Operations Management

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Operations Management Operations and
Productivity
Professor Ahmadi

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Learning Objectives

• Definition of Operations Management (OM)
• Organizational Functions
• Why Study OM?
• A brief history of operations management
• The future of the discipline
• Goods Versus Services
• Measuring productivity
• Career opportunities in operations management

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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 value in the form of goods and
  services by transforming inputs into outputs

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Organizing to Produce Goods and Services
(Organizational Functions)

• Essential functions
• Operations creates the product
• Marketing generates demand
• Finance/accounting tracks organizational
  performance, pays bills, collects money

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Functions - Bank
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Functions - Airline
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Functions - Manufacturer
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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 understand what operations managers
  do.
• OM is such a costly part of an organization.

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What Operations Managers Do

• Basic Management Functions
• Planning
• Organizing
• Staffing
• Leading
• Controlling

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The Critical Decisions

• Quality management
• Service and product design
• Process and capacity design
• Location
• Layout design
• Human resources and job design
• Supply chain management
• Inventory, material requirements planning,
• Intermediate, short term, and project scheduling
• Maintenance

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Major Events in OM

• Standardized parts (Eli Whitney 1800)
• Scientific Management (Frederick Taylor 1881)
• Coordinated assembly line ( Henry Ford 1903)
• Gantt charts (Gantt 1916)
• Motion study (Frank and Lillian Gilbreth 1922)
• Quality control (Deming 1950)

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Major Events in OM (Continued)

• CPM/PERT (DuPont 1957)
• 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)

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New Challenges in OM
From
To

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

• Global focus
• Just-in-time
• Supply chain partnering
• Rapid product development
• Mass customization
• Empowered employees, teams
• Others
• Environmental Sensitivity
• Ethics

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Goods Versus Services
Goods
Services

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

• Reselling unusual
• Difficult to inventory
• Quality difficult to measure
• Selling is part of service

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Goods Versus Services - Continued
Goods
Services

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

• Provider, not product is transportable
• Site of facility important for customer contact
• Often difficult to automate
• Revenue generated primarily from intangible
  service.

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Productivity Measurement

• Measure of process improvement
• Represents output relative to input
• Only through productivity increases can our
  standard of living improve

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Multi-Factor Productivity

• Also known as total factor productivity
• Output and inputs are often expressed in dollars

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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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Entry-Level Jobs in OM

• Purchasing planner/buyer
• Production (or operations) supervisor
• Production (or operations) scheduler/controller
• Production (or operations) analyst
• Inventory analyst
• Quality specialist
• Others