Professional Documents
Culture Documents
Operations Management
Operations Management
Management
Introduction - Chapter 1
1-1
Outline
What is Operations Management?
Why Study OM?
Production vs. Service Organizations.
Operations Management Decisions.
Heritage of OM.
Recent Developments & Challenges.
Productivity.
1-2
What Is Operations Management?
Operations management is the management of
systems that produce goods and provide
services.
It includes planning, designing and operating
systems to achieve goals of the organization.
1-4
Examples
Production Service
Auto factories Hospitals
(assembly plants)
Airlines
Job shops (printing)
Movie theaters
Fast food restaurants
Grocery stores
1-5
Why Study OM?
OM is one of three major functions of any
organization (Marketing, Finance, and
Operations).
We should know how goods and services are
produced.
OM is such a costly part of an organization.
Jobs!
1-6
Organizational Functions
Operations.
Creates product or service.
Marketing.
Generates demand.
Finance/Accounting.
Obtains funds &
tracks money.
1-7
Characteristics of Goods
Tangible product.
Consistent inputs and
outputs.
Production separate from
consumption.
Can be inventoried.
Low customer interaction.
1-8
Characteristics of Service
Intangible product.
Variable inputs and outputs
(people!).
Production and consumption
at same place and time.
No inventories.
High customer interaction.
1-9
Goods Contain Services &
Services Contain Goods
Automobile
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Consulting Service
Counseling
100 75 50 25 0 25 50 75 100
% of Product that is a Good % of Product that is a Service
1-10
OM Jobs
1-11
Operations Management for a
Manufacturer
Marketing Finance/
Operations
Accounting
1-12
Operations Management for an
Airline
Marketing Finance/
Operations
Accounting
1-13
Critical Decisions for OM
Product & service design.
Quality management.
Process design.
Capacity & location of facilities.
Layout of facilities.
Human resources & Job design.
Supply-chain management.
Inventory management.
Scheduling.
Maintenance.
1-14
Skills and Knowledge Needed
Knowledge of production and service processes.
Analytical Tools:
Forecasting
Decision-Making
Linear Programming
Break-even analysis
Inventory control
Waiting lines (queueing)
1-15
Heritage of OM
Prior to 1700s - Most products custom-made on a
small scale with local distribution.
Local craftsmen.
Products were handmade and unique.
Industrial Revolution
Mechanized production and distribution.
Allowed mass production and wider distribution.
Fostered division of labor.
1-16
Industrial Revolution
Key developments:
Steam engine (1769).
Interchangeable parts (1798).
Machine tools (1798).
Results:
Production increased.
Prices decreased.
Workers replaced by machines.
Need to manage complex production systems.
1-17
Scientific Management
Study production systems scientifically to
improve them (beginning in 1880s).
There are scientific laws for production
systems that can be used to improve (optimize)
production.
Work smarter, not harder.
1-18
Related Fields
Operations Management.
Industrial Engineering.
1-19
Eli Whitney
Born 1765; died 1825.
1-20
Recent Developments for OM
Information technology: (computers, bar codes,
EDI, internet, wireless, etc.)
Just-In-Time systems.
Quality emphasis.
Service economy.
Globalization.
Environmental concerns.
Security.
1-21
Development of the Service
Economy
80%
U.S. Employment, % Share
Services
40%
Industry
Farming
0
1850 1900 1950 2000
1-22
Most Jobs are in Services
Sector % of Jobs
Professional Services 24
Retail & Wholesale 21
Utilities & transportation 7
Other Services (finance, real estate, hospitality, etc.) 21
Agriculture 2
Manufacturing, construction and mining 25
1-23
Productivity
Used to measure of process improvement.
Amount of output relative to input.
Units produced
Productivity =
Inputs used
1-25
Productivity for One Product
Units produced
Productivity =
Inputs used
Output is easy to measure with one product.
Input may have many components.
Parts and subassemblies.
Labor.
Equipment.
Knowledge.
etc.
1-26
Productivity Variables
Output
Productivity =
Labor + material + energy + capital +
miscellaneous
1-27
Productivity Measurement
Problems
Quality of output should be considered.
If you produce more, but of lower quality, does
productivity rise?
1-28
How Would You Measure
Productivity for UM - St. Louis?
Units produced
Productivity =
Inputs used
What is output?
How is it measured?
What is input?
How is it measured?
1-29
How Would You Measure
Productivity for:
A builder of new homes?
An automobile mechanic?
A hospital?
A fire department?
A restaurant?
1-30