CHAPTER ONE
PRODUCTION/OPERATIONS
MANAGEMENT
SIXTH EDITION
PRODUCTION AND OPERATIONS MANAGEMENT
WILLIAM J. STEVENSON
Rochester Institute of Technology
Irwin/McGraw-Hill
Irwin/McGraw-Hill
The
McGraw-Hill
Companies,
The
McGraw-Hill
Companie
s, Inc., 1999
Inc., 1999
1-1
PART ONE
CHAPTER
ONE
PRODUCTION AND OPERATIONS MANAGEMENT
INTRODUCTION
Chapter One
Production and Operations Management
Chapter Two
Productivity, Competitiveness, and Strategy
Irwin/McGraw-Hill
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-2
The McGraw-Hill Companies,
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Management
Operations function consists of all activities directly
related to producing goods or providing services.
Organization
Finance
Irwin/McGraw-Hill
Production/
Operations
Marketing
TheMcGraw-Hill Companies, Inc., 1999
1-3
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Business Operations Overlap
Production/
Operations
Marketing
Irwin/McGraw-Hill
Finance
TheMcGraw-Hill Companies, Inc., 1999
1-4
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Types of Operations
Operations
Examples
Goods Producing
Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange
Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment
Films, radio and television,
concerts, recording
Communication
Newspapers, radio and television
newscasts, telephone, satellites
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-5
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Value-Added
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Land
Labor
Capital
Outputs
Goods
Services
Transformation/
Conversion
process
Feedback
Feedback
Irwin/McGraw-Hill
Control
Feedback
TheMcGraw-Hill Companies, Inc., 1999
1-6
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Food Processor
Inputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Irwin/McGraw-Hill
Processing Outputs
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned vegetables
TheMcGraw-Hill Companies, Inc., 1999
1-7
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Hospital Process
Inputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Irwin/McGraw-Hill
Processing Outputs
Examination
Surgery
Monitoring
Medication
Therapy
Healthy patients
TheMcGraw-Hill Companies, Inc., 1999
1-8
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Interfaces
Industrial
Engineering
Distribution
Maintenance
Operations
Purchasing
Accounting
Irwin/McGraw-Hill
Public Relations
Personnel
TheMcGraw-Hill Companies, Inc., 1999
1-9
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Decision Making
System Design
capacity
location
arrangement of departments
product and service planning
acquisition and placement of
equipment
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-10
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Decision Making
System operation
personnel
inventory
scheduling
project
management
quality assurance
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-11
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Major Characteristics of
Production Systems
Degree of standardization
Type of operation
project
job shop
repetitive production
continuous processing
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-12
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Manufacturing or Service?
Tangible
Irwin/McGraw-Hill
Act
TheMcGraw-Hill Companies, Inc., 1999
1-13
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Key Differences
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Quality assurance
These differences are beginning to fade
in many cases
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-14
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Manufacturing vs Service
Characteristic
Manufacturing Service
Output
Tangible
Customer contact
Low
High
Uniformity of input
High
Low
Labor content
Low
High
Uniformity of output
High
Low
Measurement of productivity
Easy
Difficult
Opportunity to correct
quality problems
High
Low
Intangible
High
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-15
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Responsibilities of
Operations Management
Planning
Capacity
Location
Products and services
Make or buy
Layout
Projects
Scheduling
Controlling
Inventory
Quality
Irwin/McGraw-Hill
Organizing
Degree of centralization
Subcontracting
Staffing
Hiring/laying off
Use of Overtime
Directing
Incentive plans
Issuance of work orders
Job assignments
TheMcGraw-Hill Companies, Inc., 1999
1-16
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Models
A model is an abstraction of reality.
Physical
Schematic
Mathematical
Tradeoffs
What are the pros and cons of models?
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-17
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Systems Approach
The whole is greater than the sum of the parts.
Suboptimization
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-18
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Quantitative Approaches
Linear programming
Queuing Techniques
Inventory models
Project models
Statistical models
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-19
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Pareto Phenomenon
A vital few things are important for reaching
an objective or solving a problem.
80/20 Rule - 80% of problems are caused by
20% of the activities.
How do we identify the vital few?
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-20
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Recent Trends
Global competition
Operations strategy
Total quality management (TQM)
Flexibility
Time reduction Technology
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-21
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Recent Trends (Continued)
Worker involvement
Reengineering
Environmental issues
Service
Irwin/McGraw-Hill
TheMcGraw-Hill Companies, Inc., 1999
1-22
