Chapter 1- Introduction to Operations Management PDF

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HST 400- Chapter 1 Notes (Page 1-21) Introduction to Operations Management Operations Management- the management of processes that create goods and/or provide services Process- a sequence of activities, usually performed by more than one person, which uses resources and achieves a desired result (Core, Managerial, Support) Example- Airline (Service) Core Processes- include taking customer reservations, communication with customers check and boarding, inflight service, and baggage handling Support Processes- employee recruitment and training, buying and maintaining aircraft, buying fuel and spare parts Managerial Processes- including forecasting travel demand, capacity and flight planning, location maintenance facilities ect

A Good- a tangible item Service- an act or work for someone (a customer or client) Efficiency- operating at a minimum cost and time Effectiveness- achieving the intended goals Why Study Operations Management? 1. A large percentage of a company’s expenses occur in the operations area (purchasing materials, paying workforce salaries), more efficient operations can result in large increases in profit 2. A number of management jobs are in operations management- including jobs in purchasing, quality assurance, production planning and control, scheduling, logistics, inventory management and many more 3. Activities in all the other areas of organizations, such as finance, accounting, HR, management information systems, and marketing- are all interrelated with OM 4. Operations innovations lead to marketplace and strategic benefits Functions Within Organizations 

Organizations are formed to pursue goals that are achieved more efficiently and effectively by the concerted efforts of a group of people rather than by individuals working alone

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Structures into departments or functions Orgs are devoted to producing goods and/or providing services May be for-profit or non-profit Their goals, design, management and outputs(goods/services) may be similar or different A typical organization has 3 basic functions: operations, finance and marketing

Operations   

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The operations function, representing manufacturing/service process, manages all the activities directly related to producing goods or providing services The production of goods or services involved transforming. converting inputs into finishes goods or services The production process must be an adaptive system- to ensure that the desired outputs are obtained, measurements should be taken at a various points (feedback_ and then compared with previous establishes standards to determine whether corrective action is needed (control) The essence of the operations function is too add value during the transformation process

Value added- is the term used to describe the difference between the cost of inputs and the value or price of outputs Nonprofits- the value of outputs is their value to society; the greater the value added, the greater the efficiency of these operations For- profit- the value of outputs is measure by the prices that customers are willing to pay for those goods or services  

Companies use the money generated by value added for R+D, investment in new facilities and equipment, workers’ salaries, and owners profits. One way that orgs attempt to become more productive is to critically examine whether any of their activities adds value- those that do not add value are wasteful o Eliminating or improving such wastes decreases the costs of inputs or transformation, thereby increasing the value added o Ex. Producing an item earlier than delivery date, need to pay for storage. Reducing storage time would reduce transformation cost. This concept is called just in time

Finance  

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Function secures funds at favorable terms and allocates those funds throughout the organization Finance and OM personnel cooperate by exchanging information and expertise in actives such as: o Provision of funds- the necessary funding of operations and the amount and timing of funding can be important and even critical when funds are tight- careful planning can help avoid cash flow problems o Economic analysis of capital investment proposals- evaluation of alternative investments in plant and equipment requires inputs from both operations and finance people

Marketing  

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Includes sales, is responsible for receiving customer wants/needs and feedback, and for communication them to operations and to produce design (usually engineers) Operations uses forecast demand/sales to purchase material and schedule production, while product design people use the information to improve the quality of current goods and services, and to design new ones Marketing/sales, product design. And operations must work closely together to successfully implement produce design changes and to design changes and to develop and produce new products

Lead time- the time between placement of an order and the shipment of the completed order to the customer Other Functions 

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Management Accounting- supplies management with information on costs of labour, materials and overhead, and provides reports on items such as scrap, downtime and inventories o Financial accounting deals with accounts payable and receivable and gathers the information needed for financial statements Management information systems- concerned with providing management with the information it needs to manage effectively. This occurs through computer and communication systems that capture relevant info and prepare results Purchasing- has responsibility for procurement of materials, supplies, equipment and services. Personnel/HR- department is concerned with recruitment and training of personnel, labour relations, contract negotiations, wage and salary administration and ensuring H+S of employees Manufacturing Engineering- responsible for the machines and equipment needed in the producing process Maintenance- responsible for the upkeep and repair of equipment, buildings and groups Product Design- manufacturing companies is done by design engineers but in other companies it could be done by people such as architects Logistics- involves the transportation of raw material to the plant

The Scope of Operations Management    

A primary functions of operations management is decision making o Certain decision affect the design of the systems, and others are planning/control Design decisions are usually strategic and long-term, whereas planning decisions are tactical and medium-term and control decisions are short term Design involves produce, productions process, capacity, facility location, layout, buying equipment, and work/job OM is more involved in day-to-day operation decisions and planning than design

Differentiation Production of Goods and Services

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Production of goods results in a tangible output, such as automobile- anything that we can see or touch Production industries include manufacturing, construction, agriculture, forestry, fisheries, mining, and oil and gas Services, imply acts- majority fall into these categories: government services, wholesale/retail, finance and insurance, real estate rental and leasing, healthcare, professional services, personal services ect. Production of goods and performance services are often similar in many design and planning/control decisions. They differ in: o Customer contact, use of inventories, and demand variability o Uniformity of inputs o Labour content of jobs o Uniformity of outputs o Measurement of productivity o Quality assurance

The Operations Managers Job  

OM manger has the ultimate responsibility for the creation of goods and performance of services OM oversee vary tremendously from organization to organization, largely because of the different goods or services produced

Operations Managers and Decision Making 

The OM exerts considerable influence over the degree to which the goals and objective o the organization are realized

Model- an abstraction of reality, a simplified representation of something o Physical (ionic), mathematics (symbolic), statistical. o Models ignore the unimportant details so that attention can be concentrated on the most important aspects of a problem, this increasing the opportunity to understand a problem and find its solution Quantitative Techniques- are methods that focus an objective measurements and analysis of numbers in order to draw conclusions- they include deterministic and statistical. Examples o Optimization- a popular technique is linear programming, which is widely used for optimal allocation of scarce resources o Queuing techniques- for analyzing situation in which waiting lines form o Inventory techniques- to control inventories o Project scheduling technique- for planning, coordinating and controlling large scale projects o Forecasting techniques- to forecast demand o Statistical Techniques- for quality control Heuristic- a quick way to find a good solution

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Trade Off- is a balance achieved between two incompatible features- a compromise o Ex. Deciding on the amount of inventory to stock, the manager may take into account the tradeoff between the increased level of customer services that the additional inventory would yield and the increases cost of holding that inventory in storage System- is a set of interrelated parts that must work together Pareto Phenomenon- a few factors account for a high percentage of results achieved Ethics- are moral principles that govern a person’s behavior 

Work safety, Product safety, The environment, Closing facilities

The Historical Evolutions of Operation Management Craft Production- highly skilled workers using simple, flexible tools to produce small quantities of customized goods 

Major shortcomings- production was slow and costly, when parts failed, the replacements also had to be custom made, which was also slow and costly- production costs did not decrease as volume increased

Economies of scale- the economic conditions that favor larger plants and machines/equipment by causing minimum average unit cost to decease as size increases Scientific Management- applying science to observe, measure, analyze, and improve work methods including the use of economic incentives Moving assembly line- a type of assembly line in which the product is pulled alone the line at a fixed speed while the workers assemble its parts Mass Production- system in which lower- skilled workers use specialized machinery to produce high volumes of standardized goods Business Analytics- software used to build analysis models and simulations to create scenarios, understand realities and predict future states

Major Trends 1. The internet and Ecommerce 2. Technology 3. Globalization-worldwide movement toward economic, financial, trade and operations integration 4. Supply chains 5. Sustainability

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