Introduction (T1)

Arliza AbdullahOPM530/533

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Introduction to Operations Management

UNIVERSITI TEKNOLOGI MARAFACULTY OF BUSINESS MANAGEMENT


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WHAT IS OPERATIONS MANAGEMENT?

ORGANIZING TO PRODUCE GOODS AND SERVICES

WHY STUDY OM?

OPERATIONS IN THE SERVICE SECTOR

EXCITING NEW TRENDS IN OPERATIONS MANAGEMENT

THE PRODUCTIVITY ISSSUE

Topics


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Organizing to Produce Goods and Services

Essential functions: Marketing – generates demand Operations –creates the product Finance/accounting – tracks organizational performance, pays bills, collects

money


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Functions - Bank

Operations Finance/Accounting

Marketing

CheckClearing

TellerScheduling

Transactions

ProcessingSecurity

Commercial Bank© 1984-1994 T/Maker Co.


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Functions - Manufacturer

Operations Finance/Accounting

Marketing

ProductionControl

Manufacturing QualityControl

Purchasing

Manufacturing


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Organizational Charts

Manufacturing

OperationsFacilities: Construction:maintenanceProduction & inventory control Scheduling: materials control

Supply-chain managementManufacturing Tooling, fabrication,assemblyDesign Product development and design Detailed product specificationsIndustrial engineering Efficient use of machines, space, and personnelProcess analysis Development and installation of production tools and equipment

Finance & AccountingDisbursements/credits Receivables Payables General ledgerFunds Management Money market International exchangeCapital requirements Stock issue Bond issues and recall

MarketingSales promotionsAdvertisingSalesMarket research

Production is the creation of goods and services

Operations management is the set of activities that creates value in the form of goods and services by transforming inputs into outputs

Transformation Process is a series of activities along a value chain extending from supplier to customer where less valuable input resources are transformed into valuable form of output

Definitions


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Transformations of Inputs to Outputs

Physical: Physical: as in manufacturing operationsas in manufacturing operationsLocational: Locational: as in transportation as in transportation operationsoperationsExchange: Exchange: as in retail operationsas in retail operationsPhysiological: Physiological: as in health careas in health carePsychological: Psychological: as in entertainmentas in entertainmentInformational: Informational: as in communicationas in communication

Land, Labor, Capital, Management

Goods and Services

Feedback loop

Inputs Transformation Process Outputs


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Characteristics of Goods

Tangible product Consistent product definition Production usually separate

from consumption Can be inventoried Low customer interaction

© 1995 Corel Corp.


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Characteristics of Service

Intangible product Produced & consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed

© 1995 Corel Corp.


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Goods Versus Services

Can be resold Can be inventoried

Some aspects of quality measurable

Selling is distinct from production

Reselling unusual Difficult to inventory Quality difficult to measure Selling is part of service

GoodsGoods ServiceService


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Goods Versus Services - Continued

Product is transportable Site of facility important for cost

Often easy to automate Revenue generated primarily

from tangible product

Provider, not product is transportable

Site of facility important for customer contact

Often difficult to automate Revenue generated primarily

from intangible service.

GoodsGoods ServiceService GoodsGoods ServiceService


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Continuum from Goods to Services

Source: Adapted from Earl W. Sasser, R. P. Olsen, and D. Daryl Wyckoff, Management of Service Operations (Boston: Allyn Bacon, 1978), p.11.


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Why Study OM?

OM is one of three major functions (marketing, finance, and operations) of any organization.

We want (and need) to know how goods and services are produced.

We want to understand what operations managers do. OM is such a costly part of an organization.


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An Integrated Value Chain

Value chain: set of activities that create and deliver products to customer

Manufacturer SupplierCustomer

Flow of information (customer order)Flow of information (customer order)

Flow of product (order fulfillment)Flow of product (order fulfillment)


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Competitiveness and Productivity

Competitiveness degree to which a nation can produce goods and services that

meet the test of international markets Productivity

ratio of output to input Output

sales made, products produced, customers served, meals delivered, or calls answered

Input labor hours, investment in equipment, material usage, or square

footage


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Productivity

Measures of Productivity


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Measurement Problems

Quality may change while the quantity of inputs and outputs remains constant

External elements may cause an increase or decrease in productivity

Precise units of measure may be lacking


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Productivity Variables

Labor - contributes about 10% of the annual increase Capital - contributes about 38% of the annual increase Management - contributes about 52% of the annual increase


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Key Variables for Improved Labor Productivity

Basic education appropriate for the labor force Diet of the labor force Social overhead that makes labor available Maintaining and enhancing skills in the midst of rapidly changing

technology and knowledge


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Service Productivity

Typically labor intensive Frequently individually processed Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality


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New Challenges in OM

Local or national focus Batch shipments Low bid purchasing

Lengthy product development

Standard products Job specialization

Global focus Just-in-time Supply chain partnering Rapid product development,

alliances Mass customization Empowered employees,

teams

FromFrom ToTo


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Changing Challenges for the Operations Manager

Past Causes Future Local or national focus

Low-cost, reliable worldwide communication and transportation networks

Global Focus

Batch (large) shipments

Cost of capital puts pressure on reducing investment in inventory

Just-in-time shipments

Low-bid purchasing

Quality emphasis requires that suppliers be engaged in product improvement

Supply-chain partners

Lengthy product development

Shorter life cycles, rapid international communication, computer-aided design, and international collaboration

Rapid product development, alliances, collaborative designs


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Changing Challenges for the Operations Manager

Past Causes Future Standardized products

Affluence and worldwide markets; increasingly flexible production processes

Mass customization

Job specialization

Changing sociocultural milieu. Increasingly a knowledge and information society.

Empowered employees, teams, and lean production

Low cost focus

Environmental issues, ISO 14000, increasing disposal costs

Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing

Documents

Introduction (T1)