Slide 1: Introduction to
Operations Management Dr Felton Lean Slide 2: What is Operations Management? Dr Felton Lean 3 Basic Functions of Business Organizations : 3 Basic Functions of Business Organizations Ensure and allocating financial resources Produce goods or services Assess consumer needs, and sell / promote goods or services Dr Felton Lean Operations: A Transformation Process : Operations: A Transformation Process Workers
Services Operations and
processes Feedback Performance Lead time The time between ordering a good or service and receiving it. Dr Felton Lean Operations Management : Operations Management The management of systems or processes that create goods and/or provide services.
Executing Dr Felton Lean Slide 6: OVERVIEW OF OPERATIONS MANAGEMENT MODEL Transformation
Services Control Input: resources
etc. Dr Felton Lean Slide 7: Operations management is the process of obtaining and utilizing resources to produce useful goods and services so as to meet the goals of the organization. Dr Felton Lean Slide 8: • The difference between the cost of inputs and the value or price of outputs. Inputs Material Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Feedback Feedback Value added Value added Value of the output or price of the output as accepted by the customers, not just enforced by the supplier. Land Dr Felton Lean Slide 9: Operations management considers how the input are transformed into goods or services.
Control is when something is learned about the goods or services that is used to more effectively transform future goods or services. Dr Felton Lean Slide 10: • The difference between the cost of inputs and the value or price of outputs. Inputs Material Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Feedback Feedback Value added Value added Value of the output or price of the output as accepted by the customers, not just enforced by the supplier. Land Dr Felton Lean Slide 11: Feedback and Control Measurements taken at various points in the transformation process for control purposes are called feedback.
The process of comparing outputs to previously established standards to determine if corrective action is needed is called controlling Physical Flow Information Flow Dr Felton Lean Operations = Transformation Process : Operations = Transformation Process Inputs
Management, Methods, Material, Machines, Maintenance
Also: Personnel , information & energy
Cutting, machining, storing, transporting, investing, analyzing
Goods/services Value-added The difference between the cost of inputs and the value or price of outputs. Dr Felton Lean EXAMPLE OF OPERATIONS MANAGEMENT PROCESS : EXAMPLE OF OPERATIONS MANAGEMENT PROCESS Automobile factory
steel, plastic Car
utilities, etc. Dr Felton Lean Example: Hospital : Example: Hospital Inputs Processing Outputs Table 1.2 Healthy patients Doctors, nurses
Therapy Improvement of patients health condition Dr Felton Lean Example: MBA : Example: MBA Inputs Processing Outputs Table 1.2 Knowledge
Exam Future operations managers Teaching Evaluation Dr Felton Lean Slide 16: Manufacture or Service Operations? Dr Felton Lean Slide 17: • Degree of standardization • Type of Operation • Manufacturing or Service Major characteristics of operational systems Dr Felton Lean Manufacturing or Service? : Manufacturing or Service? Production of goods Delivery of services “perceptible by the senses especially the sense of touch”
WordNet ® 2.0, © 2003 Princeton University Dr Felton Lean Slide 19: Degree of standardization Dr Felton Lean Slide 20: Types of operations Dr Felton Lean Slide 21: Production management is concerned with the manufacturing of goods:
Examples of goods:
etc. Dr Felton Lean Slide 22: Manufacturing vs. Service Characteristic Manufacturing Service Output
Uniformity of output
Uniformity of input
Measurement of productivity
Opportunity to correct quality problems before delivery
Patentable Table 1.3 Tangible
Not Usually Dr Felton Lean Slide 23: Operations management is also concerned with the management of service industries as well as the manufacturing of goods. Dr Felton Lean Slide 24: What does Operations Manger Do? Dr Felton Lean Slide 25: Operations Management includes:
Deciding where to locate facilities
And more . . . Scope of Operations Management Dr Felton Lean Example: Airline Company : 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. Dr Felton Lean Example: Automobile Factory : 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. Dr Felton Lean Slide 28: Responsibilities of Operations Manager Products & services Planning – Capacity – Location – – Make or buy – Layout – Projects – Scheduling Controlling/Improving – Inventory Organizing – Degree of centralization – Process selection Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments Table 1.6 Dr Felton Lean Slide 29: Why is Operations Management Important? Dr Felton Lean Reasons to Study Operations Management : Reasons to Study Operations Management 50% or more of the jobs in industry are operations management-related:
Operations Management activities are at the core of all business organizations.
All Other Functional Areas are interrelated with Operations Management Dr Felton Lean Operations as Technical Core : Operations as Technical Core Dr Felton Lean IMPORTANCE OF OPERATIONS MANAGEMENT : IMPORTANCE OF OPERATIONS MANAGEMENT Improves productivity:
* Effective control of the conversion process of inputs into
outputs (e.g., fewer defect output, less wastage of material
inputs, effective allocation of staff, will lead to more output
per unit time).
** Higher productivity leads to higher profits – How?
Improves our ability to meet customer needs:
* Ensure provision of high quality products and services at
reasonable prices (not just cheap output)
* Enables us to provide service to our target customers better
than our competitors
* Meeting customer needs is crucial to long term survival of
the firm – Why? Dr Felton Lean IMPORTANCE OF OPERATIONS MANAGEMENT : IMPORTANCE OF OPERATIONS MANAGEMENT Central to the building of a brand name/reputation of the company/firm, as a competitive weapon:
* High-quality product/service provider
* Low cost/good value producer/service provider (e.g.,
Woolworths, Sony & Panasonic)
* Fast delivery or response/lead time (e.g., Hong Kong –
for 2 hrs suit tailoring
Improves the living standards of citizens and wealth of nations:
* Has impact on GDP per capital – high output per unit
* High-value added vs. skills needed to manufacture Dr Felton Lean Slide 34: The Overlapping of Three Major Functions Figure 1.5 Budgeting
Economic analysis of investment proposals
Provision of funds
Financial indicators Competitor
Trend of technology
Judgment of manufacturability
Fulfillment lead time Dr Felton Lean OPERATIONAL-BASED COMPETITIVE ADVANTAGE : OPERATIONAL-BASED COMPETITIVE ADVANTAGE Operational based competitive advantage can be achieved by:
* Doing things right the first time - Quality advantage;
- defect free output, lower costs, improved competitiveness, can even lead to higher prices (e.g., Sony, Toyota, etc).
* Doing things cost effectively - Cost advantage;
- cost efficiency leads to price competitiveness and decent
- Lack of cost competitiveness can lead to large-scale
* Do things fast: Speed advantage; can lose sales if slow
- Reputation for speed is important Dr Felton Lean OPERATIONAL-BASED COMPETITIVE ADVANTAGE : OPERATIONAL-BASED COMPETITIVE ADVANTAGE * Change things quickly: Adaptability-advantage (ability to
change from making Tea, Coffee, etc)
- Change operations to meet customer demand for variety
- SME Furniture manufacturer (beds, chairs, tables, sofa)
* Do things right every time: Reliability-advantage
- offer error-free products or services to customers EVERY
* Do things better: Service-advantage and continuous
improvement (e.g., TQM – all aspects of business important
in delivering quality service to customer). Dr Felton Lean Types of Manufacturing Processes (subset of OM Transformations). : Types of Manufacturing Processes (subset of OM Transformations). Conversion - iron ore to iron, mixtures to steel, crude oil to gas, etc.
Fabrication - blue beads to pen tops.
Assembly - parts to assemblies.
Testing - in-house or on-site testing. Dr Felton Lean Process Flow StructuresFlow of Product or Service : Process Flow StructuresFlow of Product or Service Job shop/ Unit Production
Batch/ Process Departments
Assembly Line/ Product Departments
Continuous Flow/ Process Industries Dr Felton Lean Introduction : Process selection
Deciding on the way production of goods or services will be organized
Layout of facilities
Design of work systems Introduction Dr Felton Lean Process Selection and System Design : Figure 6.1 Process Selection and System Design Dr Felton Lean Process Selection : Variety
Expected output Job Shop Batch Repetitive Continuous Process Selection Dr Felton Lean Process Types : Job shop
High volumes of standardized goods or services
Very high volumes of non-discrete goods Process Types Dr Felton Lean Product – Process Matrix : Figure 6.2 Product – Process Matrix Dr Felton Lean Product – Process Matrix : Figure 6.2 (cont’d) Product – Process Matrix Dr Felton Lean Automation : Automation: Machinery that has sensing and control devices that enables it to operate
Programmable automation Automation Dr Felton Lean Automation : Computer-aided design and manufacturing systems (CAD/CAM)
Numerically controlled (NC) machines
Flexible manufacturing systems(FMS)
Computer-integrated manufacturing (CIM) Automation Dr Felton Lean Slide 47: PROCESS FLOW CONT’D UNIT/JOB SHOP – One of a Kind, Custom Tools, Buildings, Software, Research Projects, Exclusive Restaurants
BATCH – Furniture, Clothes, Most Plastic Parts, Many Photo Shops
MASS – Autos, BIC pens, Consumer Electronics, One-Hour Photos, Fast Food Restaurants
CONTINUOUS PROCESS – Chemicals, Primary Materials, Petroleum, Lumber Dr Felton Lean INTERMITTENT & CONTINUOUS : INTERMITTENT & CONTINUOUS INTERMITTENT PROCESSES
MASS ASSEMBLY LINE
CONTINUOUS PROCESS Dr Felton Lean Slide 49: Source: Modified from Robert Hayes and Steven Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: John Wiley & Sons, 1984). p. 209. Exhibit 5.9 13 Dr Felton Lean ABOVE THE DIAGONAL : ABOVE THE DIAGONAL Flexibility/Variety is Higher
Costs are Higher
OK with low volume markets
OK when high customization is necessary
A competitor can undercut you
Risky when high volume can be stimulated through price competition Dr Felton Lean BELOW THE DIAGONAL : BELOW THE DIAGONAL Costs are lower
Automation is higher
Greater market risk – what do you do with an automated highly specialized plant when demand decreases?
Competition may match costs with greater product variety. Dr Felton Lean Service Operations : Service Operations Types of Service Operations Service Capital Intensive Labor Intensive Monitored by Unskilled Operators Automatic Operated by Skilled Operators Unskilled Labor Skilled Labor Professionals Vending machines, automated car washes Movie theaters, taxis, dry cleaners Airlines, medical testing, excavating Lawn care, janitorial, guards Appliance repair, banks, catering Doctors, lawyers, consultants Dr Felton Lean Service Operations : Service Operations Defining Services - Types of Processes Project
Continuous Process Construction,
Cereal Plant Consulting,
Fast Food Rest.
Police / Fire Svc Type Mfg. Example Service Example Dr Felton Lean Service Operations : Service Operations The Transformation Process - Services Service Primary Conversion Desired System Input Process Output College Students Knowledge Educated . Transmission People
Hospital Patient Health Care Healthy . People
Restaurant Customers Food Satisfied . Preparation Customers
Video Store Customers Fill Requests Satisfied . Customers Dr Felton Lean Production Cycle : Production Cycle Dr Felton Lean New Product Development : New Product Development Dr Felton Lean