Professional Documents
Culture Documents
Chaper .1
Chaper .1
Chaper .1
Operations Management
William J. Stevenson
1-2
CHAPTER
Introduction to
Operations Management
McGraw-Hill/Irwin
1-3
1-4
1-5
This strategy is based on the corporate mission, and in essence reflects how the firm
plans to use all its resources and functions (marketing, finance, and operations) to
gain competitive advantage. The operations strategy specifies how the firm will employ
its production capabilities to support its corporate strategy. (We will discuss the extent
to which operations influences corporate strategy in subsequent chapters.)
Operations management deals with the direct production resources of the firm. These
resources may be thought of as the five Ps of operations management People,
Plants, Parts, Processes, and Planning and control systems. The people are the direct
and indirect work force, the plants include the factories or service branches where
production is carried out; the parts include the materials (or in the case of services, the
supplies) that go through the system: the process include the equipment and the steps
by which production is accomplished; and the planning and control systems are the
procedures and information used by management to operate the system.
1-6
1-7
1-8
Finance
Operations
Marketing
1-9
Operations
Marketing
Finance
Value-Added
Figure 1.2
Transformation/
Conversion
process
Outputs
Goods
Services
Feedback
Control
Feedback
Feedback
Operations Interfaces
Industrial
Engineering
Maintenance
Distribution
Purchasing
Operations
Public
Relations
Legal
Personnel
Accounting
MIS
Goods-service Continuum
Figure 1.3
Steel production
Home remodeling
Auto Repair
Maid Service
Teaching
Automobile fabrication
Retail sales
Appliance repair Manual car wash Lawn mowing
Manufacturing or Service?
Tangible
Act
Types of Operations
Table 1.4
Operations
Goods Producing
Examples
Food Processor
Table 1.2
Inputs
Processing
Outputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned
vegetables
Hospital Process
Table 1.2
Inputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Processing
Outputs
Examination
Surgery
Monitoring
Medication
Therapy
Healthy
patients
Government
Wholesale/retail
Financial services
Healthcare
Personal services
Business services
Education
Characteristic
Manufacturing Service
Output
Tangible
Customer contact
Low
High
Uniformity of input
High
Low
Labor content
Low
High
Uniformity of output
High
Low
Measurement of productivity
Easy
Difficult
Opportunity to correct
quality problems
High
Low
High
Amount of inventory
Intangible
Planning
Capacity
Location
Products & services
Make or buy
Layout
Projects
Scheduling
Controlling/Improving
Inventory
Quality
Costs
Productivity
Organizing
Degree of centralization
Process selection
Staffing
Hiring/laying off
Use of Overtime
Directing
Incentive plans
Issuance of work orders
Job assignments
Models
A model is an abstraction of reality.
Physical
Schematic
Mathematical
Tradeoffs
Generally easy to use and less expensive than dealing directly with
the actual situation.
Model requires users to organize and quantify information and in
the process, often indicate areas where additional information is
needed.
Provide systematic approach to problem solving
Understanding of problem
They enable manage to ask What If question
Require users to be very specific about objectives
Serve as a consistent tool for evaluation.
Enable users to bring the power of mathematics to bear on a
problem
Provide a standardized format for analyzing a proble m
LIMITATIONS
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
Decision Making
System Design
capacity
location
arrangement of departments
product and service planning
acquisition and placement of
equipment
Decision Making
System operation
personnel
inventory
scheduling
project
management
quality assurance
Decision Making
Models
Quantitative approaches
Analysis of trade-offs
Systems approach
Quantitative Approaches
Linear programming
Queuing Techniques
Inventory models
Project models
Statistical models
Systems Approach
The whole is greater than
the sum of the parts.
Suboptimization
Pareto Phenomenon
A few factors account for a high
percentage of the occurrence of some
event(s).
80/20 Rule - 80% of problems are caused
by 20% of the activities.
How do we identify the vital few?
Table 1.7
Mass production
Interchangeable parts
Division of labor
Trends in Business
Major trends
The Internet, e-commerce, e-business
Management technology
Globalization
Management of supply chains
Agility
Direct
Suppliers
Producer
Distributor
Final
Consumer
Value
Added
Value of
Product
$0.15
$0.15
$0.08
$0.23
$0.15
$0.38
$0.08
$0.46
$0.54
$1.00
$0.08
$1.08
$0.21
$1.29
Total Value-Added
$1.29
Global Marketplace
Markets and companies are becoming increasingly global in
nature. The North American Free Trade Agreement
(NAFTA) has opened borders for trade between the United
States, Canada, and Mexico. Even more far-reaching is the
General Agreement on Tariffs and Trade (GATT). 124
Countries have agreed to open their economies, reduce tariffs
and subsidies, and expand protection of intellectual property.
Operations strategy
At present various companies are recognizing the importance
of operations strategy on the overall success of their business,
and the necessity for relating it to their overall business
strategy.
Worker involvement
Various companies are pushing the responsibility for decision
making and problem solving to lower levels in the
organizations. The reasons for this include recognition of the
knowledge workers possess about the production process and
system. A key to worker involvement is the use of teams of
workers who solve problems and make decisions on a consensus
basis.
Reengineering