Operations Management

The business function responsible for planning, coordinating, and controlling the resources needed to produce a companys goods and services. An organizations core function Involves managing people, equipment, technology, information, and many other resources.

Operations
A function or system that transforms inputs into outputs of greater value

Transformation Process

A series of activities along a value chain extending from supplier to customer Activities that do not add value are superfluous and should be eliminated

Physical Locational Exchange Physiological Psychological Informational

Historical Evolution of Operations Management

Until the 19th century, the world was mostly rural and agricultural. Most of the products were made by highly skilled people called artisans. Under the apprenticeship system, an artisan supervised the work of several apprentices during long training period. In the 18th century, most manufacturing was performed by rural families in their own homes under the domestic or cottage

industry system.
Merchants supplied families in small towns with raw materials and later found markets for the finished products. The development of steam power and the introduction of laborsaving equipment (or automation) early in the 18th century led to the development of the factory system.

Historical Evolution of OM (contd..)

The principle of the factory systems was simple: Assign workers a small set of tasks that they repeat over and over. This reduces the time spent by workers in switching tasks and they become specialized. The result is improved labor productivity and lower production costs. Technological developments in 1850s transformed factory system into mass-production. Factories became larger. identical products. They produced huge volumes of

Historical Evolution of OM (contd..)

Manufacturing costs were reduced because no time was needed for setting machines and people to produce other types of products. As the sizes of the factories increased, management of these operations became a major problem. Frederick Taylor introduced systematic approaches to operations management at the turn of 19th century. His intent was to eliminate waste, especially the wasted effort, in order to minimize costs. Henry Ford combined the teachings of Taylor with the concepts of labor specialization and interchangeable parts to design the first moving assembly line in 1913.

Historical Evolution of OM (contd..)

In 1920s and 1930s, a series of studies were conducted at the

Hawthorne Works of Western Electric by Elton Mayo.

The results showed that psychological factors were as important as scientific job design. The Hawthorne Studies stimulated the development of human

relations movement by demonstrating that worker motivation

is a crucial element in improving productivity. As the complexity of operations increased, sophisticated decision-making tools were needed.

Historical Evolution of OM (contd..)

Some of the quantitative models and statistical techniques used by modern operations managers are: 1- Statistical Quality Control: Uses statistics in the control of product quality by controlling the processes by which products are made. 2- Economic Order Quantity: Used for finding the least cost inventory ordering

3- Gantt charts for sequencing operations and Critical Path Method for finding optimum completion time of operations. 4- Linear programming: A management tool for optimum resource allocation given some restrictions of the resources.

Historical Evolution of OM (contd..)

The 1950s was the beginning of the information technology era. The discovery of transistor by Shockley led to the ability process data and information at continuously decreasing costs. Today, you can imagine the difficulty of monitoring inventories of

hundreds of units OR managing a large project without a

computerized system. In the late 1950s and early 1960s scholars began to write books

dealing specifically with the problems faced by operations managers.

These books also contained information regarding the application of quantitative models to operations management.

Historical Events in Operations Management

Era
Industrial Revolution

Events/Concepts
Steam engine Division of labor Interchangeable parts Principles of scientific management

Dates
1769 1776 1790 1911 1911 1912 1913

Originator
James Watt Adam Smith Eli Whitney Frederick W. Taylor Frank and Lillian Gilbreth Henry Gantt Henry Ford

Scientific Management

Time and motion studies Activity scheduling chart Moving assembly line

Copyright 2011 John Wiley & Sons, Inc.

Historical Events in Operations Management (contd..)

Era
Human Relations

Events/Concepts
Hawthorne studies Motivation theories Linear programming Digital computer

Dates
1930 1940s 1950s 1960s 1947 1951 1950s 1960s, 1970s

Originator
Elton Mayo Abraham Maslow Frederick Herzberg Douglas McGregor George Dantzig Remington Rand Operations research groups Joseph Orlicky, IBM and others

Operations Research

Simulation, waiting line theory, decision theory, PERT/CPM MRP, EDI, EFT, CIM

Copyright 2011 John Wiley & Sons, Inc.

Historical Events in Operations Management (contd..)

Era Events/Concepts
JIT (just-in-time) TQM (total quality management)
Quality Revolution Strategy and operations Reengineering Six Sigma

Dates Originator
1970s
1980s

Taiichi Ohno (Toyota) W. Edwards Deming, Joseph Juran

Wickham Skinner, Robert Hayes Michael Hammer, James Champy GE, Motorola

1980s
1990s 1990s

Copyright 2011 John Wiley & Sons, Inc.

Historical Events in Operations Management (contd..)

Era
Internet Revolution

Events/Concepts
Internet, WWW, ERP, supply chain management

Dates
1990s

Originator
ARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE, Dell Amazon, Yahoo, eBay, Google, and others China, India, emerging economies

E-commerce

2000s

Globalization

WTO, European Union, Global 1990s supply chains, Outsourcing, 2000s Service Science

Copyright 2011 John Wiley & Sons, Inc.

Role of Operations Management

To transform organizational inputs into outputs.

Objectives of Operations Management

The customer service objective -To provide agreed/adequate levels of customer service (and hence customer satisfaction) by providing goods or services with the right specification, at the right cost and at the right time. The resource utilization objective To achieve adequate levels of resource utilization (or productivity) e.g., to achieve agreed levels of utilization of materials, machines and labor.

Operations Function
Operation function is much broader than activities occur in a factory.

Primary Topics in Operations Management

Primary Topics in Operations Management (cont.)

Mass Customization
Mass Customization is an operational strategy focused on inducing velocity and flexibility in a make-to-order production process, with the capability of producing at a minimum, a quantity of one, or large quantities with minimal changeovers and interruptions.

The characteristics are:

Make to order High or low volumes Low inventories Short lead times Just-In-Time materials/pull scheduling in early stages Synchronized scheduling in later stages Short cycle times

Mass Customization (contd.)

Highly flexible and responsive processes
Highly flexible machines and equipment Quick changeover Continuous flow work cells Collocated machines, equipment, tools and people Compressed space Multi-skilled employees Empowered employees High first-pass yields with major reductions in defects

Quality
Quality is the ongoing process of building and sustaining relationships by assessing, anticipating, and fulfilling stated and implied needs. Oxford American Dictionary a degree or level of excellence American Society for Quality totality of features and characteristics that satisfy needs without deficiencies Customers perspective how well product or service does what it is supposed to within range. Producers perspective production process and COST

Quality Gurus
W. Edwards Deming Joseph M. Juran Armand Feigenbaum Philip Crosby Karou Ishikawa Genichi Taguchi

Henry Ford

Deming
Demings 14 Points
1. Create constancy of purpose 2. Adopt philosophy of prevention 3. Cease mass inspection 4. Select a few suppliers based on quality 5. Constantly improve system and workers 6. Institute worker training 7. Instil leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans 11. Remove numerical quotas 12. Enhance worker pride 13. Institute vigorous training and education programs 14. Develop a commitment from top management to implement above 13 points

Deming Wheel: PDCA Cycle

Crosby
Crosbys Absolutes
Quality means conformance to requirements if you intend to do it right the first time, then everyone must know what it is Quality comes from prevention: Vaccination is the way to prevent organizational disease. Prevention comes from training, discipline, example, leadership, and so forth.

Crosbys 6C
Comprehension (understanding) Commitment (by all). Competence (Improvement). Correction (Elimination of errors). Communication (Support of all people, customers, suppliers etc) Continuance (Improvement).

Crosby's 14 Steps for Implementing Quality Improvements

1. 2. Management must commit to centering its quality focus on customers needs Quality improvement teams with representatives from each department oversee improvement process Measurement tools to establish baselines and find current and potential problems Costs of quality are carefully defined and used as a management tool Quality awareness and personal concerns heightened by training in quality improvement principles

3.
4.

5.

Crosby's 14 Steps for Implementing Quality Improvements (contd...)

6. Once trained, corrective action is taken closest to the sources of defects and nonconformance 7. Zero defects planning analyzes the relevant activities using a committee 8. Associates educated about their roles in the quality improvement process 9. A zero defects day launches the quality improvement program company-wide and signals a change 10. Individuals and groups establish their own quality improvement goals

Crosby's 14 Steps for Implementing Quality Improvements (contd.)

11. Associates inform management of obstacles faced

and types of work environments needed 12. All who participate are recognized for their commitment to quality improvement 13. Quality councils spotlight quality and share information about the process of continuous improvement 14. The quality improvement process is continuous and never ends

Taguchi
Improvement of the quality of product and process prior to manufacture (that is, at the design stage) rather than the more traditional approach of achieving quality through inspection. a. Quality loss function b. Signal to noise ratio c. Robust quality of design Product Design Improvement During the product design and production engineering phases, 3 steps to be followed 1. System design 2. Parameter design 3. Tolerance design