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Operations ManagementOperations Management

Operations Management is:

The management of systems or processes that create goods and/or provide services

Operations Management affects: Companies’ ability to compete Nation’s ability to compete internationally

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Value-Added ProcessValue-Added Process

The operations function involves the conversion of inputs into outputs

Inputs Land Labor Capital

Transformation/Conversion

process

Outputs Goods Services

Control

Feedback

FeedbackFeedback

Value added

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Value-Added & Product Value-Added & Product PackagesPackages

Value-added is the difference between the cost of inputs and the value or price of outputs.

Product packages are a combination of goods and services.

Product packages can make a company more competitive.

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Production of Goods vs. Delivery of Production of Goods vs. Delivery of ServicesServices

Production of goods – tangible output Delivery of services – an act Service job categories

Government Wholesale/retail Financial services Healthcare Personal services Business services Education

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Key DifferencesKey Differences

1. Customer contact

2. Uniformity of input

3. Labor content of jobs

4. Uniformity of output

5. Measurement of productivity

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Key DifferencesKey Differences

6. Production and delivery

7. Quality assurance

8. Amount of inventory

9. Evaluation of work

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Goods vs ServiceGoods vs Service

Characteristic Goods Service

Customer contact Low High

Uniformity of input High Low

Labor content Low High

Uniformity of output High Low

Output Tangible Intangible

Measurement of productivity Easy Difficult

Opportunity to correct problems High Low

Inventory Much Little

Evaluation Easier Difficult

Patentable Usually Not usual

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Automobile assembly, steel making

Home remodeling, retail sales

Automobile Repair, fast food

Goods-service ContinuumGoods-service Continuum

Computer repair, restaurant meal

Song writing, software development

Goods Service

Surgery, teaching

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Manufacturing or Service?Manufacturing or Service?

Tangible Act

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Types of OperationsTypes of Operations

Operations ExamplesGoods Producing Farming, mining, construction,

manufacturing, power generationStorage/Transportation Warehousing, trucking, mail

service, 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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Challenges of Managing Challenges of Managing ServicesServices

Service jobs are often less structured than manufacturing jobs

Customer contact is higher Worker skill levels are lower Services hire many low-skill, entry-level workers Employee turnover is higher Input variability is higher Service performance can be affected by worker’s

personal factors

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Key Decisions of Operations Key Decisions of Operations ManagersManagers

WhatWhat resources/what amounts

WhenNeeded/scheduled/ordered

WhereWork to be done

HowDesigned

WhoTo do the work

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Decision MakingDecision Making

System Design– capacity– location– arrangement of departments– product and service planning– acquisition and placement of

equipment

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Decision MakingDecision Making

System operation– personnel– inventory– scheduling– project

management– quality assurance

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Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities Supply chain management And more . . .

Scope of Operations ManagementScope of Operations Management

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The OrganizationThe Organization

The Three Basic Functions

Organization

Finance Operations Marketing

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Business Operations OverlapBusiness Operations Overlap

Operations

FinanceMarketing

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Operations InterfacesOperations Interfaces

Public Relations

Accounting

IndustrialEngineering

Operations

Maintenance

Personnel

Purchasing

Distribution

MIS

Legal

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Historical Evolution of Operations Historical Evolution of Operations ManagementManagement

Industrial revolution (1770’s) Scientific management (1911)

Mass production Interchangeable parts Division of labor

Human relations movement (1920-60) Decision models (1915, 1960-70’s) Influence of Japanese manufacturers

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Trends in BusinessTrends in Business

Major trends The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior

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Management TechnologyManagement Technology

Technology: The application of scientific discoveries to the development and improvement of goods and services

Product and service technology Process technology Information technology

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Suppliers’ Suppliers

DirectSuppliers Producer Distributor Final

Consumer

Simple Product Supply ChainSimple Product Supply Chain

Supply Chain: A sequence of activitiesAnd organizations involved in producingAnd delivering a good or service

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Other Important TrendsOther Important Trends

Working with fewer resources Revenue management Process analysis and improvement Increased regulation and product liability Lean production