BA240: Operations Management Overview Manufacturing & Services Process Mapping The Role of Technology POM Software Demo Measuring Productivity Exercises.

BA240: Operations Management

OverviewManufacturing & Services

Process MappingThe Role of Technology

POM Software DemoMeasuring Productivity

Exercises

What is Operations Management?

Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.

What is a Transformation Process?

A transformation process is defined as a user of resources to transform inputs into some desired outputs.

Transformations

• Physical -- manufacturing

• Locational -- transportation

• Exchange -- retailing

• Storage -- warehousing

• Physiological -- health care

• Informational -- telecommunications

Value-AddedValue-Added

The difference between the cost of inputs and the value or price of outputs.

Inputs Land Labor Capital

Transformation/Conversion

process

Outputs Goods Services

Control

Feedback

FeedbackFeedback

Value added

OM in the Organization Chart

OperationsOperations

Plant Manager

Plant Manager

OperationsManager

OperationsManager

DirectorDirector

Manufacturing, Production control, Quality assurance, Engineering,

Purchasing, Maintenance, etc

Manufacturing, Production control, Quality assurance, Engineering,

Purchasing, Maintenance, etc

Finance Marketing

Business Operations OverlapBusiness Operations Overlap

Operations

FinanceMarketing

Responsibilities of Operations ManagementResponsibilities of Operations Management

Products & services

Planning– Capacity– Location–– Make or buy– Layout– Projects– Scheduling

Controlling/Improving– Inventory– Quality

Organizing– Degree of centralization– Process selection

Staffing– Hiring/laying off– Use of Overtime

Directing– Incentive plans– Issuance of work orders– Job assignments

– Costs– Productivity

OM Decisions

1. Product / Service Design2. Quality Management3. Process Strategy / Capacity Planning4. Location Strategies5. Layout Strategies6. Human Resources

7. Supply Chain Management8. Inventory Management9. Scheduling10. Maintenance

Core services are basic things that customers want from products they purchase.

Core Services

Core Services Performance Objectives

OperationsManagement

Flexibility

Quality

Speed

Price (or cost Reduction)

Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way

Value-Added Services

Value-Added Service Categories

OperationsManagement

Information

Problem Solving

Sales Support

Field Support

Manufacturing or Service?Manufacturing or Service?

Tangible Act

Manufacturing vs ServiceManufacturing vs Service

Characteristic Manufacturing ServiceOutput

Customer contact

Uniformity of input

Labor content

Uniformity of output

Measurement of productivity

Opportunity to correct

Tangible

Low

High

Low

High

Easy

High

Intangible

High

Low

High

Low

Difficult

Lowquality problems

High

U.S. Manufacturing vs. Service Employment

0

20

40

60

80

100

45 50 55 60 65 70 75 80 85 90 95 00

Year

Perc

ent

Year Mfg. Service45 79 2150 72 2855 72 2860 68 3265 64 3670 64 3675 58 4280 44 4685 43 5790 35 6595 32 6800 30 70

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

Productivity

• Partial measures– output/(single input)

• Multi-factor measures– output/(multiple inputs)

• Total measure– output/(total inputs)

Productivity = Outputs

Inputs

Productivity GrowthProductivity Growth

Current Period Productivity – Previous Period ProductivityPrevious Period Productivity

Productivity Growth =

Measures of ProductivityMeasures 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

Units of output per kilowatt-hourDollar value of output per kilowatt-hour

Energy Productivity

Units of output per dollar inputDollar value of output per dollar input

Capital Productivity

Units of output per machine hourmachine hour

Machine Productivity

Units of output per labor hourUnits of output per shiftValue-added per labor hour

Labor Productivity

Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures

Factors Affecting Productivity

Capital Quality

Technology Management

• Standardization

• Quality

• Use of Internet

• Computer viruses

• Searching for lost or misplaced items

• Scrap rates

• New workers

Other Factors Affecting Productivity

• Safety

• Shortage of IT workers

• Layoffs

• Labor turnover

• Design of the workspace

• Incentive plans that reward productivity

Other Factors Affecting Productivity

Bottleneck Operation

Machine #2Machine #2BottleneckOperation

BottleneckOperation

Machine #1Machine #1

Machine #3Machine #3

Machine #4Machine #4

10/hr

10/hr

10/hr

10/hr

30/hr

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