2. OM Defined
Operations management:
The business function responsible for
planning, coordinating, and controlling
the resources needed to produce a
company’s products and services
6. Transformation Process
Physical: as in manufacturing operations
Locational: as in transportation operations
Exchange: as in retail operations
Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication
7. Service - Manufacturing
Services:
• Intangible product
• No inventories
• High customer
contact
• Short response time
• Labor intensive
Manufacturing:
• Tangible product
• Can be inventoried
• Low customer
contact
• Capital intensive
• Long response time
10. OM Decisions
• Strategic decisions:
– Decisions that set the direction for the
entire company.
– Broad in scope & long-term in nature
• Tactical decisions:
– Short-term & specific in nature
– Bound by the strategic decisions
11. The Critical Decisions
• Quality management
– Who is responsible for quality?
– How do we define quality?
• Service and product design
– What product or service should we offer?
– How should we design these products and
services?
12. The Critical Decisions - Continued
• Process and capacity design
– What processes will these products require
and in what order?
– What equipment and technology is
necessary for these processes?
• Location
– Where should we put the facility
– On what criteria should we base this
location decision?
13. The Critical Decisions - Continued
• Layout design
– How should we arrange the facility?
– How large a facility is required?
• Human resources and job design
– How do we provide a reasonable work
environment?
– How much can we expect our employees
to produce?
14. The Critical Decisions - Continued
• Supply chain management
– Should we make or buy this item?
– Who are our good suppliers and how many
should we have?
• Inventory, material requirements
planning,
– How much inventory of each item should
we have?
– When do we re-order?
16. Major Historical Developments
Industrial Revolution
Scientific Management
Human Relations Movement
Management Science
Computer Age
Just-In-Time Systems
Total Quality Management (TQM)
Reengineering
Flexibility
Time-based Competition
Supply Chain Management
Global Competition
Environmental Issues
Electronic Commerce
Late 1700s
Early 1900s
1930s to 1960s
Mid-1900s
1970s
1980s
1980s
1980s
1990s
1990s
1990s
1990s
1990s
Late 1990s – Early 21st Century
17. Industrial Revolution
Late 1700s
• Replaced traditional craft methods
• Substituted machine power for labor
• Major contributions:
– James Watt (1764): steam engine
– Adam Smith (1776): division of labor
– Eli Whitney (1790): interchangeable parts
18. Scientific Management
Early 1900s
• Separated ‘planning’ from ‘doing’
• Management’s job was to discover
worker’s physical limits through
measurement, analysis & observation
• Major contributors:
– Fredrick Taylor: stopwatch time studies
– Henry Ford: moving assembly line
19. Human Relations Movement
1930s to 1960s
• Recognition that factors other than
money contribute to worker productivity
• Major contributions:
– Understanding of the Hawthorn effect:
Study of Western Electric plant in Hawthorn, Illinois intended
to study impact of environmental factors (light & heat) on
productivity, but found workers responded to management’s
attention regardless of environmental changes
– Job enlargement
– Job enrichment
20. Management Science
Mid-1900s
• Developed new quantitative techniques
for common OM problems:
– Major contributions include: inventory
modeling, linear programming, project
management, forecasting, statistical
sampling, & quality control techniques
21. Computer Age
1970s
• Provided the tool necessary to support the
widespread use of Management Science’s
quantitative techniques – the ability to
process huge amounts of data quickly &
relatively cheaply
• Major contributions include the development
of Material Requirements Planning (MRP)
systems for production control
22. Developments: 1980s
Japanese Influence
• Just-In-Time (JIT):
– Techniques designed to achieve high-volume
production using coordinated material flows,
continuous improvement, & elimination of waste
• Total Quality Management (TQM):
– Techniques designed to achieve high levels of
product quality through shared responsibility & by
eliminating the root causes of product defects
• Business Process Reengineering:
– ‘Clean sheet’ redesign of work processes to
increase efficiency, improve quality & reduce costs
23. Developments: 1990s
• Flexibility:
– Offer a greater variety of product choices on a
mass scale (mass customization)
• Time-based competition:
– Developing new product designs & delivering
customer orders more quickly than competitors
• Supply Chain Management
– Cooperating with suppliers & customers to reduce
overall costs of the supply chain & increase
responsiveness to customers
24. Developments: 1990s
• Global competition:
– International trade agreements open new markets for
expansion & lower barriers to the entry of foreign
competitors (e.g.: NAFTA & GATT)
– Creates the need for decision-making tools for facility
location, compliance with with local regulations,
tailoring product offerings to local tastes, managing
distribution networks, …
• Environmental issues:
– Pressure from consumers & regulators to reduce, reuse
& recycle solid wastes & discharges to air & water
25. Electronic Commerce
• Internet & related technologies enable new
methods of business transactions:
– E-tailing creates a new outlet for retail goods &
services with global access and 24-7 availability
– Internet provides a cheap network for coordinating
supply chain management information
• Developing influence of broadband & wireless
26. Trends in Business
• Major trends
– The Internet, e-commerce, e-business
– Management technology
– Globalization
– Management of supply chains
– Outsourcing
– Agility
– Ethical behavior
1-26
27. Management Technology
• Technology: The application of scientific
discoveries to the development and
improvement of goods and services
• Product and service technology
• Process technology
• Information technology
1-27
28. Simple Product Supply Chain
Suppliers’
Suppliers
Direct
Suppliers
Producer
Distributor
Final
Consumer
Supply Chain: A sequence of activities
And organizations involved in producing
And delivering a good or service
1-28
29. Other Important Trends
•
•
•
•
•
Working with fewer resources
Revenue management
Process analysis and improvement
Increased regulation and product liability
Lean production
1-29
Hinweis der Redaktion
This is the typical breakdown one finds in many business courses. It may be helpful to the students if you discuss each of these elements in relationship to something you or they have done. Work on a group project, for example, can provide a useful vehicle for the discussion.
Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.