lecture #10 unit seven operations management. an area of business concerned with the production of...

Lecture #10Lecture #10UNIT SEVENUNIT SEVEN

OPERATIONS OPERATIONS MANAGEMENTMANAGEMENT

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT An area of business concerned with the production of An area of business concerned with the production of

goods & services & involves the responsibility of goods & services & involves the responsibility of ensuring that business operations are efficient (using ensuring that business operations are efficient (using as little resources as needed) & effective (meeting as little resources as needed) & effective (meeting customer requirements).customer requirements).

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT

Is concerned with managing the processes that Is concerned with managing the processes that convert inputs ( material, labour & energy) into convert inputs ( material, labour & energy) into

outputs (goods & services) outputs (goods & services)

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT Historically the field of operations was focused on Historically the field of operations was focused on

manufacturing organizations & was called manufacturing organizations & was called industrial or production management. industrial or production management.

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT Now-a-days concepts of quality, process analysis, Now-a-days concepts of quality, process analysis,

job design, facility location, capacity, layout, job design, facility location, capacity, layout, inventory & scheduling are applied equally to inventory & scheduling are applied equally to manufacturing & provision of servicesmanufacturing & provision of services

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT Benefits are: improved quality, reduced costs, & Benefits are: improved quality, reduced costs, &

increased value to customersincreased value to customers


Areas CoveredAreas Covered 1. Plant location and layout1. Plant location and layout 2. Inventory management2. Inventory management 3. Cost control3. Cost control 4. Quality Control4. Quality Control 5. Risk management5. Risk management

OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT Interfunctional ConnectionsInterfunctional Connections

Engineering

Operations

Marketing

Accounting

FinanceHuman Resources

OPERATIONS MANAGEMENT SYSTEMOPERATIONS MANAGEMENT SYSTEM

Inputs

•Workers•Managers•Equipment•Facilities•Materials•Services•Land•Energy

Operations & Transformations

1

2 4

3

5Outputs•Goods•Services

Customer or client participation

Information on performance

External environment

All businesses (manufacturing or non-All businesses (manufacturing or non-manufacturing) should include an manufacturing) should include an operations plan as part of the business operations plan as part of the business plan. plan.



Retail Operation or Service


If the business contains a Retail Operation or Service:1.From whom will merchandise be purchased?2.How will the inventory control system operate?3.What are the storage needs of the venture and how will they be promoted?4.How will the goods flow to the customer?5.Chronologically, what are the steps involved in a business transaction?6.What are the technology utilization requirements to service customers effectively?

Plant location and layoutPlant location and layout

Plant location and layoutPlant location and layout Entrepreneur may need information on:Entrepreneur may need information on:

1.1. LocationLocation2.2. Manufacturing operationsManufacturing operations3.3. Raw materialsRaw materials4.4. EquipmentEquipment5.5. Labor skillsLabor skills6.6. SpaceSpace7.7. OverheadOverhead

Most of the information should be incorporated directly into the Most of the information should be incorporated directly into the business planbusiness plan. .

Plant location and layoutPlant location and layout Location: Location:

• The company’s location and its The company’s location and its accessibility to customers, suppliers, accessibility to customers, suppliers, and distributors need to be determined.and distributors need to be determined.

Plant location and layoutPlant location and layout Manufacturing Operations: Manufacturing Operations:

• Basic machine and assembly operations Basic machine and assembly operations need to be identified, as well as whether need to be identified, as well as whether any of these operations would be any of these operations would be subcontracted and to whomsubcontracted and to whom

Plant location and layoutPlant location and layout Raw Materials: Raw Materials:

• The raw materials needed and suppliers’ The raw materials needed and suppliers’ names, addresses, and costs should be names, addresses, and costs should be determined.determined.

Plant location and layoutPlant location and layout Equipment: Equipment:

• The equipment needed should be listed, The equipment needed should be listed, with its cost and whether it will be with its cost and whether it will be purchased or leasedpurchased or leased

Plant location and layoutPlant location and layout Labour skills: Labour skills:

• Each unique skill needed, the number of Each unique skill needed, the number of personnel required for each skill, pay personnel required for each skill, pay rate, and a assessment of where and rate, and a assessment of where and how these skills will be obtained should how these skills will be obtained should be determinedbe determined

Plant location and layoutPlant location and layout Space: Space:

• The total amount of space needed The total amount of space needed should be determined, including should be determined, including whether the space will be owned or whether the space will be owned or leased.leased.

Inventory managementInventory management

Inventory managementInventory management Entrepreneur needs to:Entrepreneur needs to:

• Determine value of inventory.Determine value of inventory.• Determine how inventory affects the Determine how inventory affects the

cost of goods sold (income statement).cost of goods sold (income statement).• Decide on FIFO (First Items In Inventory) Decide on FIFO (First Items In Inventory)

or LIFO (Last Items In Inventory). or LIFO (Last Items In Inventory).

Managing Fixed AssetsManaging Fixed Assets

Managing Fixed AssetsManaging Fixed Assets Involve long-term commitments and large Involve long-term commitments and large

investments for the new venture. investments for the new venture.

Equipment Equipment • require servicing and insurance.require servicing and insurance.• affect utility costs. affect utility costs. • depreciate over time. depreciate over time.

Leasing can be an alternative to buying. Leasing can be an alternative to buying.

Production PlanProduction Plan

Production PlanProduction Plan Details how the product(s) will be Details how the product(s) will be

manufactured.manufactured.1.1. Will you be responsible for all or part of the Will you be responsible for all or part of the

manufacturing operation?manufacturing operation?2.2. If some manufacturing is subcontracted, who will be If some manufacturing is subcontracted, who will be

the subcontractors? (Give names and addresses.)the subcontractors? (Give names and addresses.)3.3. Why were these subcontractors selected?Why were these subcontractors selected?4.4. What are the costs of the subcontracted What are the costs of the subcontracted

manufacturing? (Include copies of any written manufacturing? (Include copies of any written contracts.)contracts.)

6.6. What will be the layout of the production process? What will be the layout of the production process? (Illustrate steps if possible.)(Illustrate steps if possible.)

7.7. What equipment will be needed immediately for What equipment will be needed immediately for manufacturing?manufacturing?

8.8. What raw materials will be needed for What raw materials will be needed for manufacturing?manufacturing?

9.9. Who are the suppliers of new materials and what are Who are the suppliers of new materials and what are the appropriate costs?the appropriate costs?

10.What are the costs of manufacturing the product?10.What are the costs of manufacturing the product?11.What are the future capital equipment needs of the 11.What are the future capital equipment needs of the

venture?venture?

Production PlanProduction Plan

Cost controlCost control

Cost controlCost control Entrepreneur needs to: Entrepreneur needs to:

• Assess each item to determine cost reductionAssess each item to determine cost reduction• Determine raising prices to ensure positive Determine raising prices to ensure positive

profits. profits. • Compare current actual costs with prior Compare current actual costs with prior

incurred costs.incurred costs.• Allocate expenses as effectively as possible, by Allocate expenses as effectively as possible, by

product.product.• Avoid arbitrary cost allocation.Avoid arbitrary cost allocation.

Record KeepingRecord Keeping

Record KeepingRecord Keeping

Helpful to consider using a software Helpful to consider using a software package.package.

Maybe necessary to enlist the Maybe necessary to enlist the support and services of an support and services of an accountant/ consultant.accountant/ consultant.

Vitally important to use a system for Vitally important to use a system for storing and using customer storing and using customer information.information.

TaxesTaxes

TaxesTaxes Entrepreneur will be required to:Entrepreneur will be required to:

• Withhold taxes for employees. Withhold taxes for employees. • Pay a number of taxesPay a number of taxes• Allocate taxes as part of any budget.Allocate taxes as part of any budget.• File end-of-year returns of the business. File end-of-year returns of the business. • Consider use of a tax accountant.Consider use of a tax accountant.

Quality controlQuality control

Quality controlQuality control Two problems for the entrepreneur:Two problems for the entrepreneur:

1.1. Maintaining quality control of Maintaining quality control of products and servicesproducts and services

2.2. Establishing effective managerial Establishing effective managerial controlscontrols

Quality controlQuality control Standardization in the supplies, Standardization in the supplies,

products, and services provided products, and services provided helps ensure that quality standards helps ensure that quality standards are maintained.are maintained.

Standardization also supports a Standardization also supports a consistent image on which the consistent image on which the business depends for expansion.business depends for expansion.

Risk managementRisk management

Risk managementRisk management Identifies potential hazards and alternative Identifies potential hazards and alternative

strategies to meet business plan goals and strategies to meet business plan goals and objectives.objectives.

Assessment of risk should be based on:Assessment of risk should be based on:• Potential risks to the new venture. Potential risks to the new venture. • Discussion of what might happen if risks Discussion of what might happen if risks

become reality. become reality. • Strategy employed to prevent, minimize, or Strategy employed to prevent, minimize, or

respond. respond.

Risk managementRisk management Major risks for a new venture could result from:Major risks for a new venture could result from:

• Competitor’s reaction.Competitor’s reaction.• Weaknesses in marketing/ production/ management Weaknesses in marketing/ production/ management

team. team. • New advances in technology. New advances in technology.

Management/ Supervision of Management/ Supervision of WorkersWorkers

Management/ Supervision of WorkersManagement/ Supervision of Workers

Preparation of job descriptions.Preparation of job descriptions. Itemizing specifications.Itemizing specifications. Outsourcing of HR responsibilities:Outsourcing of HR responsibilities:

• Recruiting.Recruiting.• Hiring.Hiring.• Establish benefit programs.Establish benefit programs.• Payroll.Payroll.• Firing.Firing.• Permanent vs. part-time.Permanent vs. part-time.• Corporate Culture.Corporate Culture.

Overcoming Pressures on Overcoming Pressures on Employee Employee Management Management

Activities to institute a more Activities to institute a more participative style of management:participative style of management:

• Establishing a team spirit.Establishing a team spirit.• Communicating with employees.Communicating with employees.• Providing feedback.Providing feedback.• Delegating some responsibility to Delegating some responsibility to

employees.employees.• Providing continuous training for employees.Providing continuous training for employees.

Overcoming Entrepreneur’s Overcoming Entrepreneur’s Time Management PressureTime Management Pressure

Overcoming Entrepreneur’s Overcoming Entrepreneur’s Time Management PressureTime Management Pressure

Benefits of effectively managing Benefits of effectively managing time:time:

• Increased productivity.Increased productivity.• Increased job satisfaction.Increased job satisfaction.• Improved interpersonal relationships.Improved interpersonal relationships.• Reduced time anxiety and tension.Reduced time anxiety and tension.• Better health.Better health.

Basic Principles of Time Basic Principles of Time Management Management (1 of 2)(1 of 2)

Principle of desire: a recognition of the need to Principle of desire: a recognition of the need to change personal attitudes and habits regarding change personal attitudes and habits regarding the allocation of time. the allocation of time.


Principle of effectiveness: a focus on the most Principle of effectiveness: a focus on the most important issues. important issues.


Principle of analysis: understanding how time is Principle of analysis: understanding how time is currently being allocated, and where it is being currently being allocated, and where it is being inefficiently invested. inefficiently invested.


Principle of teamwork: acknowledgment that only a small Principle of teamwork: acknowledgment that only a small amount of time is actually under one’s control and that amount of time is actually under one’s control and that most of one’s time is taken up by others.most of one’s time is taken up by others.


Principle of prioritized planning: categorization of tasks by Principle of prioritized planning: categorization of tasks by their degree of importance and then the allocation of time their degree of importance and then the allocation of time to tasks based on this categorization.to tasks based on this categorization.


Principle of reanalysis: periodic review of one’s time Principle of reanalysis: periodic review of one’s time management process.management process.

The EndThe End

lecture #10 unit seven operations management. an area of business concerned with the production of...

Documents