chapter1 om introd,nkj

8/12/2019 Chapter1 OM Introd,nkj

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Operations Management

The business function responsible for

planning , coordinating , and controlling the

resources needed to produce products and

services for a company

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Operations Management is:

A management function

An organizations core function

In every organization whether Service or

Manufacturing, profit or Not for profit

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Typical Organization Chart

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What is Role of OM? OM Transforms inputs to outputs

Inputs are resources such as Men, Material, and

Money Outputs are goods and services.

Helps to minimize wastage

Helps in value creation..

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OMs Transformation Process

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OMs Transformation Role

To add value

Increase product value at each stage

Value added is the net increase between output product

value and input material value

Provide an efficient transformation

Efficiency means performing activities well for least

possible cost

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Operations are everywhere !

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Operations ExamplesGoods producing Farming, mining, construction

Storage/transportation Warehousing, trucking, mail, taxis, buses, hotels

Exchange Trade, retailing, wholesaling, renting, leasing, loans

Entertainment Radio, movies, TV, concerts, recording

Communication Newspapers, journals, radio, TV, telephones, satellite


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OM at the core of Businesses

Three basic functions Operations/Production

Goods oriented (manufacturing and assembly) Service oriented (health care, transportation and retailing) Value-added (the essence of the operations functions)

Finance-Accounting Budgets (plan financial requirements) Provision of funds (the necessary funding of the operations)

Marketing Selling, Promoting Assessing customer wants and needs

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Organization

Finance Operations Marketing


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Manufacturing vs. Service Operations

Differences with respect to1. Customer contact2. Uniformity of input

3. Labor content of jobs4. Uniformity of output5. Measurement of productivity6. Production and delivery7. Quality assurance8. Amount of inventory

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On the other hand

Both use technology Both have quality, productivity, & response issues Both must forecast demand Both will have capacity, layout, and location issues Both have customers, suppliers, scheduling and

staffing issues

Manufacturing often provides services Services often provides tangible goods

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Responsibilities of Operations Management

Planning Capacity, utilization Location Choosing products or

services Make or buy Layout Projects Scheduling Market share Plan for risk reduction Forecasting

13SUPPLY SIDE DEMAND SIDE

Controlling Inventory Quality Costs

Organization Degree of standardization Subcontracting Process selection

Staffing Hiring/lay off Use of overtime Incentive plans

In a nutshell, thechallenge is

Matching the Supply

with Demand


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Supply Does Not Naturally MatchDemand

Inventory results from a mismatch between supply and demandMismatch can take one of the following two forms

Supply waits for Demand Inventory = Finished goods and resources

Demand waits for Supply Inventory is negative or said to be backordered in manufacturing Inventory = Waiting customers in services

Mismatch happens because

the demand varies the capacity is rigid and finite.

If the capacity is infinite, products (or services) can be provided at an infinite rateand instantaneously as the demand happens. Then there is no mismatch.


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Types of Models Physical models (prototypes) Schematic models (Graphs, charts, pictures) Mathematical models, by application area

Statistical models Linear regression

Linear programming Queuing techniques

Inventory models EOQ model

Project management models Networks

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Types of Mathematical Models

Simulation models : to test a proposed idea Monte Carlo Simulation

Optimization models : to create an optimal idea Linear programming

Pattern recognition models : to recognize a pattern

Statistics, Forecasting, data mining

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OM Decisions

All organizations make decisions and follow asimilar path1. Strategic decisions

Strategic Decisions set the direction forthe entire company; they are broad inscope and long-term in nature

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OM Decisions

2. Tactical decision Tactical decisions: focus on specific day-

to-day issues like resource needs,schedules, & quantities to produce

They are very frequent Strategic decisions are less frequent Tactical and Strategic decisions must align

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OM Decisions

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Historical Development of OM

Industrial revolution Late 1700s Scientific management Early 1900s

Hawthorne Effect 1930s

Human relations movement 1930s- Management science 1940s- Computer age 1960s- Environmental Issues 1970s- JIT & TQM* 1980s-

*JIT= Just in Time, TQM= Total Quality Management

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Historical Development cont

Reengineering 1990- Global competition 1980- Flexibility 1990- Time-Based Competition 1990- Supply chain Management 1990- Electronic Commerce 2000- Outsourcing & flattening of world 2000-

For long-run success, companies must place much importance on their operations

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Business Information Flow

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OM Across the Organization

Most businesses are supported by the functionsof operations, marketing, and finance

The major functional areas must interact toachieve the organization goals

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OM Across theOrganization cont

Marketing is not fully able to meet customer needs if they do notunderstand what operations can produce

Finance cannot judge the need for capital investments if they do notunderstand operations concepts and needs

Information systems enables the information flow throughout theorganization Human resources must understand job requirements and worker

skills Accounting needs to consider inventory management, capacity

information, and labor standards

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Chapter 1 Highlights OM is the business function that is responsible for managing

and coordinating the resources needed to produce a companys products and services.

The role of OM is to transform organizational inputs intocompanys products or services outputs

OM is responsible for a wide range of decisions, ranging from

strategic to tactical.

Organizations can be divided into manufacturing and serviceorganizations, which differ in the tangibility of the product orservice

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Chapter 1 Highlights cont Many historical milestones have shaped OM. Some of these

are the Industrial Revolution, scientific management, thehuman relations movement, management science, and thecomputer age

OM is highly important function in todays dynamic businessenvironment. Among the trends with significant impact are

just-in-time, TQM, reengineering, flexibility, time-basedcompetition, SCM, global marketplace, and environmentalissues

OM works closely with all other business functions

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chapter1 om introd,nkj

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