Key Topics Define Operations Management Give examples (Inputs – Processes – Outputs) Service operations vs. goods production Current Challenges in Operations.

Key Topics

Define Operations Management Give examples (Inputs – Processes – Outputs) Service operations vs. goods production Current Challenges in Operations Management Quality attributes for services and products Total quality management tools What is supply chain management

OperationsManagement

Finance

Marketing

InformationSystems Accounting

DemandForecasting

Systems

ProductDesign

Distribution

InventoryManagement Investment

AnalysisTechnologyManagement

BusinessStrategy

CashFlow

Quality

CustomerSatisfaction

FacilityDesign

ProductCosting

NetworkingTelecommunications

ProductManagement

Valuation

ProductPricing

Planning &Control

Advertising

Budgeting

SalesManagement

JIT

MarketResearch

RiskManagement

The Big Picture!

Process Choice

Capacity

Organizational Behavior

Leadership

Group Dynamics/Teams

Organizational Effectiveness

Motivation

Operations Management

Production: creation of goods and services

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

Each part of the organization, not just operations, must design and operate processes and deal with quality, technology and staffing issues

Processes and Operations

Inputs• Workers• Managers• Equipment• Facilities• Materials• Services• Land• Energy

Processes and operations

5

1

2

3

4

Internal andexternal customers

Outputs• Services• Goods

Information on performance

Small Group Activity

Identify the inputs, processes, and outputs for: Saint Michael’s College Fletcher Allen Hospital Ben and Jerry’s Ice Cream

100100

8080

6060

4040

2020

Mill

ions

of W

orke

rsM

illio

ns o

f Wor

kers ServicesServices

Goods ProductionGoods Production

1984

1986

1988

1990

1992

1994

1996

1998

2000

$4,000$4,000

$3,000$3,000

$2,000$2,000

$1,000$1,000

(Bill

ions

)(B

illio

ns)

ServicesServices

Goods ProductionGoods Production

1984

1986

1988

1990

1992

1994

1996

1998

2000

Growth in the Goods and Services Sectors

Options for Increasing Contribution

Marketing Option

Finance & Accounting

Option

OM Option

Current Sales Revenue :

+50%

Finance Costs: -50%

Production Costs: -20%

Sales $100,000 $150,000 $100,000 $100,000

Cost of Goods Sold

-80,000 -120,000 -80,000 -64,000

Gross Margin

20,000 30,000 20,000 36,000

Finance Costs

-6,000 -6,000 -3,000 -6,000

Net Margin

14,000 24,000 17,000 30,000

Taxes @ 25%

-3,500 -6,000 -4,250 -7,500

Contribution 10,500 18,000 12,750 22,500

Significant Events in Operations Management

Continuum of Characteristics

More like a manufacturing organization

More like a service

organization

• Physical, durable product• Output that can be inventoried• Low customer contact• Long response time• Regional, national, or

international markets• Large facilities• Capital intensive• Quality easily measured

• Intangible, perishable product• Output that cannot be

inventoried• High customer contact• Short response time• Local markets• Small facilities• Labor intensive• Quality not easily measured

New Challenges in OM

Global focus Just-in-time Supply chain partnering

Rapid product development, alliances

Mass customization Empowered employees,

teams

FromFrom ToTo

Local or national focus Batch shipments Low bid purchasing

Lengthy product development

Standard products Job specialization

Competitive Priorities

Cost 1. Low-cost operationsQuality 2. High-performance design

3. Consistent qualityTime 4. Fast, Reliable delivery

5. On-time delivery6. New development speed

Flexibility 7. Customization8. Volume flexibility

Operating system capabilities and strengths required to serve customers and outperform competitors

Southwest Airline’s Low Cost Competitive Advantage

Small Group Activity

What makes a quality good? What makes a quality service?

Operation Reliability & durability Conformance Serviceability Appearance Perceived quality

Quality

Dimensions of Quality for Goods

Under-standing

Tangibles

Reliability

CommunicationCredibility

Security

Responsiveness

Competence

Courtesy

Access

© 1995 Corel Corp.

Service Quality Attributes

Seven Tools for TQM

Supply-Chain ManagementSupply-Chain Management

Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying service requirements.

SCM, is a strategic weapon that seeks to synchronize a firm’s functions and those of its suppliers to match the flow of materials, services, and information with customer demand

Integrated Supply Chain

Suppliers Purchasing Production Distribution Customers

Phase 1:Independent supply-chain entities

Suppliers Customers

Internal supply chainMaterials management department

ProductionPurchasing Distribution

Phase 2:Internal integration

Integrated supply chain

CustomersSuppliersInternal supply chain

Phase 3:Supply-chain integration