McGraw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Chapter One

Introduction to

Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Operations Management

Organization

Finance Operations Marketing

The management of systems or processes that create goods and/or provide services

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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• Operations Management includes:– Forecasting– Capacity planning– Scheduling– Managing inventories– Assuring quality– Motivating employees– And more . . .

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Business Operations Overlap

Marketing

Operations

Finance

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Steel productionAutomobile fabrication

House buildingRoad construction

DressmakingFarming

Auto RepairAppliance repair

Maid ServiceManual car wash

TeachingLawn mowing

Low service contentHigh goods content

High service contentLow goods content

Increasinggoods content

Increasingservice content

Goods-service continuumIntroduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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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

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Types of Operations

Operations Examples

Goods Producing Farming, mining, construction,manufacturing, power generation

Storage/Transportation Warehousing, trucking, mailservice, moving, taxis, buses,hotels, airlines

Exchange Retailing, wholesaling, banking,renting, leasing, library, loans

Entertainment Films, radio and television,concerts, recording

Communication Newspapers, radio and televisionnewscasts, telephone, satellites

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Value-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

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned vegetablesMetal Sheets Making cans

Water CuttingEnergy CookingLabor PackingBuilding LabelingEquipment

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy patientsHospital Surgery

Medical Supplies MonitoringEquipment MedicationLaboratories Therapy

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Operations Interfaces

Public Relations

Accounting

IndustrialEngineering

Operations

Maintenance

PersonnelPurchasing

Distribution

MIS

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Decision Making

System Design– capacity– location– arrangement of departments– product and service planning– acquisition and placement of

equipment

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Decision Making

System operation– personnel– inventory– scheduling– project

management– quality assurance

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Manufacturing or Service?

Tangible Act

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Key Differences

• Customer contact

• Uniformity of input

• Labor content

• Uniformity of output

• Measurement of productivity

• Quality assurance

These differences are beginning to fadein many cases

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Manufacturing vs Service

CharacteristicOutput

Customer contact

Uniformity of input

Labor content

Uniformity of output

Measurement of productivity

Opportunity to correct

ManufacturingTangible

Low

High

Low

High

Easy

High

ServiceIntangible

High

Low

High

Low

Difficult

Lowquality problems

High

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Responsibilities of Operations Management

Products & services

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

Controlling– Inventory– Quality

Organizing– Degree of centralization– Subcontracting

Staffing– Hiring/laying off– Use of Overtime

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

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Models

A model is an abstraction of reality.

– Physical– Schematic– Mathematical

What are the pros and cons of models?

Tradeoffs

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Systems Approach

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

SuboptimizationSuboptimization

Introduction to Operations Management

McGraw-Hill/IrwinOperations Management, Seventh Edition, by William J. StevensonCopyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

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Quantitative Approaches

• Linear programming

• Queuing Techniques

• Inventory models

• Project models

• Statistical models

Introduction to Operations Management