Production & Operations Management

Prepared by; Engineer Edna C. Ambion

Operations Research
is the application of techniques developed in mathematics, statistics, engineering and the physical sciences to the solution of problems in business, government, industry, economics and the social sciences.

What is POM?
Production is the creation of goods and services Production and/or Operations Management are the activities that transform resources into goods and services

Activities involved in Production Operations System

Forecasting Capacity planning Scheduling Managing inventory Assuring quality Employee motivation and training Location of facilities

Why Study POM?

It is the core of all business organizations 35% or more of all are jobs are in operations management-related areas-such areas as customer service, QA, PPC, Scheduling and many more one of the 3 critical parts of any organization:

Marketing generates demand Operations creates the product Finance/accounting tracks organizational performance, pays bills, collects money

Why Study POM?

It shows us how goods and services are produced It shows us what POM managers do It is the most costly part of any organization

Basic Functions in the Organizations

1.Operations consist of all the activities directly related to producing goods or providing services - the essence is to add value during the transformation process. Value added is the difference between the cost of inputs and the value or price of output. Businesses consider those that do not add value wasteful. Eliminating or improving such operations decreases the cost of inputs or processing thereby increasing the value added.

Basic Functions in the Organizations

2.Finance function comprises activities related to securing resources at favorable price and allocating those resources throughout the organization. Finance and operation cooperates on issues on budgeting, economic analysis of investment proposal and provision of funds. 3.Marketing- consists of selling and/or promoting the goods or services of an organization. Advertising and pricing decisions are made by marketing people.

Other Functions in the Organizations

Accounting preparing financial statements, including income statement and balance sheet. Purchasing- procurement of materials,supplies and equipment. Evaluate vendors for quality,service. Price and ability to adjust to changing demand. Personnel concerned with recruitment and trainings of personnel, labor relations,contract negotiations and salary administration, assisting in manpower projections and ensuring health and safety of employee.

Other Functions in the Organizations

Public relations responsibility for building and maintaining a positive public image of the organization. Industrial engineering- concerned with scheduling, performance standards,work methods, quality control and material handling. Distribution involves shipping of goods to warehouse retail outlets or final customer. Maintenance-responsible for general upkeep and repair of equipment,buildings, ground, removing toxic wastes, parking and security.

Designing and Operating Production Systems

system Design decisions concerning capacity,location, arrangement of departments,product and service planning, and acquisition and placement of equipment.

system operation- Decisions concerning personnel,inventory, scheduling,project management and quality assurance

Classifying Production Systems

1. degree of standardization the output of production system can range from highly standardized to highly customized. Standardized ouput there is a high degree of uniformity in goods or services,(goodsradios,computers, newspaper, canned foods etc. Services automatic car washes, televised newscast, etc) Customized output means that product or service is designed for a specific case or individual.

Classifying Production Systems

customized goods include eyeglasses, custom fitted clothing window glass (cut to order) etc. customized service include tailoring, taxi rides and surgery. 2. types of operation- the degree of standardization and the volume of output or service influence the way a firm organizes production. 3. Production of Goods versus service operations

Characteristics of Goods

Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction

1995 Corel Corp.

Characteristics of Services

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

Goods vs. Services

Goods Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Service Reselling unusual Difficult to inventory Quality difficult to measure
Selling

is part of

service

Goods vs. Services - Continued

Goods

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

Changing Challenges for the Operations Manager

Past
Local or national focus Batch (large) shipments Low-bid purchasing Lengthy product development

Causes
Low-cost, reliable worldwide communication and transportation networks Cost of capital puts pressure on reducing investment in inventory Quality emphasis requires that suppliers be engaged in product improvement Shorter life cycles, rapid international communication, computer-aided design, and international collaboration

Future
Global Focus Just-in-time shipments Supply-chain partners Rapid product development, alliances, collaborative designs

Changing Challenges for the Operations Manager

Past
Standardized products Job specialization Low cost focus

Causes
Affluence and worldwide markets; increasingly flexible production processes Changing sociocultural milieu. Increasingly a knowledge and information society. Environmental issues, ISO 14000, increasing disposal costs

Future
Mass customization Empowered employees, teams, and lean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing

The Productivity Challenge

Productivity
Measure of process improvement Represents output relative to input

Productivity

Units produced = Input used

Only through productivity increases can our standard of living improve

The Economic System Transforms Inputs to Outputs

Inputs
Land, Labor, Capital, Management

Process
The economic system transforms inputs to outputs at about an annual 2.5% increase in productivity (capital 38% of 2.5%), labor (10% of 2.5%), management (52% of 2.5%)
Feedback loop

Outputs
Goods and Services

Sample problem-Productivity
Determine the productivity for each cases: 1.Four workers installed 720 square yards of carpeting in 8 hours. A machine produced 68 usable pieces in 2 hours

Factors that Affect Productivity

1. 2. 3. 4.

5.

Methods Capital Quality Technology Management

Improving Productivity
1.

2.
3. 4.

Measurement in managing and controlling Look at the system as a whole improvements on bottleneck operation Developing methods by soliciting ideas from workers Establish reasonable goals for improvements.

Improving Productivity
5. Management support on improvements. 6. Measure improvements and publicize them. 7. Dont confuse productivity with efficiency.

Competitiveness
Competitiveness how effectively an organization meets the needs of customers relative to others that offer similar goods or services 1. Price 2. Quality 3. Product differentiation 4. Flexibility 5. Time

Reasons why some organizations fail:

1. too much emphasis on short term financial performance at the expense of research and development 2. Failing to take advantage of strengths and opprotunities and/or failing to recognize competitive threats. 3. neglecting operations strategy

Reasons why some organizations fail:

4. placing too much emphasis on product/service design and not too much on process design 5. neglecting investment in capital and human resources 6. Failing to establish good communications and cooperation among diff functional areas. 7.Failing to consider customer wants and needs.