chapter one introduction to operations management
TRANSCRIPT
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Chapter OneIntroduction to
OperationsManagement
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Back to Basics
• What is the objective for any business?
• How is profit determined?
• Profit=revenue-cost
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What is the Operations Function in an Organization?
• The operations function is responsible for the the creation of goods and services
• Alternatively, the operations function transforms a set of inputs into a set of outputs
• The operations function exists in some form in all firms
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Marketing
Operations
Finance
Business Operations Overlap
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Types of OperationsOperations Examples
Goods Producing Farming, mining, construction,manufacturing, power generation
Storage/Transportation Warehousing, trucking, mailservice, moving, taxis, buses,hotels, airlines
Exchange Retailing, wholesaling, banking,renting, leasing, library, loans
Entertainment Films, radio and television,concerts, recording
Communication Newspapers, radio and televisionnewscasts, telephone, satellites
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Value-Added
The difference between the cost of inputs and the value or price of outputs
Inputs Land Labor Capital
Transformation/Conversion
process
Outputs Goods Services
Control
Feedback
FeedbackFeedback
Value added
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The Model Applied to aFood Processor
Inputs Transformation/Processing
Outputs
Canned vegetables
Packing
CleaningMaking cansCuttingCooking
Labeling
Raw VegetablesMetal SheetsWaterEnergyLaborBuildingEquipment
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Inputs Transformation/Processing
Outputs
Healthy patients
DoctorsNursesStaffBuildingMedical SuppliesEquipmentLaboratories
ExaminationSurgeryMonitoringMedicationTherapy
The Model Applied to aHospital
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Stage of ProductionValue Added
Value of Product
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
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Operations Interfaces
Public Relations
Accounting
IndustrialEngineering
Operations
Maintenance
PersonnelPurchasing
Distribution
MIS
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Operations System Design
• Decisions concerning– capacity
– location
– arrangement of work areas
– product and service planning
– acquisition and placement of processes
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Operations System Operation
• Decisions concerning– personnel– inventory– scheduling– project management– quality– assurance
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Major Characteristics of Operations Systems
• Degree of standardization /customization
• Type of operation– Project– Job shop– Repetitive production– Continuous processing
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Tangible Act
Manufacturing or Service?
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Steel productionAutomobile fabrication
House buildingRoad construction
DressmakingFarming
Auto RepairAppliance repair
Maid ServiceManual car wash
TeachingLawn mowing
Low service contentHigh goods content
High service contentLow goods content
Increasinggoods content
Increasingservice content
Goods-service continuum
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Opportunity to correct High Lowquality problems
Measurement of productivity Easy Difficult
Uniformity of output High Low
Labor content Low High
Uniformity of input High Low
Customer contact Low High
Output Tangible Intangible
Characteristic Manufacturing Service
High
Key Differences Between Service and Manufacturing Operations
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What Does the Managerof the Operations Function Do?• Makes and implements decisions
regarding the design, operation and control of the operations system
• Applies analyses and tools to enhance the performance measures for the operations system
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Products and services
• Planning– Capacity– Location–
– Make or buy– Layout– Projects– Scheduling
• Controlling– Inventory– Quality
• Organizing–
–
Degree of centralizationSubcontracting
• Staffing– Hiring/laying off– Use of Overtime
• Directing–
–
–
Incentive plansIssuance of work ordersJob assignments
Responsibilities of Operations Management
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A model is an abstraction of reality.
– Physical– Schematic– Mathematical
What are the pros and cons of models?
Tradeoffs
Models
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SuboptimizationSuboptimization
A Systems Approach to Decision Making
• A system is a set of interrelated parts that must work together
• The whole is greater than the sum of the parts
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Quantitative Approaches to Decision Making
• Linear programming
• Queuing techniques
• Inventory models
• Project models
• Statistical models
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• A vital few things are important for reaching an objective or solving a problems
• 80/20 Rule – 80% of problems are caused by 20% of the activities
How do we identify the vital few?
Pareto Phenomenon
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Recent Trends
• The Internet
• E-Business
• Supply Chain Management
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Suppliers’ Suppliers
DirectSuppliers Producer Distributor Final
Consumer
A Simple ProductSupply Chain
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Continuing Trends
• Quality and process improvement
• Technology
• Globalization
• Operations strategy
• Environmental issues