Operations Management. Introduction to Operations Management. Operations: the conversion process. Supply Chain. What is operations?

Transcription

1 1-1 Introduction to Operations Management Chapter 1 Introduction to Operations Management 1-2 Introduction to Operations Management 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 1-3 Introduction to Operations Management Basic Functions of the Business Organization 1-4 Introduction to Operations Management Operations: the conversion process The management of systems or processes that create goods and/or provide services Inputs Land Labor Capital Information Value-Added Transformation/ Conversion Process Outputs Goods Services Feedback Feedback Control Feedback 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. 1-5 Introduction to Operations Management Supply Chain Supply Chain a sequence of activities and organizations involved in producing and delivering a good or service Suppliers suppliers Direct suppliers Producer Distributor Final Customers 1-6 Introduction to Operations Management Food Processor Table 1.2 Inputs Processing Outputs Raw Vegetables Cleaning Canned Metal Sheets Making cans vegetables Water Cutting Energy Cooking Labor Packing Building Labeling Equipment

2 High 1-7 Introduction to Operations Management Hospital Process Table 1.2 Inputs Processing Outputs Doctors, nurses Examination Healthy Hospital Surgery patients Medical Supplies Monitoring Equipment Medication Laboratories Therapy 1-8 Introduction to Operations Management Goods-service Continuum Products are typically neither purely service- or purely goodsbased. Goods Services Home Remodeling, Retail Sales Automobile Assembly, Steelmaking Songwriting, Software Development Computer Repair, Restaurant Meal Surgery, Teaching 1-9 Introduction to Operations Management 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 1-10 Introduction to Operations Management Manufacturing vs Service Characteristic Output Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Opportunity to correct quality problems Manufacturing Service Tangible Low High Low High Easy High 1-11 Introduction to Operations Management Process Management 1-12 Introduction to Operations Management Process Management Process - one or more actions that transform inputs into outputs Three Categories of Business Processes: Upper-management processes Operational processes Supporting processes These govern the operation of the entire organization. These are core processes that make up the value stream. These support the core processes. Four Sources of Variation: Variety of goods or services being offered Structural variation in demand Random variation Assignable variation The greater the variety of goods and services offered, the greater the variation in production or service requirements. These are generally predictable. They are important for capacity planning. Natural variation that is present in all processes. Generally, it cannot be influenced by managers. 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.

3 1-13 Introduction to Operations Management Scope of Operations Management Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities And more Introduction to Operations Management 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 1-15 Introduction to Operations Management Types of Operations Operations Examples Goods Producing Farming, mining, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites 1-16 Introduction to Operations Management U.S. Manufacturing vs. Service Employment Fig 1.7 manufacturing vs. service employment 1-17 Introduction to Operations Management 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 1-18 Introduction to Operations Management Manufacturing vs. Services Since the 1970s the US economy has been driven by consumer credit and a misguided no>on of building a service economy. -- Jeffery Immelt, CEO

4 1-19 Introduction to Operations Management 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 innova>on Reality: 1-20 Introduction to Operations Management Why Manufacturing Matters? Myth #2: the migra>on of mature manufacturing industries away from developed countries like the U.S. is just part of a healthy, natural process of economic evolu>on that allows resources to be redeployed to new, higher- poten>al businesses. Reality: 1-21 Introduction to Operations Management Why Manufacturing Matters? Example 2: GM Chevy Volt s lithium- ion bajery the highest value- added component in the car will be made by South Korea s LG Introduction to Operations Management Why Manufacturing Matters? " manufacturing no longer only encompasses the work of 'making things. "Today, rather, the work of making things cannot be separated from the work of inven>ng them and improving them and developing the next genera>on of them. Companies cannot, anymore, invent a product in one country - - and build it in another. Innova>on and produc>on - - the lab and the plant - - must be linked." -- Andrew N. Liveris, CEO 1-23 Introduction to Operations Management The State of U.S. Manufacturing Fact #1: U.S. manufacturing workforce peaked at 19.5 million in It has declined about 40% since then, to 11.7 million. Fact #2: U.S. lost over 5 million manufacturing jobs between 2000 and Reason #1: 1-24 Introduction to Operations Management The State of U.S. Manufacturing Fact #3: After decades of decline, manufacturing jobs are returning to the U.S.. Fact #4: The U.S. remains the global manufacturing leader, churning out 19% of the world s goods, ahead of China s 15.6%. Reason #2:

5 1-25 Introduction to Operations Management The State of U.S. Manufacturing Reasons for the Return: 1. Wages. Climbing wages in China (17% per year) makes offshoring less compelling Introduction to Operations Management Does America Need Manufacturing? Myth: It is a curiosity of modern life that informa>on companies can create extraordinary social disrup>ons and vast shareholder wealth but rela)vely few jobs. Cases: 2. TransportaAon. Rising fuel prices make global shipping less cost-effective. 3. Security. Supply chain disruptions following the 3/11/11 tsunami in Japan have companies reconsidering local or regional supply chains Introduction to Operations Management Does America Need Manufacturing? 1-28 Introduction to Operations Management Does America Need a clear Policy? Insights: When you re manufacturing anything, even if the work is done by robots and machines, there s an incredible value chain involved, Susan Hockfield, the president of M.I.T., says. Manufacturing is simply this huge engine of job creation. Government (industrial) policy debates: s: federal bailouts of Lockheed and Chrysler s: assist U.S. companies in gaining ground on the Japanese in the semiconductor industry. 3. When George H. W. Bush became the president in 1988, the move away from industrial policy was clear Introduction to Operations Management Does America Need Manufacturing? U.S. corporations, by offshoring so much manufacturing work over the past few decades, have eroded our ability to raise living standards and curtailed the development of new hightechnology industries Introduction to Operations Management Did That Robot Take My Job? Technology/Productivity factor? Companies binged on new equipment and software in the late 1990s even more than today, yet the unemployment rate averaged 4.4% Another Key Factor?

6 1-31 Introduction to Operations Management Why Learn about Operations Management? 1-32 Introduction to Operations Management Operations Interfaces Industrial Engineering Operations Distribution Maintenance Marketing Finance Purchasing Legal Operations Personnel Public Relations Accounting MIS 1-33 Introduction to Operations Management Why Learn about Operations Management? Career Opportunities abound Operations manager Purchasing manager Supply chain manager Distribution manager Quality manager Etc. Visit APICS, ISM, ASQ, CSCMP websites 1-34 Introduction to Operations Management 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 1-35 Introduction to Operations Management Decision Making Models Quantitative approaches Analysis of trade-offs Systems approach 1-36 Introduction to Operations Management Systems Approach The whole is greater than the sum of the parts. Suboptimization

7 1-37 Introduction to Operations Management Historical Evolution of Operations Management Industrial revolution (1770 s) Scientific management (1911) Mass production Interchangeable parts Division of labor Human relations movement ( ) Decision models (1915, s) Influence of Japanese manufacturers 1-38 Introduction to Operations Management Trends in Business (Operations Today) Major trends The Internet, e-commerce, e-business Management of technology Globalization Management of supply chains Agility 1-39 Introduction to Operations Management Key Issues for Today s Business Operations Environmental Concerns Sustainability: Using resources in ways that do not harm ecological systems that support human existence. All areas of business have an impact on sustainability. Individual choice makes a big difference too Ethical Conduct Meeting all economic, social, and environmental criteria (e.g., Fair Trade Certified agri-product, Forest Stewardship Council certified paper and furniture) 1-40 Introduction to Operations Management 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 1-41 Introduction to Operations Management A Typical Supply Chain 1-42 Introduction to Operations Management The need for managing supply chain Supply Chain Management is essential to business success because of The need to improve operations Increasing level of outsourcing Increasing transportation cost Competitive pressures Increasing globalization Increased complexity of supply chains The need to manage inventories Increasing importance of e-business

8 1-43 Introduction to Operations Management Simple Product Supply Chain 1-44 Introduction to Operations Management Elements of Supply Chain Management Suppliers Suppliers Direct Suppliers Producer Distributor Supply Chain: A sequence of activities and organizations involved in producing and delivering a good or service Final Consumer 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 1-45 Introduction to Operations Management 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