1. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-1

2. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 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

3. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-3 Chapter One Introduction to Operations Management

4. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 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

5. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-5 5 Typical Organization Chart

6. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-6 Business Operations Overlap Marketing Operations Finance Introduction to Operations Management

7. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-7 Operations Management includes: –Forecasting –Capacity planning –Scheduling –Managing inventories –Assuring quality –Motivating employees –And more... Introduction to Operations Management

8. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-8 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

9. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-9 9 What is Role of OM? OM Transforms inputs to outputs –Inputs are resources such as People, Material, and Money –Outputs are goods and services

10. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-10 © Wiley 201010 OM’s Transformation Role To add value –Increase product value at each stage –Value added is the net increase between output product value and input material value Provide an efficient transformation –Efficiency – means performing activities well for least possible cost

11. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-11 Value-Added The difference between the cost of inputs and the value or price of outputs. Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Value added Introduction to Operations Management

12. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-12 12 OM’s Transformation Process

13. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-13 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

14. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-14 Food Processor InputsProcessing Outputs Raw VegetablesCleaning Canned vegetables Metal SheetsMaking cans WaterCutting EnergyCooking LaborPacking BuildingLabeling Equipment Introduction to Operations Management

15. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-15 Hospital Process InputsProcessingOutputs Doctors, nursesExaminationHealthy patients HospitalSurgery Medical SuppliesMonitoring EquipmentMedication LaboratoriesTherapy Introduction to Operations Management

16. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-16 Operations Interfaces Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS Introduction to Operations Management

17. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-17 Decision Making System Design – capacity – location – arrangement of departments – product and service planning – acquisition and placement of equipment Introduction to Operations Management

18. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-18 Decision Making System operation – personnel – inventory – scheduling – project management – quality assurance Introduction to Operations Management

19. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-19 Major Characteristics of Production Systems Degree of standardization Type of operation – project – job shop – repetitive production/assembly line – continuous processing Introduction to Operations Management batch –

20. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-20 Manufacturing or Service? Tangible Act Introduction to Operations Management

21. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-21 Key Differences Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Quality assurance These differences are beginning to fade in many cases Introduction to Operations Management

22. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-22 Manufacturing vs Service Characteristic Output Customer contact Uniformity of input Labor 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

23. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-23 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

24. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-24 Major Tasks of Operations Managers Quality Production Timely Production Cost-effective Production

25. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-25 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

26. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-26 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

27. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-27 The Internet E-Business Supply Chain Management Recent Trends Introduction to Operations Management

28. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-28 Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer Simple Product Supply Chain Introduction to Operations Management

29. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-29 Continuing Trends Quality and process improvement Technology Globalization Operations strategy Environmental issues Introduction to Operations Management

30. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-30 Important Quality Dimensions in Manufacturing Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived Quality

31. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-31 Dimension 1: Performance Does the product or service do what it is supposed to do, within its defined tolerances? Performance is often a source of contention between customers and suppliers, particularly when deliverables are not adequately defined within specifications. The performance of a product often influences profitability or reputation of the end-user. As such, many contracts or specifications include damages related to inadequate performance.

32. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-32 Dimension 2: Features Does the product or services possess all of the features specified, or required for its intended purpose? While this dimension may seem obvious, performance specifications rarely define the features required in a product. Thus, it’s important that suppliers designing product or services from performance specifications are familiar with its intended uses, and maintain close relationships with the end-users.

33. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-33 Dimension 3: Reliability Will the product consistently perform within specifications? Reliability may be closely related to performance. For instance, a product specification may define parameters for up-time, or acceptable failure rates. Reliability is a major contributor to brand or company image, and is considered a fundamental dimension of quality by most end-users.

34. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-34 Dimension 4: Conformance Does the product or service conform to the specification? If it’s developed based on a performance specification, does it perform as specified? If it’s developed based on a design specification, does it possess all of the features defined?

35. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-35 Dimension 5: Durability How long will the product perform or last, and under what conditions? Durability is closely related to warranty. Requirements for product durability are often included within procurement contracts and specifications. For instance, fighter aircraft procured to operate from aircraft carriers include design criteria intended to improve their durability in the demanding naval environment.

36. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-36 Dimension 6: Serviceability Is the product relatively easy to maintain and repair? As end users become more focused on Total Cost of Ownership than simple procurement costs, serviceability (as well as reliability) is becoming an increasingly important dimension of quality and criteria for product selection.

37. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-37 Dimension 7: Aesthetics The way a product looks is important to end-users. The aesthetic properties of a product contribute to a company’s or brand’s identity. Faults or defects in a product that diminish its aesthetic properties, even those that do not reduce or alter other dimensions of quality, are often cause for rejection.

38. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-38 Dimension 8: Perception Perception is reality. The product or service may possess adequate or even superior dimensions of quality, but still fall victim to negative customer or public perceptions. As an example, a high quality product may get the reputation for being low quality based on poor service by installation or field technicians. If the product is not installed or maintained properly, and fails as a result, the failure is often associated with the product’s quality rather than the quality of the service it receives.

39. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-39 Summary It should be obvious from the discussion above that the individual dimensions of quality are not necessarily distinct. Depending on the industry, situation, and type of contract or specification several or all of the above dimensions may be interdependent. When designing, developing or manufacturing a product (or delivering a service) the interactions between the dimensions of quality must be understood and taken into account. While these dimensions may not constitute a complete list of relevant dimensions, taking them into consideration should provide us with a better understanding of the slippery concept of quality.

40. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-40 Important Quality Dimensions in Servicing Time Timeliness Completeness Courtesy Consistency Accessibility & Convenience Accuracy Responsiveness

41. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-41 Time: How long must a customer wait? Timeliness: Will a package be delivered by 10:30 the next morning? Completeness: Are all items in the order included? Courtesy: Do front-line employees greet each customer cheerfully? Consistency: Are services delivered in the same fashion for every customer? Accessibility and convenience: Is the service easy to obtain? Accuracy: Is the service performed right the first time? Responsiveness: Can service personnel react quickly and resolve unexpected problems? Important Quality Dimensions in Servicing

42. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-42 Exciter, Satisfier, Dissatisfier An exciter is something that a company does that leaves their customer not just satisfied, but a raving fan! The customer is left with an extremely positive impression and feels the need to share their great experience with their friends and family. They are providing this positive feedback without being prompted by the company to do so. In a world where word of mouth referrals drive business more than media advertising, this is huge! These are "front of the box" features that typically set your product apart from the competition. They're typically hard to discover or require unique assets. Exciters are also features that get your development team excited to work on ‘something cool’ and keep team moral high.

43. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-43 Exciter, Satisfier, Dissatisfier A satisfier is something that a company does that leaves their customer satisfied and happy, but not necessarily with any certain "wow" factor. An example of this would be arriving to a clean hotel room with good customer service, but nothing beyond that. The customer leaves with positive thoughts in their mind and if asked, would give the hotel a good review.

44. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-44 Exciter, Satisfier, Dissatisfier Dissatisfiers are features customer just expect to be there, or defects where the product is designed to perform a task that it doesn't (a bug). A dissatisfier turn a client or candidate away and send them out into the marketplace with a negative impression of the company. An example would be a hotel giving someone a room that had barely been cleaned and providing below average customer service. The person going through that experience would be certain to leave with a negative thought in their mind and to share that thought with their friends and family.

45. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-45 Exciter, Satisfier, Dissatisfier Indifferent features are issues customers just don't care about. Perhaps you may think they're cool, but the general customer doesn't really care. Many times indifferents are required for another feature For example, the differential gear in a car. you may think the distribution ratio and response is impressive, but most customers just don't care.

46. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-46 Product Life Cycle

47. McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 1-47 Product Life Cycle