Introduction to Operations Management

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Introduction to Operations Management

• Daniel F. Duran
• BSAD 342
• Operations Management

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Operations Strategy

• A transformation process that results in a
  superior product or service and a competitive
  advantage

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Todays Objectives

• Introduce what is meant by Operations Management
• Provide a brief background as to the evolution of
  the Operations Function
• Look at todays competitive environment and
  Operational Challenges
• Discuss how some companies deal with these
  challenges

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Operations As A Transformation Process

Transformation process
OUTPUT
INPUT
Material Machines Labor Management Capital
Goods or Services at
Competitive Prices and Value
Feedback Change/ Resistance/ Balance
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Transformation Processes Name That Sector, Firm,
Function

• Physical (manufacturing)
• Locational (transport/storage)
• Exchange (retail)
• Physiological (healthcare)
• Psychological (entertainment)
• Informational (communications)

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Characteristics of Goods
Tangible product Consistent product
definition Production usually separate from
consumption Can be inventoried Low customer
interaction
Other Examples?
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Characteristics of Service
Intangible product Produced consumed at same
time Often unique/Inconsistent Product
Definition High customer interaction Often
knowledge-based Frequently dispersed
Other Examples?
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Typical Company Functional Elements

• What are the typical functions found in Product
  or Service Oriented Company?
• What is typically included in the Operations
  function?

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Typical Manufacturing Company Divisional
Functional Structure
G.M/Pres
Sales/Service
Marketing
RD
Operations/ Manufacturing
-Production -Procurement -Logistics -Planning/Sch
-Process Dev -Facilities
-Product Mktng -Mkt Dev -Service Planning -Order
Processing
-Field Sales -Field Serv -Maj Acct Mgmt -Order
Mgmt -Field Admin
-Research -Product Dev -Engr Services
HR
Finance
Quality
-Gen Acct -Cost Acct -Mgmt Reporting
-Training -Staffing -Compensation
-Training -Regulatory Supp -ISO 9000
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Commercial Bank
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Airline Organization
Airline
Operations Ground support equipment Maintenance Gr
ound Operations Facility maintenance
Catering Flight Operations Crew scheduling
Flying Communications Dispatching Management
science
Finance Accounting Accounting Payables Receivabl
es General Ledger Finance Cash control Internation
al exchange
Marketing Traffic administration Reservations Sche
dules Tariffs (pricing) Sales Advertising
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Historical Events In Operations Management

• Industrial Revolution
• Railroad Barons/Bandits
• US Steel and Other
• Scientific Management
• F.W. Taylor
• Human Relations
• Management Science
• Quality Revolution
• Information Age
• Globalization

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Quality Revolution

• Just In Time 1970s Taiichi Ohno, Toyota
• Total Quality 1980s W. Edwards Deming,
• Management Joseph Juran, et. al.
• Reengineering 1990s Hammer, Champy

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Information Age

• Electronic Document Interexchange, Electronic
  Funds Transfer
• Began in 1970s by Numerous individuals and
  companies
• Internet, World Wide Web
• Born in 1980s ARAPANET, Swiss
• Customer Information Management
• Blossomed in 1990s

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Core Trends in Operations Management

• The rapid rate of technology change, increased
  competition, and globalization has resulted in
  specialization by Manufacturing and Service
  firmsthey must increase the focus of their
  internal operations to remain competitive
• Partnerships are required to provide the
  necessary technology, products, and services to
  meet customer needs
• Many drivers of availability, quality and cost
  now lie outside a firms direct control
• Firms must execute as never before (Quality,
  Flexibility, Costs, Asset Mgmt Employee
  Productivity)

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Globalization Means Worldwide Markets and
Operations To

• Take advantage of favorable costs
• Gain access to foreign markets
• Reduced trade barriers
• Changing markets

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New Challenges in OM
From To

• Global focus
• Just-in-time
• Supply chain partnering
• Rapid product development,
• And alliances
• Mass customization
• Empowered employees, teams

• Local or national focus
• Batch shipments
• Low bid purchasing
• Lengthy product development
• Standard products
• Job specialization

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Competing on Cost

• Elimination of all waste
• Improve yield
• Tighten productivity standards
• Invest in automation
• Example Southwest Airlines

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Competing on Quality

• Quality in defense
• Minimize defect rate
• Challenger Disaster
• John Glenns Response
• Conform to design specifications
• Opportunity to please the customer
• Understand attitudes towards and expectations of
  quality
• Example Ritz-Carlton Hotel
• Example Nordstrom's

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Competing on Flexibility

• Marketing wants variety for customers
• Manufacturing wants stability and efficiency of a
  production system
• Ability to produce variety of products
• Introduce new products
• Modify existing products
• Respond quickly to customer needs
• Example Custom Foot

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Competing on Speed

• Fast moves
• Fast adaptations
• Tight linkages with suppliers
• Change is embraced and risk-taking encouraged
• Examples McDonalds, LensCrafters, FedEX,
• L.L. Bean shipping, Citicorp mortgages, HP
  testing equipment, Saks Fifth Ave tailor-made
  suits

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Products and Services

• Make-to-order
• Made to customer specs
• Wedding invitations
• Make-to-stock
• Made to standard customers
• Books, TVs, apparel
• Assemble-to-order
• Standard modules are added to customer spec
• Computer systems Dell

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Primary Topics In Operations Management

• Deploying strategy
• Assuring quality
• Designing products services
• Planning the production process
• Laying out the facility

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Primary Topics In Operations Management

• Designing jobs work
• Managing the supply chain
• Forecasting demand for products services
• Production planning scheduling