acquisition and placement of equipment
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Decision Making System operation – personnel inventory scheduling
project management quality assurance
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Decision Making Models Quantitative approaches Analysis of trade-offs
Systems approach
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Models Tradeoffs A model is an abstraction of reality.
– Physical Schematic Mathematical Tradeoffs What are the pros and cons of models?
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Models Are Beneficial Easy to use, less expensive
Require users to organize Increase understanding of the problem Enable “what if” questions Consistent tool for evaluation and standardized format Power of mathematics
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Limitations of Models Quantitative information may be emphasized over qualitative Models may be incorrectly applied and results misinterpreted Nonqualified users may not comprehend the rules on how to use the model Use of models does not guarantee good decisions
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Quantitative Approaches
Linear programming Queuing Techniques Inventory models Project models Statistical models
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Analysis of Trade-Offs
Decision on the amount of inventory to stock Increased cost of holding inventory Vs. Level of customer service
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“The whole is greater than the sum of the parts.”
Systems Approach “The whole is greater than the sum of the parts.” Suboptimization
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How do we identify the vital few?
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?
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Ethical Issues Financial statements Worker safety Product safety
Quality Environment Community Hiring/firing workers Closing facilities Worker’s rights
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Historical Evolution of Operations Management
Table 1.7 Industrial revolution (1770’s) Scientific management (1911) Mass production Interchangeable parts Division of labor Human relations movement ( ) Decision models (1915, ’s) Influence of Japanese manufacturers
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Trends in Business Major trends The Internet, e-commerce, e-business
Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior
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Management Technology
Technology: The application of scientific discoveries to the development and improvement of goods and services Product and service technology Process technology Information technology
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Simple Product Supply Chain
Figure 1.7 Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service
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A Supply Chain for Bread
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 $0.38 Flour transported to baker $0.46 Baker produces bread $0.54 $1.00 Bread transported to grocery store $1.08 Grocery store displays and sells bread $0.21 $1.29 Total Value-Added
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