introduction operational management

7/28/2019 Introduction Operational Management

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Operations ManagementAn Introduction

Learning objectives:

-define operations management

-define the role and function of operations management

-list components of operations management-describe past/current/future challenges of operations

management



Organizational Model

OM

Marketing

MISEngineering

HRM

R&D

Accounting

SalesFinance

Operations

management is

only one

function of any

organization.

The overall

success of anorganization

depends on the

integration of

its various

functions.Many times

OM issues

overlap with

HR, finance,

marketingissues, etc.



Operations and Supply Strategy

Setting broad policies and plans for using therecourses of a firm to best support its long-termcompetitive strategy



Organization Chart-Major Elements

Facilities

Production &

Inventory ontrol

Quality Assurance

& ControlProcurement

Engineering Design

Industrial Engineering

Process Engineering

Operations

Disbursements

& Credits

Funds Management

Capital Requirements

Finance/Accounting

Sales Promotion

Advertising

Sales

Market Research

Marketing

Manufacturing Organization

…A snapshot of the

various components of

functions in an

organization.



Historical Milestones in OM (operations

management) The Industrial Revolution Post-Civil War Period

Scientific Management

Human Relations and Behaviorism Operations Research

The Service Revolution The service revolution

changed approaches to

OM…



Today's Factors Affecting OM

Global Competition

U.S. Quality, Customer Service, and Cost Challenges

Computers and Advanced Production Technology

Growth of U.S. Service Sector

http://www.census.gov/econ/www/servmenu.html

Scarcity of Production Resources

Issues of Social Responsibility http://www.bsr.org/ ; http://vcr.csrwire.com/


http://www.bsr.org/

http://vcr.csrwire.com/

http://vcr.csrwire.com/

http://www.bsr.org/




The notion of tradeoffs and how to deal with them

Cost

Quality

DeliveryFlexibility

For example, if we

improve customer serviceproblem solving by cross-

training personnel to deal

with a wider-range of

problems, they may

become less efficient at

dealing with commonly

occurring problems.

For example, if we reduce costs by reducing product qualityinspections, we might reduce product quality.



Today's Factors Affecting OM- some examples

Volkswagen is setting out to build a plant in Chattanooga, Tennessee, where vehicle production will be

due to commence in early 2011. The supervisory board of Volkswagen AG approved the plans and aninvestment volume of up to 1 billion USD (around 620 million euro). The Group’s management board

had previously pinpointed Chattanooga as the site for its new plant. “The USA market,” said Prof Martin

Winterkorn, CEO of Volkswagen AG, “is an important part of our volume strategy and we are now very

resolutely accessing that market. Volkswagen will be extremely active there.”

http://www.automobilesreview.com/auto-news/volkswagen-builds-factory-in-tennessee-usa/3065/

In a 2008 survey of 100 senior manufacturing executives commissioned by Advanced TechnologyServices and conducted by Nielsen, 81 percent said they would be affected by the serious lack of skilled labor, costing an average $52 million each over the next five years. This figure reflects morethan just the cost of recruiting, training, and retaining workers; it includes the high price of lostproduction as well. http://www.qualitydigest.com/inside/metrology-article/the-cost-poor-calibration-and-quality.html

Cleaning products giant JohnsonDiversey has joined the U.S. EPA's Climate Savers program, pledging$19 million toward emissions reduction efforts that the company expects will save $31 million over thenext five years. http://vcr.csrwire.com/node/10389


http://www.qualitydigest.com/inside/metrology-article/the-cost-poor-calibration-and-quality.html


http://vcr.csrwire.com/node/10389

http://vcr.csrwire.com/node/10389





























Ops challenges : quality

Eight key forces are considered to influence quality:

Partnering

Learning systems

Adaptability and speed of change Environmental sustainability

Globalization

Knowledge focus

Customization and differentiation

Shifting demographics

Partnering Experience

Frank Galliers Ltd defines "partnering" as workingcollaboratively with clients and suppliers bringing togetherall requisite expertise in order to fulfil the contractrequirements achieving best value for money against theKey Performance Indicators:Cost - achieving or improving budgeted contract costsTiming - meeting the contract programme on timeQuality - meeting or improving pre-determined clientquality standards

Defects - achieving zero defects at 12 months



Components of OM

OMMission and

Strategy

ProductDesignProcurement

Quality

Management

Schedule

Location

Layout

Process

Design

Reliability &

Maintenance Inventory

Human

Resources &

Job Design

These are the topics of

our course



U.S. Cost Challenges

There is continuing pressure to reduce direct costs (of producing and selling) and overheadcosts.

Cost-cutting measures being used include:

Moving production to low-labor-cost countries

Negotiating lower labor rates with union/workers

Automating processes to reduce the amount of labor needed

Reducing health care and retirement benefits

Washington, D.C. (AHN) - Soaring fuel price, the weak greenback and inflation are cutting the China price of U.S. manufacturers that had outsourced their production to Asia. The price advantage was 40 to 50 percent off.China and other Asian countries' export model, which worked for over 30 years, may no longer be viable if fuel pricescontinue to soar as cost of shipping finished product made in Asia eats up profit, according to Morgan Stanley.Because the Chinese model was premised on an oil price of $20 per barrel, some U.S. companies which outsourced

production in China are mulling transferring operations to Mexico, while others are planning to return to the U.S. As aresult steel exports from China to the U.S. dipped 38 percent from January to July, while production of steel in the U.S.went up 10 percent.Other sectors which had returned to the U.S. include furniture, electronic appliances and textiles. One of the mostprominent is Thomasville Furniture, which announced in June it was bringing back the production of upholstered andwood furniture to the U.S. and in the process create 100 jobs in North Carolina.

But not everyone will return to the U.S. Notwithstanding the high shipping bill, raw material and labor is considerablycheaper in China than in the U.S.

…see next

slides for

more…

http://www.allheadlinenews.com/



Advanced Production Technology

Computer-aided design (CAD) - allows engineers to designproducts directly on computer terminals

Computer-aided manufacturing (CAM) - translates CADinformation into machinery instructions

Flexible manufacturing systems (FMS) - clusters of automated machinery produce a variety of products

Automated storage & retrieval systems (ASRS) - computer-

controlled warehouses Automatic identification systems (AIS) - data is “read” into

computers using bar coding and the like



Scarcity of Production Resources

Raw materials like titanium, nickel, coal, natural gas, water,and petroleum products are periodically unavailable or inshort supply.

Southwest has locked in 80 percent of its fuel costs, equivalent to $24 per barrel for all of 2004. The remaining 20 percent will be bought at market value.

Ray Neidl, an analyst at Manhattan-based Blaylock & Partners, said Southwest is in a good

position by hedging its fuel costs, unlike most other airlines that are now paying marketprices for fuel.

http://www.allbusiness.com/marketing-advertising/strategic-marketing/1053930-1.html

http://www.southwest.com/?ref=home_gn



Conclusions:

Operations Strategy defined

Operations strategy is a long-range game plan for theproduction of a company’s products/services, and provides

a road map for the production function in helping to achievethe business strategy.



Challenges posed to operations

management by the "new economy"

1. The organizational unit of analysis is an operating unit(e.g., a factory, a company, or a division/business unitwithin a company).

2. Operations management is concerned primarily with

stable, well-specified "products" and "processes."

3. A major concern of operations managers is reducing thevariable cost of production.

4. Your competitors are your enemies, and the key toprevailing against them lies in differentiation (e.g., throughlower cost, superior performance, etc.).



The new approach to operations

management

Project management is at least as important as processmanagement

Critical mass versus process efficiency

The "network effect“

…these last two slides show approaches

to OM today and the foundations of OMdecisions… these can be used in the

analysis/decisions for

applications/cases/examples throughout

the course…

introduction operational management

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