Introduction to
Production and Operations
Management
Chapter 1
Learning Objectives
Define the term operations management
Identify the three major functional areas of
organizations and describe how they
interrelate
Compare and contrast service and
manufacturing operations
Describe the operations function and the
nature of the operations managers job
Learning Objectives
Differentiate
between design and
operation of production systems
Describe the key aspects of
operations management decision
making
Identify current trends that impact
operations management
Operations Management
Managing that part of the organization responsible for
producing goods and services
Management of systems or processes that create
goods and/or provide services
Operations
Examples
Goods Producing
Farming, mining, construction manufacturing, power
generation
Storage/Transport Warehousing, trucking, mail service, moving, taxis,
ation
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
The Organization
The Three Basic Functions
Secure Fin.
Resources
OM in the news
Productivity
Quality
E-business
Global Competition
Customer Service
Finance
Budgeting
Funding
Organization
Competitiveness?
Operations
Marketing
Producing
Assess
Customer
needs
Selling &
Promoting
Value-Added Process
The operations function involves the conversion of
inputs into outputs
Value-added = Value or price of outputs Cost of inputs
Value-Added Process
The operations function involves the
conversion of inputs into outputs
Value added
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Feedback
Control
Feedback
Feedback
Food Processor
Inputs
Processing
Outputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned vegetables
Scraps!
Hospital Process
Inputs
Processing
Outputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Examination
Surgery
Monitoring
Medication
Therapy
Healthy patients
Value-Added & Product Packages
Value-added
is the difference
between the cost of inputs and the
value or price of outputs.
Product packages are a combination
of goods and services.
Product packages can make a
company more competitive.
Goods-service Continuum
Tangible
Act
Goods
Service
Surgery, teaching
Song writing, software development
Computer repair, restaurant meal
Automobile Repair, fast food
Home remodeling, retail sales
Smart phones:
Product/Service?
Automobile assembly, steel making
Product packages = Good(s) + service(s)
Make a company more competitive- more value to customers
Production of Goods vs. Delivery of Services
Production
of goods tangible output,
production oriented
Delivery of services an act
Service job categories
Government
Wholesale/retail
Financial
services
Healthcare
Personal services
Business services
Education
Goods vs Service: Key Differences
Characteristic
Goods
Service
Customer contact
Uniformity of input
Labor content
Uniformity of output
Low
High
Low
High
High
Low
High
Low
Output
Measurement of productivity
Opportunity to correct problems
Inventory
Evaluation
Patentable
Tangible
Easy
High
Much
Easier
Usually
Intangible
Difficult
Low
Little
Difficult
Not usual
Challenges of Managing Services
Service jobs are often less structured than
manufacturing jobs
Customer contact is higher
Worker skill levels are lower
Services hire many low-skill, entry-level
workers
Employee turnover is higher
Input variability is higher
Service performance can be affected by
workers personal factors
Scope of Operations Management
Operations Management includes:
Forecasting
Capacity
planning
Scheduling
Managing
Assuring
inventories
quality
Motivating
Deciding
Supply
And
employees
where to locate facilities
chain management
more . . .
Key Decisions of Operations Managers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
Decision Making
System Design
System operation
capacity
personnel
location
inventory
arrangement of departments
product and service planning
acquisition and placement of
equipment
scheduling
project
management
quality assurance
Operations Management Decision Making
Models
Quantitative
approaches
Analysis of trade-offs
Systems approach
Establishing priorities
Ethics
Models
A model is an abstraction of reality.
Typically a simplified version
Physical (Crash tests)
Schematic (Blueprints)
Mathematical, statistical
Tradeoffs
What are the pros and cons of models?
Models Are Beneficial
Easy
to use, less expensive
Require users to organize
Increase understanding of the
problem
Enable what if questions
Consistent tool for evaluation and
standardized format
Power of mathematics
Limitations of Models
Quantitative
information may be
emphasized over qualitative
Models
may be incorrectly applied and
results misinterpreted
Nonqualified
users may not comprehend
the rules on how to use the model
Use
of models does not guarantee good
decisions
Quantitative Approaches
Linear programming
Queuing Techniques
Inventory models
Project models
Statistical models
Analysis of Trade-Offs
Decision
on the
amount of
inventory to stock
Increased
of holding
inventory
Vs.
Level
of
customer
service
cost
Customer
Cost
Systems Approach
The whole is greater than
the sum of the parts.
Suboptimization
Trends in Business
Major trends
The
Internet, e-commerce, e-business
Management
technology
Globalization
Management
of supply chains
Outsourcing
Agility
Ethical
behavior
Other Important Trends
Ethical behavior
Operations strategy
Working with fewer resources
Revenue management
Process analysis and improvement
Increased regulation and product liability
Lean production
Combination
of Mass Production (high
volume, low unit cost) and Craft Production
(variety and Flexibility)
