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Introduction to Operations Management
Operations Management Session 1
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Objectives The student will be able to: Define Operations Management
Describe the nature and role of the operations function Construct and use transformation models Appreciate that operations produce both products and services Understand the difference between micro and macro operations Understand the importance of internal supplier-customer chains Build a Typology of Operations based on the Four V’s Appreciate how operations fit in with Operations Strategy
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Topics What is Operations? What do Operations Managers do?
Operations Management in Goods and Services Transformation Model Business Process Analysis Typology of Operations Missions and Strategies
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Definition Operations Management (OM) management of activities that lead to the creation of goods and services through the transformation of inputs to outputs
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Functions - Airline Marketing Operations Finance/ Accounting Flight
Ground Support Facility Maintenance Catering 26
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OM - Critical Decisions
Managing quality Design of goods and services Process and capacity design Layout design Human resources Location strategies Supply-chain management Inventory management Scheduling Maintenance 18
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The Critical Decisions - 1
Quality management Who is responsible for quality? How do we define quality? Goods and services design What product or service should we offer? How should we design these products and services? 19
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The Critical Decisions - 2
Process and Capacity design What processes will these products require and in what order? What equipment and technology is necessary for these processes? 20
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The Critical Decisions - 3
Layout design How should we arrange the facility? How large a facility is required? Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce? 21
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The Critical Decisions - 4
Supply chain management and JIT “Just-in-time” Inventory, Material Requirements Planning Should we make or buy this item? Who are our good suppliers and how many should we have? How much inventory of each item should we have? When do we re-order? 22
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The Critical Decisions - 5
Immediate, short term, and project scheduling Is subcontracting production a good idea? Are we better off keeping people on the payroll during slowdowns? Maintenance Who is responsible for maintenance? Location Where should we put the facility On what criteria should we base this location decision? 23
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Output of most Operations a Mixture of Goods and Services
CRUDE OIL PRODUCTION ALUMINIUM SMELTING SPECIALIST MACHINE TOOL MANUFACTURER RESTAURANT COMPUTER SYSTEMS SERVICES MANAGEMENT CONSULTANCY PSYCHOTHERAPY CLINIC PURE GOODS Tangible Can be stored Production precedes consumption Low customer contact Can be transported Quality is evident PURE SERVICES Quality difficult to judge Cannot be transported High customer contact Production and consumption are simultaneous Cannot be stored Intangible
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Goods Versus Services - 1
Good Service Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service 33
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Goods Versus Services - 2
Good Service Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Provider, not product is transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from intangible service. 34
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The Transformation Model
Input Resources Output Services + Products Input Transformed Resources Materials Information Customers Transformation Process Customers Input Transforming Resources Facilities Staff
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Economic System Transforms Inputs to Outputs
Process Outputs Economic system transforms inputs to outputs at about an annual 1% increase in productivity: - capital 1/6 of 1% - labour 1/6 of 1% - management 2/3 of 1% Land, Labour, Capital, Management Goods and Services Feedback Loop 35
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Macro and Micro Operations
An operation or process that can not be split up into smaller operations and processes Macro An operation or process that can be split up into smaller operations and processes All Macro operations are made up of many Micro operations
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Internal Customer Concept
To treat internal suppliers and customers as if they were independent external organisations Each micro-operation should identify its internal customers and internal suppliers Discuss with them what they need and what they can offer Related to Business Process Re-engineering (BPR)
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The Four V’s Volume of demand Variety in operations
How many the organisation makes Service vs. Mass Production Variety in operations The ability to adapt the transformation process to meet needs of the customer Taxi vs. Train Variation in demand Adapting to changing demand Visibility of transformation How much of the operations functions are visible to the customer Some operations have mixed high/low visibility eg Restaurant Front and Kitchen Often they are in conflict
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A Typology of Operations
Electricity generator factory Gourmet restaurant Pioneering surgery Taxi service Television plant Fast food restaurant Routine surgery Mass rapid transport Volume Low High Bespoke tailor University tutorials Corporate tax advice Department store Off-the-peg suit plant University lectures Financial audits Jeans shop High Variety Low Electricity utility Financial audits Emergency service London underground Bread bakery Consultancy advice Shopping mall security Trucking operation Variation in Demand High Low Health care "Cook at your table" restaurant Dentist Music teacher Most manufacturing Prepackaged sandwich maker Dental technicians Distance learning High Visibility Low
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The Most Important Conflict
Volume vs Variety Project Job Batch Mass Continuous Product Unique Unique aspect to each product Made to order Made to stock Commodity Volume Very low Very low to low Low to med High Very high Variety Infinite Very high to high Medium to high Low Very low
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Process Types - Products
Project High Job Batch Variety Mass Continuous Low Low Volume High
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Process Types - Services
Professional High Service (e.g shops) Variety Mass Services Low Low Volume High
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Organisation Mission Statement
Mission – the purpose or rationale for an organisation’s existence Example Mission Statement – “To manufacture and service a growing and profitable worldwide microwave communications business that exceeds our customers’ expectations”
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Operations Management Mission Statement
General – To produce products consistent with the company’s mission as the worldwide low-cost manufacturer Specific – To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production and field service opportunities
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Strategies Strategy – How an organisation expects to achieve its missions and goals Generic Strategies – Competing on price Competing on differentiation Competing on response
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