CHAPTER 1
Introduction to
Operations Management
What is Operations
Management?
3 Basic Functions of Business Organizations
Ensure and allocating financial resources
Produce goods or services
Assess consumer needs, and sell / promote goods or services
Operations: A Transformation Process
Feedback
Inputs
Workers Managers Performance
Outputs
Goods
Equipment
Facility Materials Land
Operations and processes
Services
Energy
Information
Lead time The time between ordering a good or service and receiving it.
Operations Management
The management of systems or processes that create goods and/or provide services.
Planning
Coordinating
Executing
Operations = Transformation Process
Inputs
5 Ms
Management, Methods, Material, Machines, Maintenance
Also: Personnel , information & energy
Transformation/conversion process
Cutting, machining, storing, transporting, investing, analyzing
Output
Goods/services
Value-added The difference between the cost of inputs and the value or price of outputs.
Example: Food Processor
Table 1.2
Inputs
Raw Vegetables Metal Sheets Water Energy Labor Building Equipment
Processing
Cleaning Making cans Cutting Cooking Packing Labeling
Outputs
Canned vegetables
Consumer Feedback
Example: Hospital
Table 1.2
Inputs
Doctors, nurses
Processing
Examination
Outputs
Healthy
Hospital
Medical Supplies Equipment Laboratories
Surgery
Monitoring Medication Therapy
patients
Improvement of patients health condition
Example: BA 3352
Table 1.2
Inputs
Knowledge Text Book Lecture Notes Handouts Course CD
Processing
Lecturing Tutoring Assignment Exam
Outputs
Future operations managers
Teaching Evaluation
Manufacture or Service Operations?
Manufacturing or Service?
Tangible
Act
Production of goods
Delivery of services
Goods-Service Continuum Figure 1.3
Steel production
Automobile fabrication
Home
remodeling Retail sales
Auto Repair
Appliance repair
Maid Service
Manual car wash
Teaching
Lawn mowing
High percentage goods Low percentage service
Low percentage
goods High percentage service
Manufacturing vs. Service
Table 1.3
Characteristic
Manufacturing
Tangible High High Low Easy Low High Easy Usually
Service
Intangible Low Low High Difficult High Low Difficult Not Usually
Output Uniformity of output Uniformity (seragam) of input Labor content Measurement of productivity Customer contact
Opportunity to correct quality problems before delivery Evaluation Patentable
Manufacturing vs. Service Employment
Year Mfg. Service 45 79 21 50 72 28 55 72 28 60 68 32 65 64 36 70 64 36 75 58 42 80 44 46 85 43 57 90 35 65 95 32 68 00 30 70
90 80 70
Service Manufacturing
Percent
60 50 40 30 20 10 0 45 50 55 60 65 70 75 80 85 90 95 00 Year
What does Operations Manager Do?
Scope of Operations Management
Operations Management includes:
Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more . . .
Example: Airline Company
Forecasting: Weather, landing conditions, seat demands
for flights.
Capacity Planning: How many number of planes in each
route?
Scheduling: Scheduling of planes for flights and for
routine maintenance, scheduling of pilots and flights
attendants.
Quality: Quality of the services, Safety.
Example: Automobile Factory
Forecasting: Demands for cars. Capacity Planning : Number of shifts, level of workforce. Inventory: Various component, parts.
Scheduling: Scheduling of various types of cars,
Scheduling of workforce.
Quality: Quality of products, services.
Types of Operations
Table 1.4
Operations
Goods Producing
Examples
Farming, construction, manufacturing, power generation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Retailing, wholesaling, banking, renting, leasing, library, loans Films, radio and television, concerts, recording Newspapers, radio and television newscasts, telephone, satellites
Storage/Transportation
Exchange Entertainment Communication
Responsibilities of Operations Manager
Table 1.6
Planning Capacity Location Products & services Make or buy Layout Projects Scheduling Controlling/Improving Inventory Quality Costs Productivity Organizing Degree of centralization Process selection Staffing Hiring/laying off Use of Overtime Directing
Incentive plans Issuance of work orders Job assignments
Why is Operations
Management Important?
Reasons to Study Operations Management
Operations Management activities are at the core of
all business organizations. 50% or more of the jobs in industry are operations management-related:
Customer Service Quality Assurance Production Planning Scheduling Inventory Management Logistics
All Other Functional Areas are interrelated with
Operations Management
Operations as Technical Core
Capital Markets, Stockholders Purchasing Finance Personnel Operations Marketing Customers Workers
Suppliers
The Overlapping of Three Major Functions
Figure 1.5
Competitor Customer preference
Trend of technology Judgment of manufacturability Fulfillment lead time
Budgeting Economic analysis of investment proposals
Operations
Provision of funds Financial indicators
Marketing
Finance
Interfaces with Other Supporting Functions
Purchasing Accounting
Personnel/Human resources
Public relations Maintenance
Distribution
Industrial Engineering Maintenance
Industrial engineering
Distribution
Purchasing
Operations
Legal
Public Relations
Personnel
Accounting MIS
What are the Operational
Decisions?
Managers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
System Design
System capacity
Location of facilities
Arrangement of departments
Product and services planning
Acquisition and placement of equipment
System Operations involved..
Management of personnel
Inventory planning and control
Scheduling
Project management
Quality assurance
