More Related Content
Similar to Introduction to Operations -PPT.ppt (20)
More from etebarkhmichale (20)
Recently uploaded (20)
Introduction to Operations -PPT.ppt
- 2. Operations Management • Operations Management is: The management of systems or processes that create goods and/or provide services • Operations Management affects: – Companies’ ability to compete – Nation’s ability to compete internationally
- 3. Why do we study OM? Some of the reasons are: a) To provide modern approaches of managing operations e.g. BPR, JIT, TQM, etc… b) Provides systematic way of thinking at organizational process c) Presents attractive career opportunities d) Its concept is widely used in managing other functions of business, etc…
- 4. The Organization The Three Basic Functions Organization Finance Operations Marketing
- 5. Value-Added Process The operations function involves the conversion of inputs into outputs Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Feedback Feedback Value added
- 6. 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.
- 7. Automobile assembly, steel making Home remodeling, retail sales Automobile Repair, fast food Goods-service Continuum Computer repair, restaurant meal Song writing, software development Goods Service Surgery, teaching
- 8. Example: Food Processor What are the inputs, processes and outputs of food processing company in order to produce a canned vegetable?
- 9. Food Processor Inputs Processing Outputs Raw Vegetables Cleaning Canned vegetables Metal Sheets Making cans Water Cutting Energy Cooking Labor Packing Building Labeling Equipment
- 10. Example: Hospital Process What are the inputs, processes and outputs of hospitalizing?
- 11. Hospital Process Inputs Processing Outputs Doctors, nurses Examination Healthy patients Hospital Surgery Medical Supplies Monitoring Equipment Medication Laboratories Therapy
- 13. Production of Goods vs. Delivery of Services • Production of goods – tangible output • Delivery of services – an act • Service job categories – Government – Wholesale/retail – Financial services – Healthcare – Personal services – Business services – Education
- 14. Goods vs Service: High or Low Characteristic Goods Service Customer contact Uniformity of input Labor content Uniformity of output Output Measurement of productivity Opportunity to correct problems Inventory Evaluation Patentable
- 15. Goods vs Service Characteristic Goods Service Customer contact Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Output Tangible Intangible Measurement of productivity Easy Difficult Opportunity to correct problems High Low Inventory Much Little Evaluation Easier Difficult Patentable Usually Not usual
- 16. Operations Management includes: – Forecasting – Capacity planning – Scheduling – Managing inventories – Assuring quality – Motivating employees – Deciding where to locate facilities – Supply chain management – And more . . . Scope of Operations Management
- 17. 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
- 18. Year Mfg. Service 45 79 21 50 72 28 55 72 28 60 68 32 65 64 36 70 64 36 75 58 42 80 44 46 85 43 57 90 35 65 95 25 75 00 30 70 02 25 75 U.S. Manufacturing vs. Service Employment 0 10 20 30 40 50 60 70 80 90 45 50 55 60 65 70 75 80 85 90 95 00 02 05 Year Percent Mfg. Service
- 19. Challenges of Managing Services • Service jobs are often less structured than manufacturing jobs • Customer contact is higher • Worker skill levels are lower • Employee turnover is higher • Input variability is higher • Service performance can be affected by worker’s personal factors
- 20. Operations function and its environment The Environment of Operations • EXTERNAL ENVIRONMENT – Economic environment: Interest rate, tax regulation, inflation, etc… – Political environment: Gov’t regulations, pollution, – Competition – Technology • INTERNAL ENVIRONMENT – Finance: sources of finance, investment proposals, allocation of funds, etc.. – Accounting: cost, financial statements – Marketing: sales forecast, sales order, customer needs, feedback, etc.. – Engineering: method analysis, layout, maintenance, etc… – HR – R&D, etc
- 21. Operations Management Decision Making tools • Models • Quantitative approaches • Analysis of trade-offs • Systems approach • Establishing priorities • Ethics
- 22. 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
- 23. Decision Making System Design – capacity – location – arrangement of departments – product and service planning – acquisition and placement of equipment
- 24. Decision Making System operation – personnel – inventory – scheduling – project management – quality assurance
- 25. Models A model is an abstraction of reality. – Physical – Schematic – Mathematical What are the pros and cons of models? Tradeoffs
- 26. 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
- 27. 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
- 28. Quantitative Approaches • Linear programming • Queuing Techniques • Inventory models • Project models • Statistical models
- 29. Analysis of Trade-Offs • Decision on the amount of inventory to stock – Increased cost of holding inventory Vs. – Level of customer service
- 30. Systems Approach “The whole is greater than the sum of the parts.” Suboptimization
- 31. Establishing priorities (Pareto Rule) • 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few?
- 32. Suppliers’ Suppliers Direct Suppliers Producer Distributor Final Consumer Simple Product Supply Chain Supply Chain: A sequence of activities And organizations involved in producing And delivering a good or service
- 33. Stage of Production Value Added Valu e of Prod uct Farmer produces and harvests wheat $0.15 $0.15 Wheat transported to mill $0.08 $0.23 Mill produces flour $0.15 $0.38 Flour transported to baker $0.08 $0.46 Baker produces bread $0.54 $1.00 Bread transported to grocery store $0.08 $1.08 Grocery store displays and sells bread $0.21 $1.29 Total Value-Added $1.29 A Supply Chain for Bread
- 34. Operations Strategy and Competitiveness UNIT TWO 1-34
- 35. Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services
- 36. Businesses Compete Using Marketing • Identifying consumer wants and needs • Pricing • Advertising and promotion
- 37. Businesses Compete Using Operations • Product and service design • Cost • Location • Quality • Quick response • Flexibility • Inventory management • Supply chain management • Service and service quality • Managers and workers
- 38. Why Some Organizations Fail • Too much emphasis on short-term financial performance • Failing to take advantage of strengths and opportunities • Neglecting operations strategy • Failing to recognize competitive threats
- 39. Why Some Organizations Fail • Too much emphasis in product and service design and not enough on improvement • Neglecting investments in capital and human resources • Failing to establish good internal communications • Failing to consider customer wants and needs
- 40. Mission/Strategy/Tactics How does mission, strategies and tactics relate to decision making and distinctive competencies? Strategy Tactics Mission
- 41. Strategy • Mission – The reason for existence for an organization • Goals & Objectives – Provide detail and scope of mission • Strategies –Plans for achieving organizational goals and objectives • Tactics – The methods and actions taken to accomplish strategies
- 42. Planning and Decision Making Mission Goals Organizational Strategies Functional Goals Finance Strategies Marketing Strategies Operations Strategies Tactics Tactics Tactics Operating procedures Operating procedures Operating procedures
- 43. Strategy Example Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably. What are the mission, Goal, Strategy, Tactics, and Operations of Rita?
- 44. Strategy Example Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably • Mission: Live a good life • Goal: Successful career, good income • Strategy: Obtain a college education • Tactics: Select a college and a major • Operations: Register, buy books, take courses, study, graduate, get job
- 45. Examples of Strategies • Low cost/Price: Outsource operations to third world countries that have low labor cost • Scale-based strategies: Use capital intensive methods to achieve high output volume and low units cost • Specialization: Focus on narrow product lines to achieve higher quality • Flexible operations: Focus on quick response and/or customization • High quality: Focus on achieving higher quality than competitors • Service: Helpful courteous, reliable, etc…
- 46. Examples of Operations Strategies Banks, ATMs Convenience Location Disneyland Nordstroms Superior customer service Service Burger King Supermarkets Variety Volume Flexibility Express Mail, FedEx, One-hour photo, UPS Rapid delivery On-time delivery Time Sony TV Lexus, Cadillac Pepsi, Kodak, Motorola High-performance design or high quality Consistent quality Quality U.S. first-class postage Motel-6, Red Roof Inns Low Cost Price
- 47. Global Strategy • Strategic decisions must be made with respect to globalization • What works in one country may not work in another • Strategies must be changed to account for these differences • Other issues – Political, social, cultural, and economic differences
- 48. Strategy Formulation • Distinctive competencies • Environmental scanning • SWOT • Order qualifiers • Order winners
- 49. Strategy Formulation • Order qualifiers – Characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase • Order winners – Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition
- 50. Key External Factors • Economic conditions • Political conditions • Legal environment • Technology • Competition • Markets
- 51. Key Internal Factors • Human Resources • Facilities and equipment • Financial resources • Customers • Products and services • Technology • Suppliers
- 52. Operations Strategy • Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.
- 53. Strategic OM Decisions Decision Area Affects Product and service design Costs, quality liability and environmental Capacity Cost structure, flexibility Process selection and layout Costs, flexibility, skill level, capacity Work design Quality of work life, employee safety, productivity Location Costs, visibility Quality Ability to meet or exceed customer expectations Inventory Costs, shortages Maintenance Costs, equipment reliability, productivity Scheduling Flexibility, efficiency Supply chains Costs, quality, agility, shortages, vendor relations Projects Costs, new products, services, or operating systems
- 54. Productivity • Productivity – A measure of the effective use of resources, usually expressed as the ratio of output to input • Productivity ratios are used for – Planning workforce requirements – Scheduling equipment – Financial analysis
- 55. Productivity • Partial measures – output/(single input) • Multi-factor measures – output/(multiple inputs) • Total measure – output/(total inputs) Productivity = Outputs Inputs
- 56. Measures of Productivity Partial Output Output Output Output measures Labor Machine Capital Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure All inputs used to produce them
- 57. Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Energy Productivity Units of output per dollar input Dollar value of output per dollar input Capital Productivity Units of output per machine hour Machine Productivity Units of output per labor hour Units of output per shift Value-added per labor hour Labor Productivity Examples of Partial Productivity Measures
- 58. Example 7040 Units Produced Cost of labor of $1,000 Cost of materials: $520 Cost of overhead: $2000 What is the multifactor productivity?
- 59. Example 3 Solution MFP = Output Labor + Materials + Overhead MFP = (7040 units) $1000 + $520 + $2000 MFP = 2.0 units per dollar of input
- 60. Exercise Compute the multifactor productivity measure for each of the weeks shown. What do the productivity figures suggest? Assume 40 hour weeks and an hourly wage of $12, overhead cost is 1.5 times weekly labor cost; material cost is $6 per pound. Week Output (units) Workers Material (lbs) 1 30,000 6 450 2 33,600 7 470 3 32,200 7 460 4 35,400 8 480
- 61. Solution Week Output (units) Labor cost Overhead Cost Material Cost 1 30,000 6*40*12 = $2,880 $2,880*1.5 =$4,320 450*6 = $2,700 2 33,600 7*40*12 = $3,360 $3,360*1.5 =$5,040 470*6 = $2,820 3 32,200 7*40*12 = $3,360 $3,360*1.5 =$5,040 460*6 = $2,760 4 35,400 8*40*12 = $3,840 $3,840*1.5 =$5,760 480*6 = $2,880 Multifactor Productivity •Week 1: 30,000/(2,880+4,320+2,700) = 3.03 units/dollar •Week 2: 33,600/(3360+5,040+2,820) = 2.99 units/dollar •Week 1: 32,200/(3,360+5,040+2,760) = 2.89 units/dollar •Week 1: 35,400/(3,840+5,760+2,880) = 2.84 units/dollar
- 62. Factors Affecting Productivity Capital Quality Technology Management
- 63. Other Factors Affecting Productivity • Standardization • Quality • Use of Internet • Computer viruses • Searching for lost or misplaced items • Scrap rates • New workers
- 64. Other Factors Affecting Productivity • Safety • Shortage of IT workers • Layoffs • Labor turnover • Design of the workspace • Incentive plans that reward productivity
- 65. Outsourcing • Higher productivity in another company is a key reason organizations outsource work • Improving productivity may reduce the need for outsourcing
- 66. Improving Productivity • Develop productivity measures • Determine critical (bottleneck) operations • Develop methods for productivity improvements • Establish reasonable goals • Get management support • Measure and publicize improvements • Don’t confuse productivity with efficiency