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Introduction to Operations Management

Introduction to Operations Management

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Introduction to Operations Management

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  1. Introduction toOperations Management is the management of the direct resources required to produce the goods and services provided by an organization. Management activities performed include selecting, designing, operating, controlling and updating productive systems

  2. Types of Decisions • Strategic or long-range decisions • Tactical or medium- range decisions • Operational planning and control or short-range decisions

  3. Questions Raised At Strategic Level: 1. How well we make the product? 2. Where do we locate facilities? 3. How much capacity is needed? and 4. When should capacity be added? At Tactical Level: 1. How many workers do we need? 2. When do we need them? 3. Is overtime needed or perhaps an additional shift? 4. When to deliver material? and 5. Is a finished goods inventory needed? At Operational Level: 1. Jobs to be done today or this week? 2. To whom tasks are assigned? and 3. Which jobs have priority?

  4. Role of OM Within an Organization

  5. The Transformation Process Transformation process Inputs Outputs Transformation Process Customers/or materials Goods & Services

  6. Types of Transformation • Physical, as in manufacturing • Locational, as in transportation • Exchange, as in retailing • Storage, as in warehousing • Physiological, as in healthcare • Informational, as in telecommunications.

  7. OM Contributions to Society • Higher Standard of Living • Better Quality Goods & Services • Concern for the Environment • Improved working conditions

  8. Value chain Trend toward having the transformation process work more closely with suppliers and customers alike is often referred to as a product’s value chain. Definition : All steps that actually add value to the product without distinguishing where they are added. This concept attempts to eliminate all non-value added steps(steps such as inspections and inventory), and results in a higher degree of dependence among the value added functions that are linked to the chain.

  9. Societal Development Vs. Mode and Technology of production Complex Sophisticated Service – Information Age ? (Evolving) Societal Development Industrial Age (200 years old) Agrarian stage,Craftsmanship (Lasted 100,000 years) Stone Age,Bronze Age (Lasted over 500,000 years) Simple Primitive Many Workers Few Workers Mode of Production Technology of production Labor-Intensive Capital-Intensive

  10. Line and staff jobs in operational Management Service Industries Organizational level Manufacturing industries Vice president of manufacturing Vice-president of Operations(airline) Upper Chief administrator (hospital) Regional manager of manufacturing Plant manager Program Manager Store Manager(dept store) Middle Facilities Manager (wholesale distributor) Branch Manager (bank) Department supervisor Department supervisor (insurance company) Lower Foreman Crew chief Assistant Manager Production controller Materials Manager Quality Manager Purchasing agent Work methods analyst Process Engineer Purchasing agent Inspector Dietician (hospital) Customer service manager Systems and procedures analyst

  11. Major Responsibilities of OM Managers • To estimate the demand for the products and services the company sells, • To produce these products and services efficiently, i.e. at the lowest cost possible, • To produce these products and services with a reasonable level of quality, and • To produce them cleanly, i.e. with minimum harm to the environment

  12. Models A model is an approximate representation of reality. Two Types of Models: 1. Physical Models : a) Iconic --- looks like the real system b) Analog --- acts like the real system. 2. Symbolic Models: a) Verbal --- using language to model thought, b) Mathematical --- using Math. to model reality

  13. Mathematical Models Math Models differ in four respects : 1 ) Purpose ----------------a) descriptive, b) optimization. 2 ) Mode -------------------a) analytic, b) numeric. 3 ) Randomness ------- --- a) deterministic, b) probabilistic. 4 ) Generality ------------- a) applicable to one system. b) transferable to other systems.

  14. Challenges Facing OM Managers • Effectively consolidating the operations resulting from mergers & acquisition, • Developing flexible supply chain to enable mass customization of products and services, • Managing global suppliers, production, and distribution networks, • Managing a diverse workforce, • Effective response to restructuring, reengineering, and downsizing, • Conforming to environmental constraints, ethical, standards, and governmental regulations, • Developing and integrating new process technology with existing one.

  15. Chapter 2 Operations Strategy & Competition Competitiveness refers to the firm’s position in the marketplace. Operations Strategy refers to how the operations management function contributes to the firm’s ability to achieve its competitive advantage in the marketplace. Operations Strategies are developed from the competitive priorities of an organization which include: 1. Low cost, 2. High quality, 3. Fast delivery, 4. Flexibility, and 5. Service. Operations Strategy is thus concerned with a long-term plan in order to determine how to best utilize the major resources of the firm so that there is a high degree of compatibility between these resources and the firm’s long -term corporate strategy.

  16. Planning Issues • Major long term issues include: • How big do we make the facilities? Plant size • Where do we locate them? location • What type of processes or technologies do we install to make the products? Process • Tactical issues include: • Workforce size, 2. Material requirement. • Operational issues include: • Daily worker scheduling, 2. Jobs & equipment, • 3. Process management, 4. Inventory management

  17. Strategic – Level Feed Back Tactical or Translators Level Operational Level  Slack Or Information Administrative process

  18. Trends Affecting Operations Strategy • Globalization: new opportunities and hyper-competition • Technology: connectivity, speed, and intangibility.

  19. Time Line for OperationsStrategies competitive cost quality delivery flexibility Service 1950’s 1960’s 1970’s 1980’s 1990’s priority cost min. value max. Manufacturing based Technology info. based technology

  20. Order-Qualifiers: Minimum characteristics of a firm or its products to be considered as a source of purchase. Order-Winners: Characteristics of a firm that distinguish it from its competition so that it is selected as the source of purchase.

  21. Customer Activity Cycle (CAC) • Prepurchase: here activities focus on being responsive to customer inquires and the ability to demonstrate technical expertise, • Purchase: here activities center around the actual sale and delivery of the product and collecting payment, • Postpurchase: here activities include after sales support and product warranties.

  22. New Product and Service Development, andProcess Selection • Categories of new products: • Incremental or Derivative Products: products with least amount of innovation. These products are often cost-reduced versions of existing products or with some added minor features, e.g. waterproof Walkman CD player. • Next Generation or Platform Products: these products provide a broad base for a product family that can be leveraged over several years requiring more resource than incremental products, e.g. major model changeovers in the auto industry. • 3. Breakthrough or Radical Products: these products require substantial product design and process change, e.g. first TV, cellular phone, etc.

  23. The New Product Development Process • Idea generation • Concept Development or initial design & analysis of customer requirements and market demand. • Quality function Deployment (QFD) translating customer requirements into engineering specifications. E.g. House of Quality on page 60. • Design for Manufacturability: material choices, process selection, efficiency, quality and safety consideration all needed to mass produce the product.

  24. Types of Processes in Manufacturing • Project: process that focuses on making one-of-a-kind products, e.g. producing a movie • Intermittent: process that produces products in small lot sizes: a) Job Shop – process where a specific quantity, generally small, of a product is produced only once, e.g. printing programs for a concert, b) Batch – a process that produces the same item again and again, usually in specified lot sizes, e.g. McDonald’s making hamburgers, lot size 12. • Line - Flow: continuous process that produces high volume, highly standardized products: a) Assembly Line: manufacture individual discrete products such as cars, b) Continuous: operates 24 hours/day, e.g. refining sugar or oil. See Exhibit 3.9 page 58.

  25. Categories of New Service1. Window Dressing Services: low degree of content and delivery changes. 2. Breadth-of-offering Services: highcontent change, low delivery change.3. Revolutionary Services: high content and delivery changes.4. Channel Development Services: low content change, high delivery change

  26. Customer Contact Approach Service processes are distinguished by the degree of customer contact with the service system during the rendering of the service; thus we have high contact systems such as healthcare and low contact systems such as mailing a letter to someone. See service System Design Matrix on page 73

  27. Types of Service organization • Facilities-based Services: services that require the customer to go to the service facility, • 2. Field-based Services: services that can be performed at the customer’s location.

  28. Delivery Approaches • The Production Line Approach • The Customer Involvement Approach • The Personal Attention Approach


  30. Supplement to Chp. 3: Project Management • A project is a statement or proposal of something to be done. Projects have a series of related jobs directed towards the achievement of a goal and requiring a significant amount of time to perform. • Project management involves planning, directing and controlling resources: people, capital, equipment, and material to meet the technical, cost, and time constraints of the project.

  31. ACTIVITIESOF OM • The overall manufacturing system. • Production engineering. • Computerized design, process planning, production planning and control and prove the efficiency and effectiveness of production engineering and manufacturing methods which in many high-technology and large-scale mass-production or processing plants have largely replaced traditional and mainly manual techniques. • Manufacturing. • Quality management. • Planned maintenance. • Inventory control. • Distribution.

  32. An itegrated operations system

  33. The overall management system The overall manufacturing system is the process of transforming materials and information into goods for the satisfaction of human needs.

  34. PRODUCTION ENGINEERING Production engineering is the generic term which covers all activities concerned with specifying, planning and controlling manufacturing processes. The main production engineering activities are:

  35. Process planning Process planning determines how the product or part should be manufactured by referring to component and assembly drawings and manufacturing reference data, and specifications produced at the design stage.

  36. Production planning. Production planning analyses sales forecasts and orders and decides on the manufacturing resources (capacity, materials and labor) required to meet the current and anticipated demand. Production planning involves capacity and aggregate planning, which aim to match the level of production to the level of demand.

  37. Aggregate planning Aggregate planning aims to ensure that capacity is available to meet demand at minimum cost.

  38. Production control Production control schedules production, loads the shops and monitors progress to ensure that production programs are achieved.

  39. Scheduling Scheduling involves: • Sequencing – determining the order in which jobs will be completed at each stage in the program; • Allocating the start and finishing time for each order; • Resource allocation – assessing labour and material requirements and their availability.

  40. Scheduling The approach adopted will be influences by the extend to which the company is making to order (responding to customer orders) or making to stock (anticipating future orders).

  41. Scheduling techniques • Material requirements planning, in which the known customer requirement for the final product is exploded to produce lists of parts and components required to make it. These known requirements are compared with available inventories to determine net requirements, which are then scheduled within available capacity. • Forward scheduling, which involves setting out activity timings from a given start date to achieve a defined completion date. This is usually computerized, although bar or Gantt charts are still maintained manually in some organizations.

  42. Scheduling techniques • Reverse scheduling, as used in make-to-order situations, involves subtracting activity timings from the due date for delivery and representing them on computerized schedules or Gantt charts. • Network analysis, which is used in complex projects to schedule various interrelated and interdependent activities • Line of balance, a technique used in batch production to calculate the quantities of the parts or components of the final product which must be completed by an intermediate date to ensure the final delivery schedule is met.

  43. Scheduling The output of the scheduling process is a master production schedule which sets out when the major operations required for each expected item of demand are to be undertaken. Master production scheduling aims to balance production possibilities with sales requirements.

  44. Shop loading. Shop loading takes the master schedule and verifies labor availability, prepares detailed programs and assigns the work to a machine or an operator. Shop loading will be related to the capacity available.

  45. Progress control. Progress control monitors the progress of orders through the shops against the master production schedule and delivery requirements so that corrective action can be taken to overcome delays, shortages and bottlenecks.