PRODUCTION AND OPERATIONS MANAGEMENTBSBA

Learning ObjectivesDefinition of Operations Management (OM)Organizational FunctionsWhy Study OM?A brief history of operations managementThe future of the disciplineGoods Versus ServicesMeasuring productivityCareer opportunities in operations management

WHAT IS OPERATIONS MANAGEMENT?Production is the creation of goods and servicesOperations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

Organizing to Produce Goods and ServicesEssential functions:Marketing generates demandProduction/operations creates the productFinance/accounting tracks how well the organization is doing, pays bills, collects the moneyHuman Resources provides labor, wage and salary administration and job evaluation

Organizational Charts

Organizational Charts

Why Study OM?OM is one of four major functions of any organization, we want to study how people organize themselves for productive enterpriseWe want (and need) to know how goods and services are producedWe want to understand what operations managers doOM is such a costly part of an organization

Options for Increasing Contribution

WHAT OPERATIONS MANAGERS DOPlanningOrganizingStaffingLeadingControllingBasic Management Functions

Ten Critical Decisions

The Critical DecisionsDesign of goods and servicesWhat good or service should we offer?How should we design these products and services? Managing qualityHow do we define quality?Who is responsible for quality?

The Critical DecisionsProcess and capacity designWhat process and what capacity will these products require?What equipment and technology is necessary for these processes?Location strategyWhere should we put the facility?On what criteria should we base the location decision?

The Critical DecisionsLayout strategyHow should we arrange the facility?How large must the facility be to meet our plan?Human resources and job designHow do we provide a reasonable work environment?How much can we expect our employees to produce?

The Critical DecisionsSupply-chain managementShould we make or buy this component?Who should be our suppliers and how can we integrate them into our strategy?Inventory, material requirements planning, and JITHow much inventory of each item should we have?When do we re-order?

The Critical DecisionsIntermediate and shortterm schedulingAre we better off keeping people on the payroll during slowdowns?Which jobs do we perform next?MaintenanceHow do we build reliability into our processes?Who is responsible for maintenance?

Significant Events in OM

The Heritage of OMDivision of labor (Adam Smith 1776; Charles Babbage 1852)Standardized parts (Whitney 1800)Scientific Management (Taylor 1881)Assembly line (Ford/ Sorenson 1913)Gantt charts (Gantt 1916)Motion study (Frank and Lillian Gilbreth 1922)Quality control (Shewhart 1924; Deming 1950)

The Heritage of OMFirst Digital Computer (Atanasoff 1938)CPM/PERT (DuPont 1957, Navy 1958)Material requirements planning (Orlicky 1960)Computer aided design (CAD 1970)Flexible manufacturing system (FMS 1975)Baldrige Quality Awards (1980)Computer integrated manufacturing (1990)Globalization (1992)Internet (1995)Mass Customization (2000s)

New Challenges in OM

Characteristics of GoodsTangible productConsistent product definitionProduction usually separate from consumptionCan be inventoriedLow customer interaction

Characteristics of ServiceIntangible productProduced and consumed at same timeOften uniqueHigh customer interactionInconsistent product definitionOften knowledge-basedFrequently dispersed

Goods and Services

Changing Challenges

Traditional ApproachReasons for ChangeCurrent ChallengeEthics and regulations not at the forefrontPublic concern over pollution, corruption, child labor, etc.High ethical and social responsibility; increased legal and professional standardsLocal or national focusGrowth of reliable, low cost communication and transportationGlobal focus, international collaborationLengthy product developmentShorter life cycles; growth of global communication; CAD, InternetRapid product development; design collaboration

Changing Challenges

Traditional ApproachReasons for ChangeCurrent ChallengeLow cost production, with little concern for environment; free resources (air, water) ignoredPublic sensitivity to environment; ISO 14000 standard; increasing disposal costsEnvironmentally sensitive production; green manufacturing; sustainabilityLow-cost standardized productsRise of consumerism; increased affluence; individualismMass customization

Changing Challenges

Traditional ApproachReasons for ChangeCurrent ChallengeEmphasis on specialized, often manual tasksRecognition of the employee's total contribution; knowledge societyEmpowered employees; enriched jobsIn-house production; low-bid purchasingRapid technological change; increasing competitive forcesSupply-chain partnering; joint ventures, alliancesLarge lot productionShorter product life cycles; increasing need to reduce inventoryJust-In-Time performance; lean; continuous improvement

New Trends in OMEthicsGlobal focusEnvironmentally sensitive productionRapid product developmentMass customizationEmpowered employeesSupply-chain partneringJust-in-time performance

Productivity ChallengeProductivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)The objective is to improve productivity!Important Note!Production is a measure of output only and not a measure of efficiency

Efficiency Versus EffectivenessThe difference between efficient and effective is that efficiency refers to how well you do something, whereas effectiveness refers to how useful it is. Efficiency is doing things right; effectiveness is doing the right things.Doing the Right Things is More Important than Doing Things Right

Efficiency Versus EffectivenesFor example, if a company is not doing well and they decide to train their workforce on a new technology. The training goes really well - they train all their employees in avery short time and tests show they have absorbed the training well. But overall productivity doesn't improve. In this case the company's strategy was efficient but not effective.

The Economic System

Measure of process improvementRepresents output relative to inputOnly through productivity increases can our standard of living improveProductivity

Productivity CalculationsLabor ProductivityOne resource input single-factor productivity

Multi-Factor Productivity Also known as total factor productivityOutput and inputs are often expressed in dollarsMultiple resource inputs multi-factor productivity

Collins Title Productivity

Collins Title Productivity

Collins Title Productivity= .25 titles/labor-hr

Collins Title Productivity

Collins Title Productivity

Collins Title Productivity

Collins Title Productivity= .0077 titles/dollar

Collins Title Productivity= .0077 titles/dollar= .0097 titles/dollar

Measurement ProblemsQuality may change while the quantity of inputs and outputs remains constant (HDTV, iphones)External elements may cause an increase or decrease in productivity (using more reliable electric power system)Precise units of measure may be lacking

Productivity VariablesLabor - contributes about 10% of the annual increaseCapital - contributes about 38% of the annual increaseManagement - contributes about 52% of the annual increase

Key Variables for Improved Labor ProductivityBasic education appropriate for the labor forceDiet of the labor forceSocial overhead that makes labor available such as transportation and sanitationChallenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge

Investment and Productivity

Service ProductivityTypically labor intensive (teaching, counseling)Frequently focused on unique individual desires (customer representatives in banks)Often an intellectual task performed by professionalsOften difficult to mechanizeOften difficult to evaluate for quality

ETHICS ANDSOCIAL RESPONSIBILITYChallenges facing operations managers:Developing and producing safe, quality productsMaintaining a clean environmentProviding a safe workplaceHonoring stakeholder commitments

FINALLY

*********Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.********************************