Operations

Management
Production & Operations Management

Francis J. 1
Content
 Contact information - instructor
 Class times and locations
 Course objectives and scope
 Schedule topics
 Course materials
 Grading scheme
 Developing good study habits
 Lecture

2
 Course Materials
 Prescribed text:

Operations Management, Ninth Edition, by Jay
Heizer and Barry Render, Prentice Hall
 Lecture notes (slides) that will be used in class are available in
the classes e-mail account. Students are expected to download
the materials for their use in class. Lecture notes are loaded in
PPT and Pdf formats.
 Other reference text:
 Production and Operations Management, Eight Edition,

Norman Gaither and Greg Frazier, South-Western College

Publishing
3
 Developing Good Study
Habits
 In any course, the level of difficulty is inversely
related to the amount of independent effort you put
into studying the material.
 It is recommended that students – Start Studying
Early
 A few tips:
 Read the materials prior to class
 Make notes and prepare to ask probing questions

Attempt a few if not all the practice problems

Read notes immediately after class or as early as possible

Practice past exam papers – format might change

Network with classmates, aim high & strive for excellence

Concepts that are not clear can be discussed in class or
during office hours
4
Lecture #1 – Intro. to
POM
 Define POM
 The Productive System & Strategic
Decisions
 Heritage of POM
 Stages of Product Design
 Product Life Cycle
 The BCG Matrix
 Strategic Moves for Competitive Advantage

5
Learning Objectives
When you complete this
chapter you should be able
to:
1. Define operations
management
2. Explain the distinction
between goods and services
3. Explain the production
system
 Learning Objectives
When you complete this
chapter you should be able
4.
to:
Describe the stages of a
product design
5. Explain the product life cycle
6. Apply the BCG Matrix using
examples
7. Describe various strategic
moves to gain competitive
 Moving Assembly
Lines
 It was August 1913 in Detroit and Ford Motor managers
Clarence Avery and C. W. Klann struggled to build cars.
Men had been building cars for decades, but Avery and
Klann wanted to do it faster and cheaper. Their plan was
to put the car together while it moved and men
assembling it stood still-a revolutionary change. For
centuries, men had moved and the work stood still.
Moving work while men stand still is difficult. But they
succeeded. In 9 months, they reduced the time spent on
assembly from over 12 hours to just 93 minutes. They
revolutionized production and before they were through,
they put America on wheels with 15 million Model T Fords.

8
Operations Management
(OM)
 It is through Production and Operations
Management (POM) that we come to have our
food, shelter, durable and non durable goods,
health care, education and general standard of
living. The quality of our productive systems is
a main difference between highly industrialized
countries and underdeveloped countries.
 POM – The planning, scheduling and control of
the activities that transforms inputs into
finished goods and services (Bozarth, 2005).
The primary concern is QUALITY and EFFICIENCY.

9
Products at Procter &
Gamble
POM Examples (70% Service Industry in US – Rajiv,
2008)
 Fast Food
 Make hamburgers

 Maintain equipment

 University

Research for truth
 Disseminate truth

 Automobile
 Assemble automobiles

 Design automobiles

 Church
 Conduct weddings

 Conduct funerals

 Conduct services

11
 Diagram of the
Productive System
Finance Money
Managmt. Labor Products

Society Accountg. Inputs Material Transformation Outputs Society

Mktg. Machine Services
Engineeg. Method

Control
Internal Feedback

Quality Goods
Efficient Services
External Feedback
12
Heizer and Render (2006)

13
Organizing for Goods
and Services (Heizer & Render, 2006)

 To create goods and services, all organizations

perform 3 core functions:

Marketing – generates the demand & takes the
order

Production/Operations – creates the product or
service

Finance/Accounting – tracks how well the
organization is doing, pays the bills & collects the
money
 Universities, churches, boy scouts, fast food
outlets, car manufacturing and other
businesses all perform these functions

14
Three Functions
Required of All
organizations

15
Why Study POM?
 One of the 3 major functions of any
organization [Marketing, POM & Finance].
Understand how people organize
 How goods and services are produced
 It is one of the most costly parts of an
organization. Provides the best opportunity
for an organization to improve its profitability
 Understand what Production/Operations
managers do. Build the decision-making skills
necessary to be such a manager and explore
career opportunities

16
 POM Mission &
Strategy
 Mission – To satisfy opportunities in the economic
system, managers identify what goods or services
the firm will contribute to society. This contribution
is the firm’s reason for being, that is, its mission
 Strategy – A plan designed to achieve a mission.
Each functional area has a strategy for achieving its
mission. Strategies should be established in light of
the threats & opportunities in the environment and
the strengths & weaknesses of the organization.
 Strategic and Tactical Decisions of POM [10 decisions]

Quality strategy; Product strategy; Process strategy;
Location strategy; Layout strategy; Human resource
strategy; Purchasing & Just-in-Time strategy; Inventory
tactics; Scheduling tactics; Maintenance & Reliability tactics
[Roles of Operations Managers]

17
DEVELOPING OPERATIONS STRATEGY

Corporate Mission

Assessment of Distinctive
Global Business Business Strategy Competencies or
Conditions Weaknesses

Product/Service Plans

Competitive Priorities
Cost, Time, Quality &
Flexibility

Operational Strategies
Positioning the Production System
Focus of Production
Product/Service Designs and Plans
Production Process and Technology Plans
Allocation of Resources to Strategic Alternatives
Facility Plans: Capacity, Location, and Layout
18
 Achieving a World-Class
POM Strategy
 A world-class POM function is one that obtains excellence
in meeting customer requirements through continuous
improvement.
 World-class firms have been successful in putting together
an operations strategy that supports the overall company
objectives by creating a competitive advantage.
 Each of the 10 decisions in POM can contribute to this
competitive advantage.
 Eg. Quality strategy – Improves systems via empowered employees; Reduces
rework; Reduces costs and wins orders via quality
 Eg. Product strategy – Produces one or only a few products; Introduces new
products continually
 Eg. Human strategy – Train employees to perform a variety of jobs; Fosters
mutual trust and respect, resulting in a high level of morale

19
Best Operating Level with
Economies & Diseconomies of
Scale

20
 Heritage of POM
 Our lives and the POM discipline have been enhanced by the
innovations and contributions of numerous individuals and many
challenges.
 Industrial revolution


Global competition
 Frederick W. Taylor – Scientific management

 Frank and Lillian Gilbreth


Edward Deming
 Walter Shewhart

 POM will progress on contribution from disciplines:

 Industrial engineering, Management science, Statistics,

Management, Economics, Information sciences, etc

 Contribute to greater productivity & efficiency

21
22
23
Others Contributors
 Charles Babbage (1792-1871)

Cost accounting

Calculating machine

Management science
 Henry Fayol (1841-1925)

Function of management

Division of labor

Unity of command

Authority and responsibility

Fair reward for work done

Hierarchy

Justice and fair play

24
 Stages of Product
Design
 Market research
 Feasibility & financial viability study

 Product specs. & design (eg. % alcohol)

 Total package development (eg. label design)

 Prototype

 Pilot run & testing [adjustment loop]

 Production

 Introduction

25
The Product Life
Cycle
 Introduction
 Growth

 Maturity

 Decline

Note: Graph – Sales revenue & Time

26
Product Life Cycle
Introduction Growth Maturity Decline
Best period to Practical to Poor time to Cost control
Company Strategy/Issues

increase market change price or change image, critical

share quality image price, or quality

R&D engineering Strengthen niche Competitive costs

is critical become critical
Defend market
position
CD-ROMs
Internet search
engines Analog TVs
Drive-
LCD & plasma TVs through
restaurants
Sales iPods

3 1/2”
Xbox Floppy
360 disks

Figure 2.5
Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical differentiatio
Less rapid
development n
OM Strategy/Issues

Product and product

critical process changes – more Cost
Frequent reliability minor changes minimization
product and Competitive Optimum Overcapacity
process design product capacity in the
changes improvements Increasing industry
Short and options stability of Prune line to
production runs Increase process eliminate
High production capacity items not
Long production
costs returning
Shift toward runs
good margin
Limited models product focus Product
Reduce
Attention to Enhance improvement
capacity
quality distribution and cost cutting

Figure 2.5
The Boston Consulting
Group (BCG) Matrix
 Four Quadrants
 Question Mark
 Star


Cash Cow
 Dog

The successful sequence of market development is for

question mark, financed by cash cow, to become a
star and then turn a cash cow, which will then
finance other question marks.
Matrix is used to rank product line or group of
companies
N.B. Market growth Vs Market share[High/Low]

29
The BCG Matrix

30
Strategic Moves
Locking suppliers Reducing cost Creating barriers
or buyers to entrants

The Firm

Establishing Enhancing products Differentiating products

alliances or services and services

31
 Strategic Moves -
Jamaica
 Acquisitions or Hostile takeover
 Mergers–MMB & Sigma;IMP & IMS;Barclay &
CIBC? [Synergy: 2+2=5]
 Vertical Integration – Grace & Red Stripe?
 Diversification – Butch Stewart
 Collaborative effort – AMV Mines for Alpart &
Alcoa; Kool FM & Nationwide Network
 Outsourcing – UWI Canteen & Security
 Re-engineering/Re-tooling – IBM, NCB, BNS, Cement, ++
+
 Downsizing – Most firms (Air Ja. ++++)
Assignment: Give other examples of strategic moves in
Jamaica.
32
Vertical Integration

33
Strategic Group Map
 It is a management tool that assist
operations managers in determining the best
strategic moves to gain competitive
advantage
 It outlines the strategic moves firms should
employ to be the dominant player in the
industry
 It guides operations managers in
determining which firms to attack, merge
and acquire in the industry

34
Market Share
Digicel, LIME & Claro in Jamaica @ Dec. 2009
Tutorial Questions -
Introduction
 1. Define operations management in your own words. Will your definition accommodate both
manufacturing and service operations?
 2. What is the difference between production and operations?
 3. Production is ….................................................................……………………………..….…
 4. The three fundamental functions of any business are ………………………………………
…………….....…………………………………………………………………….……………..
 5. Production and operations management directs and controls ………......……………………..
 6. The functions of management are ………………….....................................................……….
 7. The ten decisions of OM are ………………………......................................................…..….
 8. The “father” of scientific management is:
 (a) Henry Ford
 (b) Eli Whitney
 ( c) Frederick W, Taylor
 (d) Adam Smith
 (e) None of the above
 9. A product in the final or decline phase of its life cycle may require unusual effort in the area of:
 (a) research
 (b) high volume production
 (c ) product development
 (d) enhancement of or addition of capacity
 (e) none of the above
 10. The person who developed plant wide quality control systems was ………......................…..
 11. Give examples of local firms who have made critical strategic moves
…………………………………………………………………………………………………………………………………
………………………
 12. In the 5M’s of operations, which element is the most important and why? ………………..
 13. Draw and explain the production system and give one example of a service firm.
 14. Production/operations management can be defined as the management of all activities
directly related to the creation of goods and/or services through the transformation of inputs into
outputs. Discuss
 15. The management of information is of great importance to operations management since:

Without “information” one would have no knowledge of the state of input resources, process performance, or
output goods and/or services

Properly developed information systems can contribute to the overall integration required to allow a firm to
produce on a competitive basis

36
“good” decisions require “good” information –the right information, at the right place, at the right time. Discuss
Solution – Tutorial, Intro #1
 1. Define operations management in your own words. …. (1) Structured control
activities that transform inputs into outputs. (2)The group of activities
that are necessary for the creation of goods and services, the
transformation of inputs to outputs. Will your definition accommodate both
manufacturing and service operations? Yes
 2. What is the difference between production and operations? …..There is no
fundamental difference. However, production management is usually
used when referring to a system producing a tangible product, while
operations management is used to refer to a system producing a
service.
 3. Production is ……..The creation of goods and/or services.
 4. The three fundamental functions of any business are: Marketing,
Production and Finance……………..
 5. Production and operations management directs and controls … The
transformation process, creating goods and services..
 6. The functions of management are …...Planning, Organizing, Leading &
Controlling
 7. The ten decisions of OM are: …… Strategies - Quality, Product, Process,
Location, Layout, HR, Procurement, Scheduling, Inventory &
Maintenance/Reliability. Encompass the Role of the Production Manager
 8. The “father” of scientific management is:
 (a) Henry Ford (b) Eli Whitney
 ( c) Frederick W, Taylor (d) Adam Smith (e) None of the above
 9. A product in the final or decline phase of its life cycle may require unusual
effort in the area of:
 (a) research (b) high volume production (c ) product development
 (d) enhancement of or addition of capacity (e) none of the above

37
Solution – Tutorial, Intro #2
 10. The person who developed plant wide quality control systems was ….
.Edward Deming
 11. Give examples of local firms who have made critical strategic moves ……
Red Stripe focusing on the core business, which is brewed products,
Merger between the two major gambling entities, etc.
 12. In the 5M’s of operations, which element is the most important and why?
…..All are equally important. They complement each other and create
certain synergies.
 13. Draw and explain the production system and give one example of a service
firm. …. Bank, University, Hospital; Inputs – Doctors, Nurses,
Equipment, Waiting Area; Conversion – Lab tests, W-ray, Examination;
Output – Mother & Child, Successful surgery
 14. Production/operations management can be defined as the management of
all activities directly related to the creation of goods and/or services through the
transformation of inputs into outputs. Discuss ….. (1) Define key terms, State
your position, Elaborate using the 10 major POM decisions. (2)Define
key terms, State your position, Expound in defense – Inputs, outputs,
examples, functions of management, quality output, customer
satisfaction, product design, product life cycle, strategic moves, role of
the production manager, profitability, etc
 15. The management of information is of great importance to operations
management since:

Without “information” one would have no knowledge of the state of input resources,
process performance, or output goods and/or services

Properly developed information systems can contribute to the overall integration
required to allow a firm to produce on a competitive basis

“good” decisions require “good” information –the right information, at the right place, at
the right time. Discuss
 Position – Agree with statements above, then defend position and
explain its impact on the organization. 38
 NEXT LECTURE:
Quality Management

Francis J. Vassel Dr. D. Anthony Chevers

39