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of complex systems in the service, non- profit, manufacturing, and government sectors via the effective and efficient utilization of time, labor, money, and materials in the generation of goods and/or services.
DEFINITION
Operations Operations ManagementManagement
OverviewOverview
Operations Management plans for, and creates thecompetitive advantagescompetitive advantages that all businesses need for fueling profitable growth. As a result, OM is
the most critical of the business functions.Studying OM means studying modern planning, decision-making and management methods in all
functional areas of an organization, including strategic and tactical planning, products and services
development, product and project management, process and supply chain management, and more.
Why Study OM?Why Study OM?
MARKETINGMARKETING
FINANCEFINANCE
All firms market (sell) , finance (account), and produce (operate)
TheStrategic
Triad
I. Operations Management is one of the three major functions of any organization……and they are integrally related.
THESTRATEGIC
TRIAD
PRODUCTIONPRODUCTION
Why Study OM?Why Study OM?
II. Operations Management shows us how goods and services are generated. Consequently, it is the………
foundation of all business!foundation of all business!
Why Study OM?Why Study OM?
III. Operations Management shows us what
OM managers do. This enables us to learn the skills, techniques, and models needed to practice 21st century management, and to also explore the lucrative career oppor- tunities in OM.
Why Study OM?Why Study OM?
Manufacturing activity Warehousing Distribution Inventories Research and Development
Maintenance Facilities and Equipment Worker training Cost and Quality Control Planning and Scheduling
IV. Operations Management represents as much as 70% of the operating budget of most firms due to:
Why Study OM?Why Study OM?
V. Operations Management, by virtue of its huge collective budget, provides a major opportunity for the firm to improve its profitability.
In fact, OM has become the last resort for most firms that have exhausted the potential of marketing, finance, and general management.
Why Study OM?Why Study OM?
VI. About 40% of allAbout 40% of all jobs in the United States jobs in the United States are in are in Operations ManagementOperations Management. .
Exposure to the following disciplines will Exposure to the following disciplines will enhance one’s job prospects:enhance one’s job prospects:
Operations research Statistics Information systems Economics Logistics / Transportation
Integrate new technology into manufacturing and service processes.
What OM Managers DoWhat OM Managers Do
Develop, monitor, and update measures of efficiency.
Develop, monitor, and change operating plans and schedules.
Control costs and quality.
What OM Managers DoWhat OM Managers Do
Evaluate and improve the existing operating system in terms of productivity and customer responsiveness.
Translate improved operating systems into competitive ad- vantage in the marketplace.
OM Necessary SkillsOM Necessary Skills
Keen understanding of people and processes. Ability to solve problems in multi-disciplinary teams. Strong leadership/coordinating ability. Strong analytical and problem-solving skills. Strong interpersonal communication skills. Strong background in mathematics. Strong background in computer programming. Proficiency in one or more foreign languages. Graduate degree in the field or a related field.
Exciting New Trends in Exciting New Trends in OMOM
CAUSESCAUSES FUTUREFUTURE
Global FocusGlobal Focus
Just-in-TimeJust-in-TimeShipmentsShipments
Low cost, reliableglobal
communicationand transport
networks
Cost of capitalputs pressure
on the reductionof inventoryinvestment
Exciting New Trends in Exciting New Trends in OMOM
CAUSESCAUSES FUTUREFUTURE
Quality emphasisrequires thatsuppliers beengaged in
productimprovement
Shorter product lifecycles, computer-aideddesign, international
collaboration andrapid communication
Supply ChainSupply ChainPartnersPartners
Rapid ProductRapid ProductDevelopmentDevelopment
Exciting New Trends in Exciting New Trends in OMOM
CAUSESCAUSES FUTUREFUTURE
Affluence and worldwidemarkets.
Increasingly flexibleproduction processes.
Changing socio-culturemilieu.
An increasinglyknowledge and
information basedsociety.
MassMassCustomizationCustomization
EmpoweredEmpoweredEmployees,Employees,
Teams, and LeanTeams, and LeanProductionProduction
Career PossibilitiesCareer Possibilities
Business Executive Blue-Collar Supervisor Construction Manager Production Manager Operations Manager Information System Manager Materials Manager Project Manager Customer Service Mgr Defense Analyst
Purchasing Agent Inventory Analyst Cost Estimator Systems Analyst Industrial Engineer Quality Control Mgr Time & Motion Analyst Operations Scheduler Operations Planner Process Improvement Manager
Career Possibilities
In corporations, OM managers are responsible for developingnew products and services, the strategic and tactical plans,
and the execution of, and realization of the plans.
Demand for OM concentrators is particularly high in financial services, IT, manufacturing, non-profit,
government, education, and health care.
Entrepreneurs will find OM knowledge pivotal.
The advancement opportunities are superior and may leadall the way to the organization’s senior leadership.
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
1. SERVICE AND PRODUCT DESIGN
What goods or services should we offer?
How should we design these products?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
2. QUALITY MANAGEMENT
Who is responsible for quality?
How do we define the quality we want in our services and products?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
3. PROCESS AND CAPACITY DESIGN
What processes will these products require and in what order?
What equipment and technology is necessary for these processes?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
4. LOCATION
Where should we put the facility?
On what criteria should we base the location decision?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
5. LAYOUT DESIGN
How should we arrange the facility?
How large must the facility be to meet our plan?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
6. HUMAN RESOURCES & JOB DESIGN
How do we provide a reasonable work environment?
How much can we expect our employees to produce?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
7. SUPPLY CHAIN MANAGEMENT
Should we manufacture or buy a particular component or product?
Who are our good suppliers and how many should we have?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
8. INVENTORY CONTROL AND JUST-in-TIME ( JIT )
How much inventory of each item should we have?
When do we reorder or manufacture?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
9. INTERMEDIATE, SHORT-TERM, AND PROJECT SCHEDULING
Is subcontracting or outsourcing production a good idea?
Are we better off keeping people on the payroll during slowdowns?
Which job do we perform next?
The Ten Critical The Ten Critical DecisionsDecisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
10. MAINTENANCE
Who is responsible for maintenance?
When do we perform maintenance?
What are the effects of a maintenance program on productivity and efficiency?
WHY AACSB ACCREDITORS WHY AACSB ACCREDITORS STRENGTHENED OM STRENGTHENED OM
GUIDELINESGUIDELINES
“ To sustain a career in business for many years, a business graduate needs an understanding of the analytical foundations and tools that are important for managerial decision-making.”
WHY AACSB ACCREDITORS WHY AACSB ACCREDITORS STRENGTHENED OM STRENGTHENED OM
GUIDELINESGUIDELINES
“ The explosive growth of informationtechnology applications is being driven by
management science-based models such as decision analysis, scenario generation,
simulation, and optimization ”.*
* OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
WHY AACSB ACCREDITORS WHY AACSB ACCREDITORS STRENGTHENED OM STRENGTHENED OM
GUIDELINESGUIDELINES
“Since management science techniques are driving operations, supply chains, and e-commerce, they constitute a major driver of the entire economy.”
Adam Smith develops the concept Adam Smith develops the concept of of specialization of laborspecialization of labor wherein wherein the production process is broken the production process is broken
down into discrete stages allowing down into discrete stages allowing specially-designed machines or specially-designed machines or
narrowly-trained workers to performnarrowly-trained workers to perform each step with the least materialeach step with the least material
waste and the maximum productivity.waste and the maximum productivity.
19001900
A Philadelphia engineer namedA Philadelphia engineer named Frederick W. Taylor publishesFrederick W. Taylor publishes
The Principles of Scientific The Principles of Scientific Management Management , a guide to , a guide to
increasing the efficiency of increasing the efficiency of factory workers. factory workers.
His methods, known as His methods, known as Taylorism, dominate industrialTaylorism, dominate industrial work through much of the 20work through much of the 20thth
century, from automobilecentury, from automobile plants to McDonald’s.plants to McDonald’s.
19001900
Frederick Taylor believed there were natural laws governing production systems.
Once these laws were identified through experimentation and observation, the best way to perform any job or to produce any
product could be found.
He also called for separation of responsibilities between floor workers and managers.
The latter would develop processes, jobs, work methods, and select, train, plan, coordinate,
and control.
19401940
Researchers in Britain and the Researchers in Britain and the United States build mathematical United States build mathematical models of North American shippingmodels of North American shipping
lanes. Their goal: to find an optimizedlanes. Their goal: to find an optimized approach for getting convoys safely approach for getting convoys safely
past Nazi submarines.past Nazi submarines.
The result is operations research, a The result is operations research, a mathematics discipline that now runsmathematics discipline that now runs
the logistics and operations of the the logistics and operations of the modern world.modern world.
1950s1950s
W. Edwards Deming begins teaching statisticalmanagement in Japan. His thesis: MeticulousControl of Quality also leads to lower costs.
His methods contribute to startling advancesin Japanese manufacturing which later spreadthroughout the world.
1980s1980s
W. Edward Deming and J.M. Juran stressed that..
Everyone is responsible for quality… not just inspectors. Product should be made right the first time to avoid rework. Reliance on workers to make suggestions…not “experts”. Elimination of any activity or material that does not add value to the product.
1970s1970s
Manufacturing becomes Manufacturing becomes the second major the second major
functional area of business functional area of business to utilize the computer. to utilize the computer.
Applications includeApplications include machine movementmachine movement
control, equipment & control, equipment & material monitoring, material monitoring, and the continuousand the continuous
adjustment of settings adjustment of settings and flow rates.and flow rates.
Early 21Early 21stst Century Century
Database systems and all manufacturing equipmentand subsystems are integrated into a single system.In theory, this computer-integrated manufacturingsystem (CIM) would control and coordinate everyphase of production from initial customer order, tocustom-product design, inventory purchase orders,tooling requirements, production schedules, tracking,quality control monitoring, assembly of informationon productivity, profitability, and tool wear, as well as shipping and billing.
Corporate strategy dictates the individualstrategies of the firm’s three functional units: marketing, finance, and operations.
The operations functional strategyoperations functional strategy shouldidentify tasks related to the planning, de-sign, and operation of the production con-version system.
The ten critical decisionsten critical decisions of operations management developed in chapter one provide an excellent check- list for identifying the particular tasks that an opera- tions functional strategy must perform in supporting and achieving the firm’s corporate strategy.
7. INVENTORYINVENTORY - ordering policy- ordering policy - stockage levels- stockage levels - type of system- type of system
8.8. PROCESSPROCESS - scale of operation- scale of operation - choice of technology- choice of technology - in-house production- in-house production - outsourcing- outsourcing
10.10. LOCATIONLOCATION - near supplier- near supplier - near customer- near customer
The Dynamics of The Dynamics of StrategyStrategy
Strategies change over time due to two reasons: 1. changes within the organization.
2. changes in the environment.
FOR EXAMPLE, CHANGES IN TECHNOLOGY, PRODUCT, OR PROCESS AFFECT FOR EXAMPLE, CHANGES IN TECHNOLOGY, PRODUCT, OR PROCESS AFFECT A FIRM’S STRENGTHS AND WEAKNESSES, AND THEREFORE ITS STRATEGY.A FIRM’S STRENGTHS AND WEAKNESSES, AND THEREFORE ITS STRATEGY.