Introduction to operations and logistics management

OPERATIONS and LOGISTICSOPERATIONS and LOGISTICS
MANAGEMENTMANAGEMENT
 IntroductionIntroduction
 ImportanceImportance
 ScopeScope
 TrendsTrends
 CareersCareers
 Course OverviewCourse Overview
plied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro, Ph

Operations ManagementOperations Management
The competent and adept management
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

OverviewOverview
Operations Management plans for, and creates the
competitive 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)
The
Strategic
Triad
I. Operations Management is one of the three
major functions of any organization……and
they are integrally related.
THE
STRATEGIC
TRIAD
PRODUCTIONPRODUCTION

II. Operations Management shows
us how goods and services are
generated. Consequently, it is
the………
foundation of all business!foundation of all business!

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.

 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:

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.

VI. About 40% of allAbout 40% of all jobs in the United Statesjobs in the United States
are inare in Operations ManagementOperations Management..
Exposure to the following disciplines willExposure to the following disciplines will
enhance one’s job prospects:enhance one’s job prospects:
 Operations research
 Statistics
 Information systems
 Economics
 Logistics / Transportation
 Mathematics
 Accounting / Finance
 Computer science
 Engineering
 Manufacturing

What OM Managers DoWhat OM Managers Do
 Supervise skilled trade
workers & technicians.
 Manage the production
and technical operations.
 Integrate new technology
into manufacturing and
service processes.

 Develop, monitor, and
update measures of
efficiency.
 Develop, monitor, and
change operating plans
and schedules.
 Control costs and quality.

 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 OMExciting New Trends in OM
CAUSESCAUSES FUTUREFUTURE
Global FocusGlobal Focus
Just-in-TimeJust-in-Time
ShipmentsShipments
Low cost, reliable
global
communication
and transport
networks
Cost of capital
puts pressure
on the reduction
of inventory
investment

Quality emphasis
requires that
suppliers be
engaged in
product
improvement
Shorter product life
cycles, computer-aided
design, international
collaboration and
rapid communication
Supply ChainSupply Chain
PartnersPartners
Rapid ProductRapid Product
DevelopmentDevelopment

Affluence and worldwide
markets.
Increasingly flexible
production processes.
Changing socio-culture
milieu.
An increasingly
knowledge and
information based
society.
MassMass
CustomizationCustomization
EmpoweredEmpowered
Employees,Employees,
Teams, and LeanTeams, and Lean
ProductionProduction

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 developing
new 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 lead
all the way to the organization’s senior leadership.

The Ten Critical DecisionsThe Ten Critical Decisions
OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT
1. SERVICE AND PRODUCT DESIGN
 What goods or services should we offer?
 How should we design these products?

2. QUALITY MANAGEMENT
 Who is responsible for quality?
 How do we define the quality we want
in our services and products?

3. PROCESS AND CAPACITY DESIGN
 What processes will these products require
and in what order?
 What equipment and technology is necessary
for these processes?

4. LOCATION
 Where should we put the facility?
 On what criteria should we base the
location decision?

5. LAYOUT DESIGN
 How should we arrange the facility?
 How large must the facility be to meet
our plan?

6. HUMAN RESOURCES & JOB DESIGN
 How do we provide a reasonable work
environment?
 How much can we expect our employees
to produce?

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?

8. INVENTORY CONTROL AND
JUST-in-TIME ( JIT )
 How much inventory of each item should
we have?
 When do we reorder or manufacture?

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?

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 ACCREDITORSWHY AACSB ACCREDITORS
STRENGTHENED OMSTRENGTHENED 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.”

“ The explosive growth of information
technology applications is being driven by
management science-based models such as
decision analysis, scenario generation,
simulation, and optimization ”. *
* OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT

“Since management science techniques
are driving operations, supply chains,
and e-commerce, they constitute a
major driver of the entire economy.”

OPERATIONSOPERATIONS
A Brief HistoryA Brief History
pplied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro, P

17761776
Adam Smith develops the conceptAdam Smith develops the concept
ofof specialization of laborspecialization of labor whereinwherein
the production process is brokenthe production process is broken
down into discrete stages allowingdown into discrete stages allowing
specially-designed machines orspecially-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 ScientificThe Principles of Scientific
ManagementManagement , a guide to, a guide to
increasing the efficiency ofincreasing the efficiency of
factory workers.factory workers.
His methods, known asHis 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 theResearchers in Britain and the
United States build mathematicalUnited 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 safelyapproach for getting convoys safely
past Nazi submarines.past Nazi submarines.
The result is operations research, aThe result is operations research, a
mathematics discipline that now runsmathematics discipline that now runs
the logistics and operations of thethe logistics and operations of the
modern world.modern world.

1950s1950s
W. Edwards Deming begins teaching statistical
management in Japan. His thesis: Meticulous
Control of Quality also leads to lower costs.
His methods contribute to startling advances
in Japanese manufacturing which later spread
throughout 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 becomesManufacturing becomes
the second majorthe second major
functional area of businessfunctional 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 settingsadjustment of settings
and flow rates.and flow rates.

Early 21Early 21stst
CenturyCentury
Database systems and all manufacturing equipment
and subsystems are integrated into a single system.
In theory, this computer-integrated manufacturing
system (CIM) would control and coordinate every
phase of production from initial customer order, to
custom-product design, inventory purchase orders,
tooling requirements, production schedules, tracking,
quality control monitoring, assembly of information
on productivity, profitability, and tool wear, as well
as shipping and billing.

Mission / Strategy RelationshipMission / Strategy Relationship
Corporate Mission and GoalsCorporate Mission and Goals
Product and Service SelectionsProduct and Service Selections
Market Segment SelectionsMarket Segment Selections
Competitive Advantage FactorsCompetitive Advantage Factors
Policy ConstraintsPolicy Constraints
Functional StrategiesFunctional Strategies
Operations,Operations,
Marketing, FinanceMarketing, Finance
Strategy ImplementationStrategy Implementation
andand
Performance MeasurementPerformance Measurement
Corporate StrategyCorporate Strategy
External FactorsExternal Factors Internal FactorsInternal Factors
Data InputData Input
andand
FeedbackFeedback

Corporate strategy dictates the individual
strategies of the firm’s three functional
units: marketing, finance, and operations.
The operations functional strategyoperations functional strategy should
identify tasks related to the planning, de-
sign, and operation of the production con-
version system.

Operations FunctionalOperations Functional
StrategyStrategy
 It must delineate the tasks that the operations
function must do well in order to support and
achieve the corporate strategy.
 Almost any operations task can be used to sup-
port a firm’s strategy but most firms can compete
very effectively by emphasizing one or two.
 The operations functional strategy should be con-
sistent with the marketing and finance strategies,
as well.

StrategyStrategy
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.

Strategy ChecklistStrategy Checklist
1. QUALITYQUALITY
- customer expectations- customer expectations
- quality systems design- quality systems design
- quality measures and standards- quality measures and standards
2.2. PRODUCTPRODUCT
- customized- customized
- standardized- standardized

3. SUPPLY CHAINSUPPLY CHAIN
- sole or multiple vendors- sole or multiple vendors
- type of distribution system- type of distribution system
4.4. LABORLABOR
- specialized skills- specialized skills
- multiple skills- multiple skills

5. MAINTENANCEMAINTENANCE
- “as needed”- “as needed”
- preventitive- preventitive
6.6. LAYOUTLAYOUT
- assembly line- assembly line
- work cells- work cells
- project- project

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

9. SCHEDULINGSCHEDULING
- stable- stable
- variable- variable
10.10. LOCATIONLOCATION
- near supplier- near supplier
- near customer- near customer

The Dynamics ofThe 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 AFFECTFOR 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.

The Dynamics ofThe Dynamics of
StrategyStrategy
Birth Growth Maturity DeclineBirth Growth Maturity Decline
Sales + RevenuesSales + Revenues
THE PRODUCT LIFE CYCLETHE PRODUCT LIFE CYCLE

Change in Corporate & OMChange in Corporate & OM
CORPORATECORPORATE
STRATEGYSTRATEGY
STRATEGYSTRATEGY
STAGE
Birth
Growth
Maturity
Decline
INCREASE MARKET
SHARE, R+D, ENGRG
FREQUENT PRODUCT
AND PROCESS DESIGN
CHANGES, QUALITY
FOCUS, SHORT
PRODUCTION RUNS
STRENGTHEN HOLD ON
MARKET SEGMENT VIA
PRICING AND QUALITY
IMAGE
MORE PRODUCT OPTIONS
PRODUCT AND PROCESS
RELIABILITY
ENHANCE DISTRIBUTION
INCREASE CAPACITY
DEFEND MARKET SHARE
CUT COSTS
PRODUCT STANDARDIZATION
MINOR PRODUCT CHANGES
LONG PRODUCTION RUNS
INCREASE PROCESS STABILITY
COST CONTROL EVEN
MORE CRITICAL
REDUCE CAPACITY
ELIMINATE POOR PROFIT MAKES + MODELS
COST MINIMIZATION
LITTLE PRODUCT DIFFERENTIATION

INTRODUCTION TOINTRODUCTION TO
pplied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , Ppplied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , Ph

OPERATIONS and LOGISTICSOPERATIONS and LOGISTICS
EPILOGUEEPILOGUE
pplied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , P

What You Have SeenWhat You Have Seen
• Decision Theory
• Basic Simulation
• Queuing Theory
• Manufacturing Processes

• Service Processes
• Transportation Algorithm
• Line Balancing
• Work Measurement
• Time Standards

• Learning Curve
• Just-in-Time Systems
• Inventory Control
• Short-term Scheduling

• Assignment Algorithm
• Project Management
• Linear Programming

What You Have NotWhat You Have Not
SeenSeen
• Decoupling Theory
• Outsourcing / Offshoring
• Telecommunications
• Yield Management

SeenSeen
• Data Envelopment Analysis
• Data Mining
• Internet Service Design
• Environmental Management

SeenSeen
• Process Opportunities
• Experiential Blueprinting
• Sensitivity Analysis

SeenSeen
• Minimal Spanning Trees
• Maximal Flow Technique
• Shortest Route Technique
• Stochastic Inventory Control

SeenSeen
• Advanced Transportation Theory
• Reliability Theory
• Product Development / Design
• Artificial Intelligence
• Agile Manufacturing

SeenSeen
• Data Base Management
• Quality Control
• Game Theory
• Markov Processes
• Project Budgeting

SeenSeen
• Project Crashing
• Resource Leveling
• Duality
• Goal Programming
• Integer Programming

SeenSeen
• Dynamic Programming
• Optimization Theory
• Quantitative EXCEL programming

SeenSeen
• Survey Information
• Utility Theory
• Complex Simulation
• Service Systems Theory

SeenSeen
• Global Operations
• Logistics
• Supply Chain Management
• E-commerce

SeenSeen
• Maintenance & Reliability Theory
• Mathematical Modeling
• Materials Requirements Planning

SeenSeen
• Decision Support Systems ( DSS )
• Forecasting Methods and Models
• Capacitated Transhipment Models

SeenSeen
• Traveling Salesman Network
• Enterprise Resource Systems
• Ergonomics
…….and so on, and so on !

Solutions to the DilemmaSolutions to the Dilemma
APPLY YOUR
DEGREE CREDITS
TOWARD A
2nd
DEGREE
IN
ODS or MIS

 Earn an MBA or MSEarn an MBA or MS
in:in:
- Decision Sciences- Decision Sciences
- Operations Research- Operations Research
- Operations- Operations
ManagementManagement
- Logistics- Logistics
- Materials ManagementMaterials Management
- TransportationTransportation
- Management ScienceManagement Science
- Decision Support SystemsDecision Support Systems
- Industrial engineering- Industrial engineering

 Earn a certificate or certification in:
• Supply chain management
• Quality control
• Integrated resource management
• Manufacturing management
…..and many more !

Operations and LogisticsOperations and Logistics
ManagementManagement
Thank you !
Come again !
pplied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , Ppplied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , P

Introduction to operations and logistics management

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