1. OPSM 301 Operations Management
Koç University
OPSM 301 Operations Management
Class 1:
Introduction: What is operations management?
Chapter 1
Zeynep Aksin

2. What is the OPSM301 course about?
The role of the operations function may be defined as the design, operation, and improvement of the production system that creates the firm’s primary products and services
We will study how organisations “actually do things” 

3. Operations as a Competitive Weapon
Dell Computers
Innovative Supply Chain Strategy (direct model)
Southwest Airlines
Leader in lowfare flights, by elimination of all waste
Zara
Can deliver new styles in 3-6 weeks (compared to 5-12 months for competitors)
Tansas Markets (now part of Migros)
Inventory Control system cuts stock-outs to 7.2% from 19%
Vestel Durable Goods
Distribution optimization leads to increased customer satisfaction as well as lower costs

4. Supply Chain of a Typical Original Equipment Manufacturer

5. Management Decisions Strategic (long-term) decisions
Tactical (intermediate-term) decisions
Operational planning and control (short-term) decisions

6. A Process Management Perspective
We all manage processes...
Process
Management
Information
structure
Network of
Activities and Buffers
Inputs
Outputs
Flow units
(customers, data,
material, cash, etc.)
Goods
Services
Labor & Capital
Resources

7. Process Management
A business process is a network of activities performed by resources that transforms inputs into outputs…
Process Management is a set of managerial policies specifying how a process should be operated over time...

8. Products Products are the desired set of process outputs Product Types
Goods versus Services
Product Attributes
Cost
Delivery response time
Variety
Quality

9. Inputs-Outputs Tangible Inputs Intangible Inputs Tangible Outputs
People
Raw material
Intangible Inputs
Information
Time
Tangible Outputs
Buildings
Cars
Intangible Outputs
Outgoing patient (hospital)
Delivered message (advertising company)

10. Transformations Physical--manufacturing Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications

11. All Managers are Ops Managers!
All managers must transform inputs into outputs
Example: Accounting Manager
Inputs: data, information, labor
Transformation: application of accounting principles and knowledge
Outputs: accounting reports, knowledge of performance, ...
Therefore, all managers are in some sense Operations managers
All managers have an “operation” to run

12. Operations Management
Value Proposition
System Design
Planning & Control
Product/Service
Design
Process Selection
TQM
Facility location
Facility Layout
JIT
Operations Strategy
Operation Priorities
Cost
Quality
Delivery
Flexibility
Innovation
Service
Aggregate Planning
Inventory Systems
Project Management
Scheduling
MRP
Statistical Process Control

13. Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
© 1995 Corel Corp.

14. Characteristics of Service
Intangible product
Produced & consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
© 1995 Corel Corp.

15. Goods Contain Services / Services Contain Goods
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling 25 50 75
100
Percent of Product that is a Good
Percent of Product that is a Service

16. Development of the Service Economy
Percent
United States
Canada
France
Italy
Britain
Japan
W Germany
1970
2000
Services
Industry
Farming
250
200
150
100 50 80
%70 60 40 30 20 10
U.S. Employment, % Share
Services as a Percent of GDP
U.S. Exports of Services
In Billions of Dollars
Year 2000 data is estimated

17. Units produced Productivity = Input used Productivity
Measure of process improvement
Represents output relative to input
Only through productivity increases can our standard of living improve
Productivity
Units produced
Input used =
You might also ask them to consider what happens as the rate of productivity improvement approaches zero. Does this simply mean that the standard of living ceases to rise, or are there more ominous manifestations?

18. Multi-Product (Total Factor) Productivity
Output
Labor + material + energy + capital + miscellaneous

19. Example 1
Mis Hali cleaned 65 rugs in October, consuming the following resources:
Labor: 520 hours at 13 YTL per hour
Solvent: 100 liters at 5 YTL per liter
Machine rental: 20 days at 50 YTL per day
a. What is the labor productivity per dollar? ( )
b. What is the total factor productivity? ( )

20. Example 2
Because of its excellent location and products, a bakery in Sariyer experienced a 25% increase in demand in the last year. Customers are unable to find the product of their choice on many occasions. Space limitations preclude the possibility of adding another oven. A new process is proposed by an employee which allows several loaves to be baked simultaneously, however requires additional manpower. If the bakery made 1500 loaves this time last year with a labor productivity of loaves per labor hour, how many workers will the bakery need to add, assuming each worker works 160 hours per month.
(1 worker)

21. Significant Events in Operations Management