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Operations Management Introduction Chapter 1

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Industrial Revolution. Mechanized production and distribution. ... Operations Management. Industrial Engineering. Social and psychological factors. ... – PowerPoint PPT presentation

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Title: Operations Management Introduction Chapter 1


1
Operations ManagementIntroduction - Chapter 1
2
Outline
  • What is Operations Management?
  • Why Study OM?
  • Production vs. Service Organizations.
  • Operations Management Decisions.
  • Heritage of OM.
  • Recent Developments Challenges.
  • Productivity.

3
What Is Operations Management?
  • Operations management is the management of
    systems that produce goods and provide services.
  • It includes planning, designing and operating
    systems to achieve goals of the organization.
  • Book definition (not as good) The set of
    activities that creates goods and services by
    transforming inputs into outputs.

4
Transforming Inputs to Outputs
Process
Outputs
Inputs
Land, Labor, Capital, Materials, Equipment,
Management
Production or Service System
Goods and Services
5
Examples
Production
Service
  • Auto factories (assembly plants)
  • Job shops (printing)
  • Fast food restaurants
  • Hospitals
  • Airlines
  • Movie theaters
  • Grocery stores

6
Why Study OM?
  • OM is one of three major functions of any
    organization (Marketing, Finance, and
    Operations).
  • We should know how goods and services are
    produced.
  • OM is such a costly part of an organization.
  • Jobs!

7
OM Jobs
8
Organizational Functions
  • Operations.
  • Creates product or service.
  • Marketing.
  • Generates demand.
  • Finance/Accounting.
  • Obtains funds tracks money.

9
Characteristics of Goods
  • Tangible product.
  • Consistent inputs and outputs.
  • Production separate from consumption.
  • Can be inventoried.
  • Low customer interaction.

10
Characteristics of Service
  • Intangible product.
  • Variable inputs and outputs (people!).
  • Production and consumption at same place and
    time.
  • No inventories.
  • High customer interaction.

11
Goods Contain Services Services Contain Goods
Automobile
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Consulting Service
Counseling
of Product that is a Good
of Product that is a Service
12
Operations Management for a Manufacturer
13
Operations Management for an Airline
14
Critical Decisions for OM
  • Product service design.
  • Quality management.
  • Process design.
  • Capacity location of facilities.
  • Layout of facilities.
  • Human resources Job design.
  • Supply-chain management.
  • Inventory management.
  • Scheduling.
  • Maintenance.

15
Skills and Knowledge Needed
  • Knowledge of production and service processes.
  • Knowledge of basic OM principles.
  • Analytical Tools
  • Forecasting
  • Decision-Making
  • Linear Programming
  • Break-even analysis
  • Inventory control
  • Waiting lines (queueing)

16
Heritage of OM
  • Prior to 1700s - Most products custom-made on a
    small scale with local distribution.
  • Local craftsmen.
  • Products were handmade and unique.
  • Industrial Revolution
  • Mechanized production and distribution.
  • Allowed mass production and wider distribution.
  • Fostered division of labor.

17
Industrial Revolution
  • Key developments
  • Steam engine (1769).
  • Interchangeable parts (1798).
  • Machine tools (1798).
  • Results
  • Production increased.
  • Prices decreased.
  • Workers replaced by machines.
  • Need to manage complex production systems.

18
Scientific Management
  • Study production systems scientifically to
    improve them (beginning in 1880s).
  • There are scientific laws for production
    systems that can be used to improve (optimize)
    production.
  • Work smarter, not harder.
  • Management is responsible for productivity.

19
Related Fields
  • Operations Management.
  • Industrial Engineering.
  • Social and psychological factors.
  • Operations Research/Management Science
    (Mathematical modeling).
  • Logistics.

20
Eli Whitney
  • Born 1765 died 1825.
  • Invented cotton gin.
  • Received government contract to make 10,000
    muskets (1798).
  • Showed machine tools could make standardized
    parts.

21
Recent Developments for OM
  • Information technology (computers, bar codes,
    EDI, internet, wireless, etc.)
  • Quality emphasis.
  • Service economy.
  • Globalization.
  • Environmental concerns.
  • Security.

22
Development of the Service Economy
U.S. Employment, Share
80 40 0
Services
Industry
Farming
1850
1950
1900
2000
23
Productivity
  • Used to measure of process improvement.
  • Amount of output relative to input.
  • Productivity increases improve standard of
    living.
  • From 1889 to 1973, U.S. productivity increased at
    a 2.5 annual rate.

Units produced
Productivity
Inputs used
24
Productivity for A Restaurant?
  • Amount of output per unit input.
  • What is output how is it measured???
  • Number of meals served?
  • Number of tables served?
  • Number of satisfied customers?
  • What is input how is it measured???
  • Lbs. of food?
  • Number of employees?
  • Number of tables?

25
Productivity for One Product
Units produced
Productivity
Inputs used
  • Output is easy to measure with one product.
  • Input may have many components.
  • Parts and subassemblies.
  • Labor.
  • Equipment.
  • Knowledge.
  • etc.

26
Productivity Variables
  • Output
  • Labor material energy capital
    miscellaneous

Productivity
  • Use a common measure to combine different inputs
    - usually .

27
Productivity Measurement Problems
  • Quality of output should be considered.
  • If you produce more, but of lower quality, does
    productivity rise?
  • External elements may change productivity.
  • Wireless communication may raise productivity.
  • Precise units of measure may be lacking.

28
How Would You Measure Productivity for UM - St.
Louis?
Units produced
Productivity
Inputs used
  • What is output?
  • How is it measured?
  • What is input?
  • How is it measured?

29
How Would You Measure Productivity For
  • A builder of new homes?
  • An automobile mechanic?
  • A hospital?
  • A fire department?
  • A restaurant?
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