Chapter 1 : 0 Chapter 1 Production and Operations
An Introduction Overview : 1 Overview Introduction
Historical Milestones in POM
Factors Affecting POM Today
Different Ways of Studying POM
Wrap-Up: What World-Class Producers Do Introduction : 2 Introduction Production and operations management (POM) is the management of an organization’s production system.
A production system takes inputs and converts them into outputs.
The conversion process is the predominant activity of a production system.
The primary concern of an operations manager is the activities of the conversion process. Organizational Model : 3 Organizational Model Organization Chart-Major Elements : Organization Chart-Major Elements Entry-Level Jobs in POM : 5 Entry-Level Jobs in POM Purchasing planner/buyer
Production (or operations) supervisor
Production (or operations) scheduler/controller
Production (or operations) analyst
Quality specialist Historical Milestones in POM : 6 Historical Milestones in POM The Industrial Revolution
Post-Civil War Period
Human Relations and Behaviorism
The Service Revolution The Industrial Revolution : 7 The Industrial Revolution The industrial revolution developed in England in the 1700s.
The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories.
Adam Smith’s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor.
Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers. The Industrial Revolution : 8 The Industrial Revolution The industrial revolution spread from England to other European countries and to the United Sates.
In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.
The first great industry in the U.S. was the textile industry.
In the 1800s the development of the gasoline engine and electricity further advanced the revolution.
By the mid-1800s, the old cottage system of production had been replaced by the factory system Post-Civil War Period : 9 Post-Civil War Period During the post-Civil War period great expansion of production capacity occurred.
By post-Civil War the following developments set the stage for the great production explosion of the 20th century:
increased capital and production capacity
the expanded urban workforce
new Western U.S. markets
an effective national transportation system Scientific Management : 10 Scientific Management Frederick Taylor is known as the father of scientific management. His shop system employed these steps:
Each worker’s skill, strength, and learning ability were determined.
Stopwatch studies were conducted to precisely set standard output per worker on each task.
Material specifications, work methods, and routing sequences were used to organize the shop.
Supervisors were carefully selected and trained.
Incentive pay systems were initiated. Scientific Management : 11 Scientific Management In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific management:
standardized product designs
low manufacturing costs
mechanized assembly lines
specialization of labor
interchangeable parts Human Relationsand Behavioralism : 12 Human Relationsand Behavioralism In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production.
Researchers and managers alike were recognizing that psychological and sociological factors affected production.
From the work of behavioralists came a gradual change in the way managers thought about and treated workers. Operations Research : 13 Operations Research During World War II, enormous quantities of resources (personnel, supplies, equipment, …) had to be deployed.
Military operations research (OR) teams were formed to deal with the complexity of the deployment.
After the war, operations researchers found their way back to universities, industry, government, and consulting firms.
OR helps operations managers make decisions when problems are complex and wrong decisions are costly. The Service Revolution : 14 The Service Revolution The creation of services organizations accelerated sharply after World War II.
Today, more than two-thirds of the U.S. workforce is employed in services.
About two-thirds of U.S. GDP is from services.
There is a huge trade surplus in services.
Investment per office worker now exceeds the investment per factory worker.
Thus there is a growing need for service operations management. Today's Factors Affecting POM : 15 Today's Factors Affecting POM Global Competition
U.S. Quality, Customer Service, and Cost Challenges
Computers and Advanced Production Technology
Growth of U.S. Service Sector
Scarcity of Production Resources
Issues of Social Responsibility Different Ways to Study POM : 16 Different Ways to Study POM Production as a System
Production as an Organization Function
Decision Making in POM Production as a System : 17 Production as a System Inputs Outputs Conversion
Subsystem Production System Control
Subsystem Inputs of a Production System : 18 Inputs of a Production System External
Legal, Economic, Social, Technological
Competition, Customer Desires, Product Info.
Materials, Personnel, Capital, Utilities Conversion Subsystem : 19 Conversion Subsystem Physical (Manufacturing)
Locational Services (Transportation)
Exchange Services (Retailing)
Storage Services (Warehousing)
Other Private Services (Insurance)
Government Services (Federal, State, Local) Outputs of a Production System : 20 Outputs of a Production System Direct
Technological Advances Production as an Organization Function : 21 Production as an Organization Function U.S. companies cannot compete using marketing, finance, accounting, and engineering alone.
We focus on POM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside.
To succeed, a firm must have a strong operations function teaming with the other organization functions. Decision Making in POM : 22 Decision Making in POM Strategic Decisions
Control Decisions Strategic Decisions : 23 Strategic Decisions These decisions are of strategic importance and have long-term significance for the organization.
Examples include deciding:
the design for a new product’s production process
where to locate a new factory
whether to launch a new-product development plan Operating Decisions : 24 Operating Decisions These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.
Examples include deciding:
how much finished-goods inventory to carry
the amount of overtime to use next week
the details for purchasing raw material next month Control Decisions : 25 Control Decisions These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance.
Examples include deciding:
labor cost standards for a new product
frequency of preventive maintenance
new quality control acceptance criteria What Controls the Operations System? : 26 What Controls the Operations System? Information about the outputs, the conversions, and the inputs is fed back to management.
This information is matched with management’s expectations
When there is a difference, management must take corrective action to maintain control of the system Wrap-Up: World Class Practice : 27 Wrap-Up: World Class Practice POM important in any organization
Global competition forces rapid evolution of POM
Decision based framework focus of course
Strategic, Operating, and Control