2008 Prentice Hall, Inc. 1 – 1 Operations Management Chapter 1 – Chapter 1 – Introduction to Introduction to Operations Management Operations Management PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 7e Principles of Operations Management, 7e Operations Management, 9e Operations Management, 9e
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Chapter 1 – Chapter 1 – Introduction to Introduction to Operations ManagementOperations Management
PowerPoint presentation to accompany PowerPoint presentation to accompany Heizer/Render Heizer/Render Principles of Operations Management, 7ePrinciples of Operations Management, 7eOperations Management, 9e Operations Management, 9e
Production/operations – creates Production/operations – creates the productthe product
Finance/accounting – tracks how Finance/accounting – tracks how well the organization is doing, pays well the organization is doing, pays bills, collects the moneybills, collects the money
MarketingSales promotionAdvertisingSalesMarket research
Organizational ChartsOrganizational Charts
OperationsFacilities Construction; maintenance
Production and inventory control Scheduling; materials control
Quality assurance and controlSupply chain managementManufacturing Tooling; fabrication; assembly
Design Product development and design Detailed product specifications
Industrial engineering Efficient use of machines, space, and personnel
Process analysis Development and installation of production tools and equipment
Finance/ accountingDisbursements/ credits Receivables Payables General ledgerFunds Management Money market International exchangeCapital requirements Stock issue Bond issue and recall
OM is one of three major functions OM is one of three major functions (marketing, finance, and operations) (marketing, finance, and operations) of any organizationof any organization
We want (We want (and needand need) to know how ) to know how goods and services are producedgoods and services are produced
We want to understand what We want to understand what operations managers dooperations managers do
OM is such a costly part of an OM is such a costly part of an organizationorganization
Ten Critical DecisionsTen Critical DecisionsTen Decision AreasTen Decision Areas Chapter(s)Chapter(s)
Design of goods and servicesDesign of goods and services 55 Managing qualityManaging quality 6, Supplement 66, Supplement 6 Process and capacity Process and capacity 7, Supplement 77, Supplement 7
design design Location strategyLocation strategy 88 Layout strategyLayout strategy 99 Human resources and Human resources and 10, Supplement 1010, Supplement 10
Supply chain managementSupply chain management Should we make or buy this component?Should we make or buy this component?
Who are our suppliers and who can Who are our suppliers and who can integrate into our e-commerce program?integrate into our e-commerce program?
Inventory, material requirements Inventory, material requirements planning, and JITplanning, and JIT How much inventory of each item should How much inventory of each item should
we have?we have?
When do we re-order?When do we re-order?Table 1.2 (cont.)Table 1.2 (cont.)
In 1798, received government In 1798, received government contract to make 10,000 musketscontract to make 10,000 muskets
Showed that machine tools could Showed that machine tools could make standardized parts to exact make standardized parts to exact specificationsspecificationsMusket parts could be used in any Musket parts could be used in any
Known as ‘father of scientific Known as ‘father of scientific management’management’
In 1881, as chief engineer for In 1881, as chief engineer for Midvale Steel, studied how tasks Midvale Steel, studied how tasks were donewere doneBegan first motion and time studiesBegan first motion and time studies
Created efficiency principlesCreated efficiency principles
In 1903, created Ford Motor In 1903, created Ford Motor CompanyCompany
In 1913, first used moving assembly In 1913, first used moving assembly line to make Model Tline to make Model TUnfinished product moved by Unfinished product moved by
conveyor past work stationconveyor past work station
Paid workers very well for 1911 Paid workers very well for 1911 ($5/day!)($5/day!)
Olive Garden, Hard Rock Cafe, Olive Garden, Hard Rock Cafe, Motel 6, Hilton Hotels, Walt Motel 6, Hilton Hotels, Walt Disney, Paramount PicturesDisney, Paramount Pictures
8.58.5
Public Public AdministrationAdministration
U.S., State of Alabama, Cook U.S., State of Alabama, Cook CountyCounty
Reliable worldwide Reliable worldwide communication and communication and transportation networkstransportation networks
Global focus, Global focus, moving moving production production offshoreoffshore
Batch (large) Batch (large) shipmentsshipments
Short product life cycles Short product life cycles and cost of capital put and cost of capital put pressure on reducing pressure on reducing inventoryinventory
Just-in-time Just-in-time performanceperformance
Low-bid Low-bid purchasingpurchasing
Supply chain competition Supply chain competition requires that suppliers be requires that suppliers be engaged in a focus on the engaged in a focus on the end customerend customer
Shorter life cycles, Shorter life cycles, Internet, rapid international Internet, rapid international communication, computer-communication, computer-aided design, and aided design, and international collaborationinternational collaboration
Affluence and worldwide Affluence and worldwide markets; increasingly markets; increasingly flexible production flexible production processesprocesses
Mass Mass customization customization with added with added emphasis on emphasis on qualityquality
Job Job specializationspecialization
Changing socioculture Changing socioculture milieu; increasingly a milieu; increasingly a knowledge and information knowledge and information societysociety
Empowered Empowered employees, employees, teams, and lean teams, and lean productionproduction
Environmental issues, ISO Environmental issues, ISO 14000, increasing disposal 14000, increasing disposal costscosts
Environmentally Environmentally sensitive sensitive production, green production, green manufacturing, manufacturing, recycled recycled materials, materials, remanufacturingremanufacturing
Ethics not Ethics not at forefrontat forefront
Businesses operate more Businesses operate more openly; public and global openly; public and global review of ethics; opposition review of ethics; opposition to child labor, bribery, to child labor, bribery, pollutionpollution
High ethical High ethical standards and standards and social social responsibility responsibility expectedexpected
Productivity is the ratio of outputs (goods Productivity is the ratio of outputs (goods and services) divided by the inputs and services) divided by the inputs
(resources such as labor and capital)(resources such as labor and capital)
The objective is to improve productivity!The objective is to improve productivity!
Improving Productivity at Improving Productivity at StarbucksStarbucks
A team of 10 analysts A team of 10 analysts continually look for ways continually look for ways to shave time. Some to shave time. Some improvements:improvements:
Stop requiring signatures Stop requiring signatures on credit card purchases on credit card purchases under $25under $25
Saved 8 seconds Saved 8 seconds per transactionper transaction
Change the size of the ice Change the size of the ice scoopscoop
Saved 14 seconds Saved 14 seconds per drinkper drink
New espresso machinesNew espresso machines Saved 12 seconds Saved 12 seconds per shotper shot
Improving Productivity at Improving Productivity at StarbucksStarbucks
A team of 10 analysts A team of 10 analysts continually look for ways continually look for ways to shave time. Some to shave time. Some improvements:improvements:
Stop requiring signatures Stop requiring signatures on credit card purchases on credit card purchases under $25under $25
Saved 8 seconds Saved 8 seconds per transactionper transaction
Change the size of the ice Change the size of the ice scoopscoop
Saved 14 seconds Saved 14 seconds per drinkper drink
New espresso machinesNew espresso machines Saved 12 seconds Saved 12 seconds per shotper shot
Operations improvements have Operations improvements have helped Starbucks increase yearly helped Starbucks increase yearly revenue per outlet by $200,000 to revenue per outlet by $200,000 to $940,000 in six years.$940,000 in six years.
Productivity has improved by 27%, Productivity has improved by 27%, or about 4.5% per year.or about 4.5% per year.
QualityQuality may change while the may change while the quantity of inputs and outputs quantity of inputs and outputs remains constantremains constant
External elementsExternal elements may cause an may cause an increase or decrease in productivityincrease or decrease in productivity
Precise unitsPrecise units of measure may be of measure may be lackinglacking
Key Variables for Improved Key Variables for Improved Labor ProductivityLabor Productivity
Basic education appropriate for the Basic education appropriate for the labor forcelabor force
Diet of the labor forceDiet of the labor force
Social overhead that makes labor Social overhead that makes labor availableavailable
Maintaining and enhancing skills in the Maintaining and enhancing skills in the midst of rapidly changing technology midst of rapidly changing technology and knowledgeand knowledge
About half of the 17-year-olds in the US cannot About half of the 17-year-olds in the US cannot correctly answer questions of this typecorrectly answer questions of this type
Productivity at Taco BellProductivity at Taco Bell
Improvements:Improvements: Revised the menu Revised the menu Designed meals for easy preparationDesigned meals for easy preparation Shifted some preparation to suppliersShifted some preparation to suppliers Efficient layout and automationEfficient layout and automation Training and employee empowermentTraining and employee empowerment
Productivity at Taco BellProductivity at Taco Bell
Improvements:Improvements: Revised the menu Revised the menu Designed meals for easy preparationDesigned meals for easy preparation Shifted some preparation to suppliersShifted some preparation to suppliers Efficient layout and automationEfficient layout and automation Training and employee empowermentTraining and employee empowerment
Results:
Preparation time cut to 8 seconds Management span of control
increased from 5 to 30 In-store labor cut by 15 hours/day Stores handle twice the volume with