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Operations Management Operations and Productivity Chapter 1

Operations Management Operations and Productivity Chapter 1. Outline. Global company profile: Whirlpool What is Operations Management? The heritage of Operations Management Why study OM? What Operations Managers do Organizing to produce goods and services Where are the OM jobs?

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Operations Management Operations and Productivity Chapter 1

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  1. Operations ManagementOperations and ProductivityChapter 1

  2. Outline • Global company profile: Whirlpool • What is Operations Management? • The heritage of Operations Management • Why study OM? • What Operations Managers do • Organizing to produce goods and services • Where are the OM jobs? • Exciting new trends in Operations Management • Operations in the service sector • The Productivity challenge

  3. Learning Objectives When you complete this chapter, you should be able to: • Identify or Define: • Production and productivity • Operations Management (OM) • What operations managers do • Services • Describe or Explain: • A brief history of operations management • The future of the discipline • Measuring productivity

  4. Whirlpool Case Example • Change in attitude - employees “live quality” • Training - “use your heads as well as your hands” • Flexible work rules • Gain-sharing • Global procurement • Role of information/information technology • Adoption of a Worldwide strategy

  5. What Is Operations Management? • Production is the creation of goods and services Let’s define goods and services with specific examples

  6. Characteristics of Goods • Tangible product • Consistent product definition • Production usually separate from consumption • Can be inventoried • Low customer interaction e.g. :Pencil Production

  7. Characteristics of Service • Intangible product • Produced & consumed at same time • Often unique • High customer interaction • Inconsistent product definition • Often knowledge-based • Frequently dispersed e.g. :Taxi Service

  8. Goods Versus Services GoodsService • Can be resold • Can be inventoried • Some aspects of quality measurable • Selling is distinct from production • Reselling unusual • Difficult to inventory • Quality difficult to measure • Selling is part of service

  9. Goods Versus Services - Continued GoodsService • Product is transportable • Site of facility important for cost • Often easy to automate • Revenue generated primarily from tangible product • Provider, not product is transportable • Site of facility important for customer contact • Often difficult to automate • Revenue generated primarily from intangible service.

  10. What Is Operations Management? • Operations management • There are two ways to define operations management (OM). • by what it does. Put simply, operations management is the business function that manages that part of a business that transforms raw materials and human inputs into goods and services of higher value. (Traditionally) • A second way to define operations management is to do so in context of the overall activities of the firm. • The second approach starts by recognizing that a business is really a set of processes, Each process has a job to do and each should be measured on how effective it is in achieving the desired outcomes. • Most companies are engaged in four core business processes : • Attract customers • Design and develop products • Factors of production and transformation into products of value, • Providing business support services needed to effectively operate as a business.

  11. Significant Events in OM • Division of labor (Smith, 1776) • Standardized parts (Whitney, 1800) • Scientific management (Taylor, 1881) • Coordinated assembly line (Ford 1913) • Gantt charts (Gantt, 1916) • Motion study (the Gilbreths, 1922) • Quality control (Shewhart, 1924)

  12. Significant Events - Continued • CPM/PERT (Dupont, 1957) • MRP (Orlicky, 1960) • CAD • Flexible manufacturing systems (FMS) • Manufacturing automation protocol (MAP) • Computer integrated manufacturing (CIM)

  13. Why Study OM? • OM is one of three major functions (marketing, finance, and operations) of any organization • We want (and need) to know how goods and services are produced • We want to know what operations managers do • OM is such a costly part of an organization

  14. What Operations Managers Do • Plan (For effective planning seeks we should answer these questions) • What should the firm do? • When must the firm achieve these goals? • Who is responsible for doing it? • How should this be done? • How should performance be measured? • Organize • Staff • Lead • Control

  15. Ten Critical Decisions • Service, product design • Quality management • Process, capacity design • Location • Layout design • Human resources, job design. • Supply-chain management • Inventory management • Scheduling • Maintenance

  16. Organizational Functions • Marketing • Gets customers • Operations • creates product or service • Finance/Accounting • Obtains funds • Tracks money

  17. Where Are the OM Jobs? • Technology/methods • Facilities/space utilization • Strategic issues • Response time • People/team development • Customer service • Quality • Cost reduction • Inventory reduction • Productivity improvement

  18. New Challenges in OM FromTo • Local or national focus • Batch shipments • Low bid purchasing • Lengthy product development • Standard products • Job specialization • Global focus • Just-in-time • Supply chain partnering • Rapid product development, alliances • Mass customization • Empowered employees, teams

  19. U.S. Exports of Services U.S. Employment, % Share Services as a Percent of GDP 80 %70 60 50 40 30 20 10 0 In Billions of Dollars United States Canada France Italy Britain Japan W Germany 250 200 150 100 50 0 Services Industry Farming 1970 1991 1850 75 1900 25 50 75 2000 40 50 60 70 1970 75 80 85 90 95 2000 Percent Year 2000 data is estimated Development of the Service Economy

  20. Inputs Process Outputs Land, Labor, Capital, Management The economic system transforms inputs to outputs at about an annual 1.7% increase in productivity (capital 38% of 1.7%), labor (10% of 1.7%), management (52% of 1.7%) Goods and Services Feedback loop The Economic System Transforms Inputs to Outputs

  21. Unitsproduced Productivity = Input used Productivity • Measure of process improvement • Represents output relative to input • Productivity increases improve standard of living • From 1889 to 1973, U.S. productivity increased at a 2.5% annual rate

  22. Measurement Problems • Quality may change while the quantity of inputs and outputs remains constant • External elements may cause an increase or decrease in productivity • Precise units of measure may be lacking

  23. Productivity Variables • Labor - contributes about 10% of the annual increase • Capital- contributes about 32% of the annual increase • Management - contributes about 52% of the annual increase

  24. Jobs in the U.S

  25. Labor % per year Whole Economy Manufacturing Productivity Growth 1971- 1992

  26. Service Productivity • Typically labor intensive • Frequently individually processed • Often an intellectual task performed by professionals • Often difficult to mechanize • Often difficult to evaluate for quality

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