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1. INTRODUCTION TO OPERATIONS MANAGEMENT.pptx
- 2. Business Operations Framework Identify the Needs & Wants Produce the needs & wants Sell Marketing Operations Sales Finance
- 3. The three major functions of business organizations overlap • Marketing & Sales - focus is on selling and/or promoting the goods or services of an organization • Operations - responsible for producing the goods or providing the services. • Finance - provide information on what funds might be available (short term) and to learn what funds might be needed for new products or services (intermediate to long term)
- 4. •Operations Is responsible for producing the goods or providing the services offered by the organization. •Operations management The management of systems or processes that create goods and/or provide services. •Two types of products • GOODS - Physical items produced by business organizations. (Tangible) • SERVICES - Activities that provide some combination of time, location, form, and psychological value. (Intangible)
- 5. OPERATIONS FUNCTION The essence of the operations function is to add value during the transformation process.
- 6. •Value-added • The difference between the cost of inputs and the value or price of outputs. • Value can also be psychological,as in BRANDING. • Firms use the money generated by value-added for research and development, investment in new facilities and equipment, worker salaries, and profits. • The greater the value-added, the greater the amount of funds available for these purposes.
- 9. • Many factors affect the design and management of operations systems. Among them are the degree of involvement of customers in the process and the degree to which technology is used to produce and/or deliver a product or service.The greater the degree of customer involvement, the more challenging it can be to design and manage the operation.Technology choices can have a major impact on productivity, costs, flexibility, and quality and customer satisfaction. The goods–service continuum
- 10. •Manufacturing and service are often different in terms of what is done but quite similar in terms of how it is done. Consider these points of comparison: • Degree of customer contact • Labor content of jobs • Uniformity of inputs • Measurement of productivity • Quality assurance • Inventory • Wages • Ability to patent
- 12. •There are also many similarities between managing the production of products and managing services. Here are some of the primary factors for both: • Forecasting and capacity planning to match supply and demand • Process management • Managing variations • Monitoring and controlling costs and productivity • Supply chain management • Location planning, inventory management, quality control, and scheduling • Note that many service activities are essential in goods-producing companies.These include training, human resource management, customer service, equipment repair, procurement, and administrative services.
- 13. • The service sector and the manufacturing sector are both important to the economy. • 19% are employed in Manufacturing • 57% are employed in Services *As of 3rd quarter of 2018; Source: PSA Labor Force Survey • Two reasons why Manufacturing is hiring less: • Increase in Productivity • Maintain or even increase their output using fewer workers • Outsourcing • Obtain (goods or a service) from an outside or foreign supplier, especially in place of an internal source.
- 14. • A key aspect of operations management is Process Management. • Process - one or more actions that transform inputs into outputs. • Businesses are composed of many interrelated processes. three categories of business processes: • Upper-management processes. These govern the operation of the entire organization. Examples include organizational governance and organizational strategy. • Operational processes. These are the core processes that make up the value stream (value- chain). Examples include purchasing, production and/or service, marketing, and sales. • Supporting processes. These support the core processes. Examples include accounting, human resources, and IT (information technology). • Business processes are composed of a series of supplier–customer relationships (Supply Chain) , where every business organization, every department, and every individual operation is both a customer of the previous step in the process and a supplier to the next step in the process.
- 15. SUPPLY CHAIN A sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service
- 16. Managing a Process to Meet Demand • Ideally, the capacity of a process will be such that its output just matches demand; Excess capacity is wasteful and costly; too little capacity means dissatisfied customers and lost revenue. • Having the right capacity requires having accurate forecasts of demand, the ability to translate forecasts into capacity requirements, a process in place capable of meeting expected demand. • Process variation and demand variability can make the achievement of a match between process output and demand difficult.
- 17. ProcessVariations • Variation occurs in all business processes. It can be due to variety or variability. • Variation: how much the level of demand changes over time due to external factors. • Four basic sources of variation: • The variety of goods or services being offered. The greater the variety of goods and services, the greater the variation in production or service requirements. • Structural variation in demand. These variations, which include trends and seasonal variations, are generally predictable.They are particularly important for capacity planning. • Random variation. This natural variability is present to some extent in all processes, as well as in demand for services and products, and it cannot generally be influenced by managers. • Assignable variation. These variations are caused by defective inputs, incorrect work methods, out-of-adjustment equipment, and so on.This type of variation can be reduced or eliminated by analysis and corrective action.
- 18. ProcessVariations • Variations can be disruptive to operations and supply chain processes, interfering with optimal functioning.Variations result in: • Additional cost, • Delays and shortages, • Poor quality, • Inefficient work systems. • Two widely used metrics to deal with variations: • Mean (average) • Standard deviation • Quantifies variation around the mean
- 19. Scope of Operations Management • Operations management people are involved: • Product and service design, • Process selection, • Selection and management of technology, • Design of work systems, • Location planning, • Facilities planning, and • Quality improvement of products or services. • Interrelated activities: • Forecasting, • Capacity planning, • Scheduling, • Managing inventories, • Assuring quality, • Motivating employees, • Deciding where to locate facilities
- 20. Operations Management and Decision Making • The chief role of an operations manager is that of planner and decision maker. • What: What resources will be needed, and in what amounts? • When: When will each resource be needed?When should the work be scheduled?When should materials and other supplies be ordered?When is corrective action needed? • Where: Where will the work be done? • How: How will the product or service be designed? How will the work be done (organization, methods, equipment)? How will resources be allocated? • Who: Who will do the work?
- 21. Operations Management and Decision Making • Approaches to Decision Making includes the use of: • Models • Quantitative methods • Analysis of trade-offs • Establishing priorities • Ethics • Systems approach
- 22. Operations Management and Decision Making • Models are often a key tool used by all decision makers. • Model is an abstraction of reality, a simplified representation of something. • Examples of models include formulas, graphs and charts; balance sheets and income statements; and financial ratios • Models are sometimes classified: • Physical - look like their real-life counterparts (scale-model) • Schematic - more abstract than their physical counterparts (graphs and charts, blueprints) • Mathematical - do not look at all like their real-life counterparts (numbers, formulas, and symbols)
- 23. Operations Management and Decision Making • Models are beneficial because they: • Are generally easy to use and less expensive than dealing directly with the actual situation. • Require users to organize and sometimes quantify information and, in the process, often indicate areas where additional information is needed. • Increase understanding of the problem. • Enable managers to analyze what-if questions. • Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem. • Enable users to bring the power of mathematics to bear on a problem.
- 24. Operations Management and Decision Making • Three important limitations of Models: • Quantitative information may be emphasized at the expense of qualitative information. • Models may be incorrectly applied and the results misinterpreted. • The widespread use of computerized models adds to this risk because highly sophisticated models may be placed in the hands of users who are not sufficiently knowledgeable to appreciate the subtleties of a particular model; thus, they are unable to fully comprehend the circumstances under which the model can be successfully employed. • The use of models does not guarantee good decisions.
- 25. Operations Management and Decision Making • Quantitative approaches to problem solving often embody an attempt to obtain mathematically optimal solutions to managerial problems. • managers typically use a combination of qualitative and quantitative approaches. • Managers use Performance Metrics to manage and control operations. • Performance metrics in use, including those related to profits, costs, quality, productivity, flexibility, assets, inventories, schedules, and forecast accuracy. • Operations personnel frequently encounter decisions that can be described as trade-off decisions. • Trade-off exists when an organization cannot perform simultaneously on two performance dimensions
- 26. Operations Management and Decision Making • A major influence on the entire organization is the degree of customization of products or services being offered to its customers. • Providing highly customized products or services tends to be more labor intensive than providing standardized products • The systems approach emphasizes interrelationships among subsystems, but its main theme is that the whole is greater than the sum of its individual parts. • A systems viewpoint is almost always beneficial in decision making.Think of it as a “big picture” view. • system can be defined as a set of interrelated parts that must work together.
- 27. Evolution of Operations Management
- 28. Evolution of Operations Management •OperationsToday • E-commerce Consumer-to business transactions. Uses electronic technology to facilitate business transactions. • Six Sigma A process for reducing costs, improving quality, and increasing customer satisfaction. • Agility The ability of an organization to respond quickly to demands or opportunities. • Lean system Systems that uses minimal amounts of resources to produce a high volume of high-quality goods with some variety.