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Copyright © 2014 by McGraw-Hill Education (Asia). All rights reserved.
11
Introduction to Operations
Management
1-2
Learning ObjectivesLearning Objectives
Define the term operations management Identify the three major functional areas of
organizations and describe how they interrelate
Compare and contrast service and manufacturing operations
Describe the operations function and the nature of the operations manager’s job
1-3
Learning ObjectivesLearning Objectives
Differentiate between design and operation of production systems
Describe the key aspects of operations management decision making
Briefly describe the historical evolution of operations management
Identify current trends that impact operations management
Kellogg’s CompanyKellogg’s Company
Maker of popular cereal, breakfast, and snack products, such as Kellogg’s Corn Flakes, Rice Krispies, Raisin Bran, Pop-Tarts, Eggo Waffles, and Nutri-grain bars
Founded in 1906 in Battle Creek, Michigan, by W. K. Kellogg.
Adhere to strong quality standards and developing new technologies, such as Waxtite wrappers to keep cereal fresh for long periods of time.
Figure 1.1: Kellogg’s 2006 Figure 1.1: Kellogg’s 2006 Sales Around the World (in $ billions)Sales Around the World (in $ billions)
Kellogg’s CompanyKellogg’s Company
The supply chain consists of 27 manufacturing plants in the United States and 19 plants in 15 countries around the world, including Australia, Mexico, India, Brazil, and Japan.
Key operations decisions must be made throughout Kellogg’s network of plants.
The product mix to manufactured at each plant must decided – example should every plant make every product or should plants be specialized and focus
Is it better for Kellogg's to work with smaller, local suppliers for each plant or with larger, national or international suppliers?
Inventory decisions and policies must be set for each plant, each distribution center, and each retailer that Kellogg's’ runs, works with, or sells to.
1-7
Kellogg’s CompanyKellogg’s Company
1-8
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
1-9
The OrganizationThe Organization
The Three Basic Functions
Organization
Finance Operations Marketing
Figure 1.1
1-10
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
Figure 1.2
1-11
Value-Added and Product PackagesValue-Added and Product Packages
Value-added elements make 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.
1-12
Automobile assembly, steel making
Home remodeling, retail sales
Automobile repair, fast food
The Goods–Service ContinuumThe Goods–Service ContinuumFigure 1.3
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
1-13
Food ProcessorFood Processor
Inputs Processing Outputs
Raw vegetables Cleaning Canned vegetables Metal sheets Making cans
Water CuttingEnergy CookingLabor PackingBuilding LabelingEquipment
Table 1.2
1-14
HospitalHospital
Inputs Processing Outputs
Doctors, nurses Examination Treated patientsHospital Surgery
Medical supplies MonitoringEquipment MedicationLaboratories Therapy
Table 1.2
1-16
Production of Goods Production of Goods vs. Delivery of Servicesvs. Delivery of Services
Production of goods – tangible output Delivery of services – an act Service job categories
Government Wholesale/retail Financial services Healthcare Personal services Business services Education
1-17
Key DifferencesKey Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
1-18
Key DifferencesKey Differences
6. Production and delivery
7. Quality assurance
8. Amount of inventory
9. Evaluation of work
10. Ability to patent design
1-19
Goods vs. ServiceGoods vs. Service
Characteristic Goods ServiceCustomer 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 usually
Table 1.3
1-20
Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating and training employees Locating facilities Supply chain management And more . . .
Scope of Operations ManagementScope of Operations Management
1-21
Types of OperationsTypes of OperationsTable 1.4
Operations ExamplesGoods Producing Farming, mining, construction,
manufacturing, power generationStorage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,hotels, airlines
Exchange Retailing, wholesaling, financial advising, renting or leasing
Entertainment Films, radio and television,concerts, recording
Communication Newspapers, radio and TV newscasts, telephone, satellites
1-26
Key Decisions of Operations ManagersKey Decisions of Operations Managers
WhatWhat resources/what amounts
WhenNeeded/scheduled/ordered
WhereWork to be done
HowDesigned/Resources allocated
WhoTo do the work
1-38
Overlap of Business FunctionsOverlap of Business Functions
Operations
Finance
Figure 1.5
Marketing
1-39
Operations InterfacesOperations Interfaces
Operations
Personnel/Human resources
MIS
LegalPublic Relations
Accounting
Figure 1.6
1-40
Historical Summary of Historical Summary of Operations ManagementOperations Management
Industrial revolution (1770s) Scientific management (1911)
Mass production Interchangeable parts Division of labor
Human relations movement (1920–60) Decision models (1915, 1960–’70s) Influence of Japanese manufacturers