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Introduction toOperations Management
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Operations Management

• What is operations?
• The part of a business organization that is
  responsible for producing goods or services
• How can we define operations management?
• The management of systems or processes that
  create goods and/or provide services

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Supply Demand
Operations Supply Chains
Sales Marketing
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Basic Functions of the Business Organization
The management of systems or processes that
create goods and/or provide services
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Supply Chain
Supply Chain a sequence of activities and
organizations involved in producing and
delivering a good or service
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The Transformation Process --OM Model
Feedback measurements taken at various points
in the transformation process
Control The comparison of feedback against
previously established standards to determine if
corrective action is needed.
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Food Processor
Table 1.2
Outputs
Inputs
Processing
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Hospital Process
Table 1.2
Inputs
Processing
Outputs
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Goods-service Continuum
Products are typically neither purely service- or
purely goods-based.
Goods Services
Surgery, Teaching
Songwriting, Software Development
Computer Repair, Restaurant Meal
Home Remodeling, Retail Sales
Automobile Assembly, Steelmaking
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How is the service industry doing?
High-paying service jobs Information, Financial,
Health, Education, Professional and Business
Services

• These high-paying service jobs accounted for 56
  of the service job growth since 1990!
• In 2006 they accounted for 41 of jobs.
• Compensation in these jobs grew four times
  faster than in service industry overall

High-paying
Total
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U.S. Trade Flows (exports imports of goods and
services) as of GDP
Recessions in yellow
More trade is associated with economic expansion
Trade expanded 3 times faster than GDP, by a
factor of 150(!) since 1950
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Does the trade deficit cause unemployment?
Most of the expansion in the trade deficit
occurred during the roaring 1990s!
Unemployment drops
Since 2000
Trade deficit expands
Before 2000
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U.S. manufacturing output hurt by imports?
Manufacturing output expands despite imports
Since 2000 Both recovering
1990s Surge in imports and manufacturing output
2000-2002 Manufacturing drops, imports slow
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Loss of manufacturing jobsOnly in the U.S.?
Manufacturing jobs 1993 normalized to 100
3m jobs lost in the U.S.
Its a worldwide phenomenon!
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The real culprit Productivity
Output per hour in Manufacturing
Overall Economy
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How about outsourcing of service jobs?
The U.S. has a persistent surplus in trade of
services
Surplus
Exports
Imports
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Trade in goods and services

• Increased trade tends to coincide with economic
  expansion
• Manufacturing employment is down in the U.S. Just
  like everywhere else!
• Service employment has grown despite outsourcing.

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Manufacturing vs. Service?
Manufacturing and Service Organizations differ
chiefly because manufacturing is goods-oriented
and service is act-oriented.
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Production of Goods vs. Delivery of Services

• Production of goods tangible output
• Delivery of services an act
• Service job categories
• Government
• Wholesale/retail
• Financial services
• Healthcare
• Personal services
• Business services
• Education

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Manufacturing vs Service
Characteristic
Manufacturing
Service
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Process Management
Process - one or more actions that transform
inputs into outputs
Three Categories of Business Processes Three Categories of Business Processes
Upper-management processes These govern the operation of the entire organization.
Operational processes These are core processes that make up the value stream.
Supporting processes These support the core processes.
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Process Management
Four Sources of Variation
Variety of goods or services being offered The greater the variety of goods and services offered, the greater the variation in production or service requirements.
Structural variation in demand These are generally predictable. They are important for capacity planning.
Random variation Natural variation that is present in all processes. Generally, it cannot be influenced by managers.
Assignable variation Variation that has identifiable sources. This type of variation can be reduced, or eliminated, by analysis and corrective action.
Variations can be disruptive to operations and
supply chain processes. They may result in
additional costs, delays and shortages, poor
quality, and inefficient work systems.
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Scope of Operations Management

• Operations Management includes
• Forecasting
• Capacity planning
• Scheduling
• Managing inventories
• Assuring quality
• Motivating employees
• Deciding where to locate facilities
• And more . . .

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Role of the Operations Manager

• The Operations Function consists of all
  activities directly related to producing goods or
  providing services.
• A primary function of the operations manager is
  to guide the system by decision making.
• System Design
• System Operation

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Types of Operations
Table 1.4
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U.S. Manufacturing vs. Service Employment
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The Decline in Manufacturing Employment

• Productivity
• Increasing productivity allows companies to
  maintain or increase their output using fewer
  workers
• Outsourcing
• Some manufacturing work has been outsourced to
  more productive companies
• A Statistical Artifact
• Manufacturers are increasingly using contract and
  temporary labor which no longer show up in the
  statistics as manufacturing employment

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Why Manufacturing Matters?
Myth 1 advanced economy like the U.S. no longer
needs to manufacture and can thrive exclusively
as a hub for high-value-added design and
innovation
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Why Manufacturing Matters?
Myth 2 the migration of mature manufacturing
industries away from developed countries like
the U.S. is just part of a healthy, natural
process of economic evolution that allows
resources to be redeployed to new,
higher- potential businesses.
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Key Decisions of Operations Managers

• What
• What resources/what amounts
• When
• Needed/scheduled/ordered
• Where
• Work to be done
• How
• Designed
• Who
• To do the work

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Decision Making

• Models
• Quantitative approaches
• Analysis of trade-offs
• Systems approach

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Systems Approach
The whole is greater than the sum of the parts.
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Operation Management link Operation Marketing
Finance
Operations
Marketing
Finance
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Why Operations Management?
Career Opportunities abound

• Operations manager
• Purchasing manager
• Supply chain manager
• Distribution manager
• Quality manager
• Etc.

Visit APICS, ISM, ASQ, CSCMP websites
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Operations Interfaces
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Trends in Business

• Major trends
• e-commerce, e-business
• Management of technology
• Globalization
• Management of supply chains
• Agility

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A Typical Supply Chain
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The need for managing supply chain

• In the past, organizations did little to manage
  the supply chain beyond their own operations and
  immediate suppliers which led to numerous
  problems
• Oscillating inventory levels
• Inventory stockouts
• Late deliveries
• Quality problems

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Simple Product Supply Chain
Supply Chain when something is deliver either
services or goods then SUPPLY CHAIN is there
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Elements of Supply Chain Management

• Customers what products/services do customers
  want
• Forecasting predicting timing and volume of
  customer demand
• Design incorporating customer wants,
  manufacturability, and time to market
• Capacity planning matching supply and demand
• Processing controlling quality, scheduling work

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Elements of Supply Chain Management

• Inventory meeting demand requirements while
  managing costs
• Purchasing evaluating potential suppliers,
  supporting the needs of operations on purchased
  goods and services
• Suppliers monitoring supplier quality, on-time
  delivery, and flexibility maintaining supplier
  relations
• Location determining the location of facilities
• Logistics deciding how to best move information
  and materials