Adeyl Khan, Faculty, BBA, NSU Why some companies succeed While others fail Walmart Vs. Sears/JC Penny Boeing missed production deadline …

Adeyl Khan, Faculty, BBA, NSU

Why some companies succeed While others fail

Walmart Vs. Sears/JC PennyBoeing missed production deadline …

Adeyl Khan, Faculty, BBA, NSU

Operations ManagementManaging that part of the organization

responsible for producing goods and services

Management of systems or processes that create goods and/or provide services

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Adeyl Khan, Faculty, BBA, NSU

An OrganizationThe Three Basic Functions

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Figure 1.1

What is producing?

Adeyl Khan, Faculty, BBA, NSU 1-4

Value-Added ProcessValue-Added Process

The operations function involves the conversion of inputs into outputs

Inputs * Land * Labor* Capital

Transformation/Conversion

process

Outputs Goods

Services

Control(Measurement)

Feedback

FeedbackFeedback

Value added

Figure 1.2

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Food ProcessorFood ProcessorTable 1.2

Inputs Processing Outputs

Raw Vegetables Metal SheetsWaterEnergyLaborBuildingEquipment

CleaningMaking cansCuttingCookingPackingLabeling

Canned vegetablesScraps!

What about services?

Value-added = Value or price of outputs – Cost of inputs

Adeyl Khan, Faculty, BBA, NSU 1-6

Manufacturing or Service?Manufacturing or Service?

Tangible Act

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Automobile assembly, steel making

Home remodeling, retail sales

Automobile Repair, fast food

Goods-service ContinuumGoods-service ContinuumFigure 1.3

Computer repair, restaurant meal

Song writing, software development

Goods Service

Surgery, teaching

Grameen Cell phone

Product/Service?

Adeyl Khan, Faculty, BBA, NSU 1-8

Hospital ProcessHospital ProcessTable 1.2

Inputs Processing Outputs

Doctors, nursesHospitalMedical SuppliesEquipmentLaboratories

ExaminationSurgeryMonitoringMedicationTherapy

Healthy patients

Product packages = Good(s) + service(s)Added Value

Adeyl Khan, Faculty, BBA, NSU

Production of Goods vs. Delivery of ServicesProduction of goods

Tangible output Production oriented

Delivery of services An act

Yet operations are similar!

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Adeyl Khan, Faculty, BBA, NSU

Goods vs ServiceCharacteristic 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

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Example!

Adeyl Khan, Faculty, BBA, NSU

Scope of Operations ManagementForecastingCapacity planningSchedulingManaging inventoriesAssuring qualityMotivating & Training employeesDeciding where to locate facilitiesSupply chain management

And more . . .

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Example!

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Types of OperationsTypes of OperationsTable 1.4

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

Adeyl Khan, Faculty, BBA, NSU

Decline in Manufacturing Jobs in US!Increase of Service JobsProductivity

Increasing productivity allows companies to maintain or increase their output using fewer workers

Outsourcing Some manufacturing work has been

outsourced to more productive companies

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Bangladesh!

Adeyl Khan, Faculty, BBA, NSU

Manufacturing MattersMore than half of the total R&D performed

is in the manufacturing industriesWhen a California manufacturing job is

lost, an average of 2.5 service jobs are lostAccounts for most exports

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What aboutOutsourcing

Adeyl Khan, Faculty, BBA, NSU

Managing Services is ChallengingService jobs are often less structured than

manufacturing jobsCustomer contact is higherServices hire many low-skill, entry-level

workers Employee turnover is higher

Input variability is higherService performance can be affected by

worker’s personal factors

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Adeyl Khan, Faculty, BBA, NSU

Operations Management Planning and Decision Making

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Adeyl Khan, Faculty, BBA, NSU

Decision Making of an O. Manager

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Adeyl Khan, Faculty, BBA, NSU

Approaches (Make Informed Decision)1- Models2- Quantitative approaches3- Analysis of trade-offs4- Systems approach5- Establishing prioritiesEthics

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Adeyl Khan, Faculty, BBA, NSU

A model is

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Adeyl Khan, Faculty, BBA, NSU

1- ModelsAn abstraction of reality.A simplified version (typically)

Physical ~ Crash test Schematic ~ Blueprints Mathematical ~ Statistical

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Tradeoffs

Models are not perfectPros and cons of models

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Adeyl Khan, Faculty, BBA, NSU

2- Quantitative ApproachesLinear programmingQueuing TechniquesInventory modelsProject modelsStatistical models

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Vs.Qualitative Approache

s

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3- Analysis of Trade-OffsDecision on the amount of inventory to

stock

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Systems Approach“The whole is greater than the sum of the parts.”

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SuboptimizationSuboptimization

Adeyl Khan, Faculty, BBA, NSU

5- Establishing prioritiesPareto Phenomenon• A few factors account for a high

percentage of the occurrence of some event(s).

• 80/20 Rule - 80% of problems are caused by 20% of the activities.

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How do we identify the vital few?

Adeyl Khan, Faculty, BBA, NSU

Ethical IssuesConsider how a decision will affect

Shareholders ~ Financial statements Management Employees ~ Worker safety, Hiring/firing

workers, Worker’s rights Customer ~ Quality, Product safety Community ~ Closing facilities Environment ~ Product safety

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Business Operations OverlapBusiness Operations OverlapFigure 1.5

Operations

FinanceMarketing

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Operations Interfaces

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Public Relations

Accounting

Production

Operations

Marketing

Personnel

Purchasing

Distribution

MIS

Legal

Lead time

Adeyl Khan, Faculty, BBA, NSU

Historical Evolution of Operations ManagementIndustrial revolution (1770’s)

End of craft production Introduction of Machine Power

Scientific management (1911) & Ford Model T Mass production Interchangeable parts Division of labor

Human relations movement (1920-60)~ HawthorneDecision models (1915, 1960-70’s)~ IM Models,

SPCInfluence of Japanese manufacturers (After WWII)

Quality revolution

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Table 1.7

Adeyl Khan, Faculty, BBA, NSU

Trends in Business impacting OM The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility Ethical behavior Operations strategy Working with fewer resources Revenue management Process analysis and improvement Increased regulation and product liability Lean production

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Adeyl Khan, Faculty, BBA, NSU

Discussion & Review Questions (P26-27)No. 4,5,7,10,15

Wegmans Food market (P30-32)Answer Q. No. 2

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Suppliers’ Suppliers

DirectSuppliers Producer Distributor Final

Consumer

Simple Product Supply ChainSimple Product Supply ChainFigure 1.7

Supply Chain: A sequence of activitiesAnd organizations involved in producingAnd delivering a good or service

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Stage of Production Value Added

Value of Product

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 BreadA Supply Chain for Bread

Adeyl Khan, Faculty, BBA, NSU

Learning ObjectivesDefine the term operations managementIdentify 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 manager’s job

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Adeyl Khan, Faculty, BBA, NSU

Learning ObjectivesDifferentiate between design and operation

of production systemsDescribe the key aspects of operations

management decision makingBriefly describe the historical evolution of

operations managementIdentify current trends that impact

operations management

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