Operations Management Operations and Productivity A-Team

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Operations ManagementOperations and
ProductivityA-Team
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Outline

• What is Operations Management?
• The heritage of Operations Management
• Why study OM?
• What Operations Managers do
• Organizing to produce goods and services
• Where are the OM jobs?
• Exciting new trends in Operations Management
• Operations in the service sector
• The Productivity challenge

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Learning Objectives

• When you complete this chapter, you should be
  able to
• Identify or Define
• Production and productivity
• Operations Management (OM)
• What operations managers do
• Services
• Describe or Explain
• A brief history of operations management
• The future of the discipline
• Measuring productivity

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What Is Operations Management?
Production is the creation of goods and services

• Operations management is the set of activities
  that creates goods and services by transforming
  inputs into outputs
• Operations management focuses on carefully
  managing the processes to produce and distribute
  products and services.

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Significant Events in OM

• Division of labor (Smith, 1776)
• Standardized parts (Whitney, 1800)
• Scientific management (Taylor, 1881)
• Coordinated assembly line (Ford 1913)
• Gantt charts (Gantt, 1916)
• Motion study (the Gilbreths, 1922)
• Quality control (Shewhart, 1924)

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Adam Smith

• He suggests that the huge increases in
  productivity obtainable from technology or
  technological progress are possible because human
  and physical capital are matched, usually in an
  organisation.

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Eli Whitney
Whitney's defenders have claimed that he invented
the American system of manufacturing-- the
combination of power machinery, interchangeable
parts, and division of labor that would underlie
the nation's subsequent industrial revolution.
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Frederick Winslow Taylor

• He developed the theory of management that
  analyzes and synthesizes processes, improving
  labor productivity.

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Henry Ford

• An assembly line is a manufacturing process in
  which interchangeable parts are added to a
  product in a sequential manner using optimally
  planned logistics to create a finished product
  much faster than with handcrafting-type methods.

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Henry Gantt

• A Gantt chart is a popular type of bar chart
  that illustrates a project schedule. Gantt charts
  illustrate the start and finish dates of the
  terminal elements and summary elements of a
  project.

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The Gilbreths

• The Gilbreths' motion studies were more focused
  on how a task was done, and how best to eliminate
  unneeded, fatiguing steps in any process.

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Walter Shewhart

• Shewhart framed the problem in terms of
  assignable-cause and chance-cause variation and
  introduced the control chart as a tool for
  distinguishing between the two. Shewhart stressed
  that bringing a production process into a state
  of statistical control, where there is only
  chance-cause variation, and keeping it in
  control, is necessary to predict future output
  and to manage a process economically.

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Significant Events - Continued

• CPM/PERT (Dupont, 1957)
• MRP (Orlicky, 1960)
• CAD
• Flexible manufacturing systems (FMS)
• Manufacturing automation protocol (MAP)
• Computer integrated manufacturing (CIM)

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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 know what operations managers do
• OM is such a costly part of an organization

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Why Study OM?

• Related activities
• managing purchases
• inventory control
• quality control
• storage
• logistics
• evaluations
• and we need to comunicate them with each others.

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Why Study OM?

• OM often includes substantial measurement and
  analysis of internal processes, because a great
  deal of focus is on efficiency and effectiveness
  of processes.
• Ultimately, the nature of how operations
  management is carried out in an organization
  depends very much on the nature of products or
  services in the organization.

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What Operations Managers Do by Henri Fayol

• Plan
• Organize
• Staff
• Lead
• Control

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Planning

• The process of deciding what to do. Effective
  planning seeks to answer questions such as
• What should the firm do? The output of this
  process are goals and objectives.
• When must the firm achieve these goals? The
  output is a schedule defining milestones and due
  dates.
• Who is responsible for doing it? The outputs are
  assigned responsibilities.
• How should this be done? The outputs may be
  directions or plans of action.
• How should performance be measured? The output
  includes standards of performance.
• Planning is forward looking. When planning is
  operational, the planning horizon is shorter and
  the level of detail within is greater. When
  strategic, the planning horizon is long and done
  in less detail.

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Analysing

• The process of making sense of data that is
  often poorly
• structured, incomplete, inconsistent, inaccurate,
• and/or available in overwhelming quantities.
• Analysis supports the planning process by
• providing the facts in useful formats that can
  then be
• used to evaluate business alternatives.
• Analyzing also supports managements control
  activity by
• providing the basis for corrective actions.

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Organizing

• The process of building organization structures
  and interrelated task coordination teams. In the
  past, organizing dealt mostly with humans, but
  increasingly it involves data-getting
• the right person
• the right information
• in the right form
• at the right time
• is a key success factor in organization design.

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Directing/Implementing

• An action-oriented process that carries out the
  outputs of the first three management activities.
  
• This is where money is made and lost.
• In this process, management expends resources to
  perform the tasks defined by the planning
  process.

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Controlling

• The process of measuring the results of the
  other four management activities.
• Were the plans any good?
• Did the analysis provide meaningful information
  to the other processes?
• How well did we organize our resources to get
  the job done?
• How well did we do it?
• We might even add, how well did we measure the
  performance of our control function?

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Ten Critical Decisions

• Service, product design
• Quality management
• Process, capacity design
• Location
• Layout design
• Human resources, job design.
• Supply-chain management
• Inventory management
• Scheduling
• Maintenance

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Section of OM

• Procurement (Purchasing) Practices
• reviews guidelines for buying various materials
  from suppliers and vendors - materials, including
  computers, services from lawyers, insurance, etc.
• Management Control and Coordinating Function
• includes a broad range of activities to ensure
  that organizational goals are consistently being
  met in an effective and efficient fashion

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Section of OM

• Product and Service Management
• the major activities involved in product and
  service management are similar to those in
  operations management. However, operations
  management is focused on the operations of the
  entire organization, rather than managing a
  product or service.
• Quality Management
• is crucial to effective operations management,
  particularly continuous improvement. More recent
  advancements in quality, such as benchmarking and
  Total Quality Management, have resulted in
  advancements to operations management as well.

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Section of OM

• Inventory Management
• Costs can be substantial to store and move
  inventory. Innovative methods, such as
  Just-in-Time inventory control, can save costs
  and move products and services to customers more
  quickly.
• Logistics and Transportation Management
• is focused on the flow of materials and goods
  from suppliers, through the organization and to
  the customers, with priority on efficiency and
  cost effectiveness.

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Section of OM

• Facilities Management
• depnds a great deal on effective management of
  facilities, such as buildings, computer systems,
  signage, lighting, etc.
• Configuration Management
• It's important to track the various versions of
  products and services. Consider the various
  versions of software that continually are
  produced, each with its own version number.
  Tracking these versions is configuration
  management.
• Distribution Channels
• The means of distribution depend very much on the
  nature of the product or service.

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Organisational Functions

• Marketing
• Gets customers
• Operations
• creates product or service
• Finance/Accounting
• Obtains funds
• Tracks money

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Where Are the OM Jobs?

• Technology/methods
• Facilities/space utilization
• Strategic issues
• Response time
• People/team development
• Customer service
• Quality
• Cost reduction
• Inventory reduction
• Productivity improvement

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New Challenges in OM
From
To
Global focus Just-in-time Supply chain
partnering Rapid product development,
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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Characteristics of Goods
Tangible product Consistent product
definition Production usually separate from
consumption Can be inventoried Low customer
interaction
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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
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Goods Versus Services
Goods
Service
Reselling unusual Difficult to inventory Quality
difficult to measure Selling is part of service

• Can be resold
• Can be inventoried
• Some aspects of quality measurable
• Selling is distinct from production

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Goods Versus Services - Continued
Goods
Service
Provider, not product is transportable Site of
facility important for customer contact Often
difficult to automate Revenue generated primarily
from intangible service.

• Product is transportable
• Site of facility important for cost
• Often easy to automate
• Revenue generated primarily from tangible product

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The Economic System Transforms Inputs to Outputs
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Inputs/Outputs
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Productivity
Measure of process improvement Represents output
relative to input Productivity increases improve
standard of living From 1889 to 1973, U.S.
productivity increased at a 2.5 annual rate
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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 32 of the annual
  increase
• Management - contributes about 52 of the annual
  increase

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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