OPERATIONS MANAGEMENT

Lecture 2

Teacher:
ISMATULLAH BUTT
PhD (Candidate)
Operations Management
Lecture Contents:
 Operations Management for a Manufacturer
 Operations Management for an Airline
 Critical decisions for OM
 Skills and Knowledge Needed
 Heritage of OM
 Productivity
 Operations Management for a
1-3
Manufacturer

Marketing Finance/
Operations
Accounting

Manufacturing Production Quality

Purchasing
Control Control
 Operations Management for an
1-4
Airline

Marketing Finance/
Operations
Accounting

Flight Ground Facility

Catering
Operations Support Maintenance
 Critical Decisions for OM
1-5

 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.
 Skills and Knowledge Needed
1-6

 Knowledge of production and service processes.

 Knowledge of basic OM principles.

 Analytical Tools:
 Forecasting
 Decision-Making
 Linear Programming
 Break-even analysis
 Inventory control
 Waiting lines (queuing)
 Heritage of OM
1-7

 Prior to 1700’s - 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.
 Industrial Revolution
1-8

 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.
 Scientific Management
1-9

 Study production systems scientifically to

improve them (beginning in 1880’s).
 There are ‘scientific laws’ for production
systems that can be used to improve (optimize)
production.
 Work smarter, not harder.
 Management is responsible for productivity.
 Related Fields
1-10

 Operations Management.
 Industrial Engineering.
 Social and psychological factors.
 Operations
Research/Management Science
(Mathematical modeling).
 Logistics.
 Eli Whitney
1-11

 Born 1765; died 1825.

 Invented cotton ‘gin’.

 Received government contract

to make 10,000 muskets
(1798).

 Showed machine tools could

make standardized parts.
 Recent Developments for OM
1-12

 Information technology: (computers, bar codes,

EDI,internet, wireless, etc.)

 Just-In-Time systems.
 Quality emphasis.
 Service economy.
 Globalization.
 Environmental concerns.
 Security.
 Recent Developments for OM
1-13

 Information technology: (computers, bar codes,

EDI,internet, wireless, etc.)

 Just-In-Time systems.
 Quality emphasis.
 Service economy.
 Globalization.
 Environmental concerns.
 Security.
 Development of the Service Economy
1-14
U.S. Employment, % Share
80%

Services

40%

Industry

Farming

0
1850 1900 1950 2000
 Most Jobs are in Services
1-15

Sector % of
Professional Services Jobs 24
Retail & Wholesale 21
Utilities & transportation 7
Other Services (finance, real estate, hospitality, etc 21
Agriculture 2
Manufacturing, construction and mining 25
 Productivity
1-16

Used to measure of process improvement.

Amount of output relative to input.
Units produced
Productivity =
Inputs used
Productivity increases improve standard of
living.
 From 1889 to 1973, U.S. productivity increased at a
2.5% annual rate.
 How Would You Measure Productivity for
A Restaurant?
1-17

 Amount of output (????) per input (????).

 Output:
 Number of meals served?
 Number of tables served?
 Number of satisfied customers?

 Input:
 Lbs.
of food?
 Number of employees?
 Number of tables?
 Productivity for One Product
1-18

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.
 Productivity Variables
1-19

Output
Productivity =
Labor + material + energy + capital
+ miscellaneous

 Use a common measure to combine different

inputs - usually $.
 Productivity Measurement Problems
1-20

 Quality of output should be considered.

 Ifyou produce more, but of lower quality, does
productivity rise?

 External elements may change productivity.

 Wireless communication may raise productivity.

 Precise units of measure may be lacking.

 How Would You Measure Productivity for IIU?
1-21

Units produced
Productivity =
Inputs used

 What is output?
 How is it measured?

 What is input?
 How is it measured?
 How Would You Measure Productivity for:
1-22

 A builder of new homes?

 An automobile mechanic?

 A hospital?

 A fire department?

 A restaurant?