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To Operation Management
To Operation Management
To Operation Management
to
Operation Management
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Chapter Outline
• Definition of Operations Management
• Key Points in OM.
• Operations Decisions - A Framework
• Cross-Functional Decision Making
• Operations as a System
• Contemporary Operations Themes
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Definition of
Operations Management
• Operations Management is concerned with the
production of goods and services.
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Where are the OM Jobs
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Where are the OM Jobs
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Why Study OM?
• OM is one of three major functions
(marketing, finance, and operations) of
any organization.
• We want (and need) to know how goods
and services are produced.
• We want to understand what operations
managers do.
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Organizational
Functions
• Marketing
– Gets customers
• Operations
– creates product or service
• Finance/Accountin
g
– Obtains funds
© 1995 Corel Corp.
– Tracks money
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Functions - Bank
Commercial Bank
© 1984-1994
T/Maker Co.
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Functions - Airline
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Functions -
Manufacturer
Manufacturing
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Operation Managers
• Operation Managers are the staff of the organization who have
particular responsibility of managing resources for producing
goods/services.
• Operation Manager are responsible for producing the supply
of goods or services in organization.
• Operations managers make decisions regarding the operations
function and its connection with other functions.
• Operations managers plan and control the production process
and its interfaces within the organization and with the external
environment.
• It means everything we wear, eat , sit on, read is because of
Operations Managers.
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What Is Operations Management?
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Key Points in OM
Definition
1. Functions of the operations manager.
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Operation Functions
• Arrangement of resources which are
devoted to the production and delivery
of products and services.
• Manufacturing companies- The
operation function may be called
manufacturing, production and operations
departments.
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What Operations
Managers Do
Plan - Organize - Staff - Lead -
Control
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Operation Decision
Main Elements
• Quality
– Defining Criteria
• Standard must be set
• People trained
• Inspection of goods and services produced
• Process
– How to produce & deliver
• Type of equipments
• Layout of the facility
• Work force
– Managing People
• Selection, hiring, firing, training, supervision
• Capacity
– Physical facilities & labor
• Inventory
– What, when & how much?
Example CIIT
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The Critical Decisions
• Quality management
– Who is responsible for quality?
– How do we define quality?
• Service and product design
– What product or service should we
offer?
– How should we design these products
and services?
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The Critical Decisions - Continued
• Process and capacity design
– What processes will these products
require and in what order?
– What equipment and technology is
necessary for these processes?
• Location
– Where should we put the facility
– On what criteria should we base this
location decision?
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The Critical Decisions - Continued
• 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?
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The Critical Decisions - Continued
• Supply chain management
– Should we make or buy this item?
– Who are our good suppliers and how
many should we have?
• Inventory, material requirements
planning,
– How much inventory of each item should
we have?
– When do we re-order?
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The Critical Decisions - Continued
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Cross-Functional Decision Making
• Operations are the primary
responsibility of Operation Manager.
• But have to take care of other primary
functions:
– Marketing
– Finance
AND
• Supporting functions: Accounts, IT,
Personnel
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Operations is about
managing Process
Transformation
Input (Conversion)
Output
Process
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Operations as a
Process
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Operations as a System
Energy
Materials
Labor Transformation
Goods or
(Conversion)
Capital Services
Process
Information
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Relation of Operations to its Environment
SOCIETY
External
Human Environment
EngineeringMarketing
Resources
COMPETITORS
Internal Environment
GOVERNMEN
T
Internal Environment-Upper Management, Other Business Units
External Environment-PEST, Competitors
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The Operations
Function
Operations as a transformation
process
Operations as a
basic function
Operations as the
technical core
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Operations as a
Transformation Process
INPUT
Material
Machines
Labor
Management
Capital
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Operations as a
Transformation Process
INPUT
Material
Machines TRANSFORMATION
Labor PROCESS
Management
Capital
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Operations as a
Transformation Process
INPUT
Material
OUTPUT
Machines TRANSFORMATION Goods
Labor PROCESS Services
Management
Capital
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Operations as a Transformation Process
INPUT
Material
OUTPUT
Machines TRANSFORMATION Goods
Labor PROCESS Services
Management
Capital
Feedback
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Operations as the
Technical Core
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Operations as the
Technical Core
Finance/Accounting
Production and Budgets
Inventory data Cost analysis
Capital budgeting requests Capital investments
Capacity expansion and Stockholder
Orders for materials Technology plans requirements Product/Service
Production and delivery Availability
Schedules Quality Lead-time estimates
Marketing
Suppliers
Operations
Material availability Sales forecasts
Quality data Customer orders
Delivery schedules Customer feedback
Designs Personnel needs Promotions
Hiring/firing
Skill sets
Training
Performance evaluations
Legal requirements
Job design/work
Union contract negotiations
measurement
Human Resources
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OPERATIONS MANAGEMENT IN AN E-BUSINESS
ENVIRONMENT
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Categories of
E-Commerce
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Categories of E-Commerce
Business Consumer
B2B B2C
Business
Commerceone.com Amazon.com
C2B C2C
Consumer
Priceline.com eBay.com
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Value Chain
• The set of activities that
create and deliver
products to the customer.
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A New Value Chain
(a) Traditional Value Chain
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A New Value Chain
(a) Traditional Value Chain
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A New Value Chain
(a) Traditional Value Chain
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An Integrated
Value Chain
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An Integrated
Value Chain
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Impact of E-Business on OM
Better customer relations – really?
Consumer can Compare Prices
Cost can cut because of no intermediaries
More efficient processes
Eliminate the Inefficiencies of business process
Online transaction costs 1 cent, ATM 27 cents, 52 cents by branch
Lower cost of materials – why??
The cost reduction comes from competitive bidding
Suppliers can reduce the cost because they know the customer can see
everyone of us
Information technology synergy (combining)
2.7 greater productivity than not using IT
Better and faster decision making
Timely information about the customers
Needs can be known in advance
Better decision making can take place by seeing what every one else is
doing
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Impact of E-Business on OM
New forms of organizations
eBay
Virtual company
Outsourcing (No need to go Malaysia to find computer parts )
Expanded supply chain
SC issues order fulfillment, logistics, warehousing, transportation and
delivery
Outsourcing have made SCM and important skill
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Competitiveness
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Productivity as a measure to
Competitiveness
Output
Productivity =
Input
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Productivity
Output
Productivity =
Input
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Productivity in the ‘90s
–
7– United States
6– Germany
5– Japan
4–
3–
2–
1–
0–
-1 –
-2 –
-3 – | | | | | | | | | | | |
‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 2001
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Measures of
Competitiveness
Productivity
GDP (Gross domestic product) growth
Market capitalization
Technological infrastructure
Quality of education
Efficiency of government (Stability)
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Competitiveness of
Selected Countries
100
80
60
40
20
0 US Singapore Finland Ireland Germany UK Japan Mexico Russia
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Competitiveness of
Selected Countries
100
80
60
40
20
0 US Singapore Finland Ireland Germany UK Japan Mexico Russia
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Competitive Industries
• Competitiveness can also be viewed from an industry or
firm perspective.
• Competition within the industries is intense when the firms
have
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Barriers to Entry
Companies with low barriers to entry are more
competitive
Economies of scale – cost decreases with the volume
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