Operation management 9e stevenson mcgrwhill chap001

1 Introduction to Operations Management McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc All Learning 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 1-2 Learning Objectives  Differentiate between design and operation of production systems  Describe the key aspects of operations management decision making  Briefly describe the historicalevolution of operations management  Identify current trends that impact operations management 1-3 Operations 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 1-4 The Organization Figure 1.1 The Three Basic Functions Organization Finance Operations Marketing 1-5 Value-Added Process Figure 1.2 The operations function involves the conversion of inputs into outputs Value added Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Feedback Control Feedback Feedback 1-6 Value-Added & Product Packages  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 1-7 Goods-service Continuum Figure 1.3 Goods Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile Repair, fast food Home remodeling, retail sales Automobile assembly, steel making 1-8 Food Processor Table 1.2 Inputs Processing Outputs Raw Vegetables Metal Sheets Water Energy Labor Building Equipment Cleaning Making cans Cutting Cooking Packing Labeling Canned vegetables 1-9 Hospital Process Table 1.2 Inputs Doctors, nurses Hospital Medical Supplies Equipment Laboratories Processing Outputs Examination Surgery Monitoring Medication Therapy Healthy patients 1-10 Models Are Beneficial Easy to use, less expensive Require users to organize Increase understanding of the problem Enable “what if” questions Consistent tool for evaluation and standardized format  Power of mathematics      1-29 Limitations of Models  Quantitative information may be emphasized over qualitative  Models may be incorrectly applied and results misinterpreted  Nonqualified users may not comprehend the rules on how to use the model  Use of models does not guarantee good decisions 1-30 Quantitative Approaches • Linear programming • Queuing Techniques • Inventory models • Project models • Statistical models 1-31 Analysis of Trade-Offs  Decision on the amount of inventory to stock  Increased cost of holding inventory Vs  Level of customer service 1-32 Systems Approach “The whole is greater than the sum of the parts.” Suboptimization 1-33 Pareto Phenomenon • A few factors account for a high percentage of the occurrence of some event(s) • 80/20 Rule - 80% of problems are caused by 20% of the activities How we identify the vital few? 1-34 Ethical Issues          Financial statements Worker safety Product safety Quality Environment Community Hiring/firing workers Closing facilities Worker’s rights 1-35 Business Operations Overlap Figure 1.5 Operations Marketing Finance 1-36 Operations Interfaces Industrial Engineering Maintenance Distribution Purchasing Operations Public Relations Legal Personnel Accounting MIS 1-37 Historical Evolution of Operations Management Table 1.7  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 1-38 Trends in Business  Major trends        The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior 1-39 Management Technology  Technology: The application of scientific discoveries to the development and improvement of goods and services  Product and service technology  Process technology  Information technology 1-40 Simple Product Supply Chain Figure 1.7 Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service 1-41 A Supply Chain for Bread Stage of Production Value Added Value of Product Farmer produces and harvests wheat $0.15 $0.15 Wheat transported to mill $0.08 $0.23 Mill produces flour $0.15 $0.38 Flour transported to baker $0.08 $0.46 Baker produces bread $0.54 $1.00 Bread transported to grocery store $0.08 $1.08 Grocery store displays and sells bread $0.21 $1.29 Total Value-Added $1.29 1-42 Other Important Trends        Ethical behavior Operations strategy Working with fewer resources Revenue management Process analysis and improvement Increased regulation and product liability Lean production 1-43 ... the historicalevolution of operations management  Identify current trends that impact operations management 1-3 Operations Management  Operations Management is: The management of systems or processes... the nature of the operations manager’s job 1-2 Learning Objectives  Differentiate between design and operation of production systems  Describe the key aspects of operations management decision... 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