operations management class 20 tuesday 11/8/11. operations management (om) the development and...
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Operations Management
Class 20Tuesday 11/8/11
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Operations Management (OM)Operations Management (OM)
• The development and administration of the activities involved in transforming resources into goods and services
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Key Operations Management TermsKey Operations Management Terms
• Manufacturing– The activities and processes used in
making tangible products; also called production
• Operations– The activities and processes used in
making both tangible and intangible products
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ManufacturingManufacturing
• “…manufacturers…perform the same basic function: to
transform resources into finished goods.”
Operations Management:Operations Management:
1.1. Production PlanningProduction Planning
2.2. Production ControlProduction Control
3.3. Quality ControlQuality Control
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Planning:Planning:Production Method DecisionsProduction Method Decisions
Make-To-Order
Mass Production
Mass Customization
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Facilities DecisionsFacilities Decisions
o Site Selection• Close to suppliers, customers, or both• Supply of skilled workers• Quality of life• Resource costs• Business climate• Infrastructure Issues• Tax issues
o Capacity Planningo Layout Planning
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The Transformation ProcessThe Transformation Process
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LayoutLayout
• “…how equipment, machinery, and people will be arranged to make the
production process...efficient...”
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Process LayoutProcess Layout
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Product LayoutProduct Layout
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Cellular LayoutCellular Layout
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Managing the Supply ChainManaging the Supply Chain
Purchasing Management
Inventory Control Management
Routing and Scheduling
Distribution Management
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PurchasingPurchasing
• Procurement– Buying the right items– Obtaining desired quality– Buying the right quantity– Paying the lowest price– Obtaining inventory at the right time
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Purchasing And Supplier SelectionPurchasing And Supplier Selection
Purchasing
Supplier Selection
E-Purchasing
Electronic Data Interchange
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Managing InventoryManaging Inventory
• Three basic types of inventory:– Finished-goods inventory– Work-in-process inventory [WIP]– Raw materials inventory
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Inventory Control ProcessInventory Control Process
• Determines how many supplies and goods are needed, and keeps track of:– Quantities on hand– Where each item is– Who is responsible for it
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Inventory Management ApproachesInventory Management Approaches
• Economic order quantity model (EOQ)– Identifies the optimum number of items to
order• Just in time inventory management (JIT)
– Uses smaller quantities of materials that arrive “just in time”
• Material-requirements planning (MRP)– Schedules the precise quantity of materials
needed to make the product
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Routing and SchedulingRouting and Scheduling
• Routing– The sequence of operations through which a
product must pass
• Work Scheduling – The assignment of required tasks to
departments or specific machines, workers, or teams
– Gantt charts– Program Evaluation and Review Technique
(PERT)
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Gantt ChartGantt Chart
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PERT ChartPERT Chart
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Hypothetical PERT Diagram for Making a Hypothetical PERT Diagram for Making a McDonaldMcDonald’’s Big Macs Big Mac
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Technology OfTechnology OfGoods ProductionGoods Production
Computer-Aided Design
Computer-Aided Manufacturing
Computer- Integrated Manufacturing
Flexible Manufacturing Systems
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Managing QualityManaging Quality
• Quality Control– The process an organization uses to maintain
its established quality standards
• Malcolm Baldrige National Quality Award• Total Quality Management (TQM)• Statistical Process Control [SPC]• ISO 9000
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Total Quality Management (TQM)Total Quality Management (TQM)
• To regain a competitive edge, a number of firms have adopted a total quality management approach– Uniform commitment to quality in all
areas of the organization will promote a culture that meets customers’ perceptions of quality
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Quality ManagementQuality ManagementOr Assurance- TQMOr Assurance- TQM
Customer SatisfactionEmployee InvolvementContinuous Improvement
• Statistical Process Control
• Benchmarking
International Quality Standards• ISO 9000
• ISO 14000
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Establishing Standards—ISO 9000Establishing Standards—ISO 9000
• Designed to ensure consistent product quality under many conditions
• Provides a framework for documenting how a certified business keeps records, trains employees, tests products, and fixes defects– Inspection– Sampling
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InspectionInspection
• Purchased items and finished items – To determine what the quality level is
• Work-in-process– To find defects before the product is
completed so that necessary corrections can be made
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SamplingSampling
• Whether to inspect 100 percent of the output or only part of it is related to– The cost of the inspection process– The destructiveness of the inspection process – The potential cost of product flaws in terms of
human lives and safety
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Operations Management in Service Operations Management in Service BusinessesBusinesses
• Service providers use human and mechanical processes to provide products that are intangible
• The transformation process requires inputs such as employees, equipment and supplies
• Outputs provide a benefit from a performance, event or type of involvement with the service provider
• Approximately 80% of the U.S. economy is based on the service industry
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Service Provider DecisionsService Provider Decisions
What services/goods to offer?How provide services?Where to locate business and what
will it look like?How to forecast demand for
services?