Operations

1 Mangement

Heizer and Render

Operations Management, 10e
Principles of Operations Management, 8e

1-1
 Outline
 Global Company Profile: Hard Rock
Cafe
 What Is Operations Management?
 Organizing to Produce Goods and
Services
 Why Study OM?
 What Operations Managers Do

1-2
 Outline - Continued
 The Heritage of Operations
Management
 Operations in the Service Sector
 Differences between Goods and
Services
 Growth of Services
 Service Pay
 Exciting New Trends in Operations
Management 1-3
 The Hard Rock Cafe
 First opened in 1971
 Now – 129 restaurants in over 40 countries
 Rock music memorabilia
 Creates value in the form of good food and
entertainment
 3,500+ custom meals per day in Orlando
 How does an item get on the menu?
 Role of the Operations Manager
© 2011 Pearson Education, Inc. publishing as Prentice Hall 1-4
 What Is Operations
Management?
Production is the creation of
goods and services
Operations management (OM) is
the set of activities that create
value in the form of goods and
services by transforming inputs
into outputs
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Organizing to Produce Goods
and Services
 Essential functions:
1. Marketing – generates demand
2. Production/operations – creates the
product
3. Finance/accounting – tracks how
well the organization is doing, pays
bills, collects the money

1-6
 Organizational Charts
Airline

Operations Finance/ Marketing

Ground support accounting Traffic
equipment Accounting administration
Maintenance Payables Reservations
Ground Operations Receivables Schedules
General Ledger Tariffs (pricing)
Facility
maintenance Finance Sales
Catering Cash control Advertising
Flight Operations International
exchange
Crew scheduling
Flying
Communications
Dispatching Figure 1.1(B)
Management science 1-7
 Why Study OM?
1. OM is one of three major functions of
any organization, we want to study
how people organize themselves for
productive enterprise
2. We want (and need) to know how
goods and services are produced
3. We want to understand what
operations managers do
4. OM is such a costly part of an
organization 1-8
 What Operations

Managers Do
Basic Management Functions
• Planning
• Organizing
• Staffing
• Directing
• Controlling
1-9
 Ten Critical Decision Areas in
OM
1. Design of goods and services
2. Managing quality
3. Process and capacity
design
4. Location strategy
5. Layout strategy
6. Human resources and
job design
7. Supply-chain
management
8. Inventory, MRP, JIT
9. Scheduling
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10.
 The Critical Decisions
1. Design of goods and services
 What good or service should we offer?
 How should we design these products
and services?
2. Managing quality
 How do we define quality?
 Who is responsible for quality?

Table 1.2 (cont.)

1 - 11
 The Critical Decisions
3. Process and capacity design
 What process and what capacity will
these products require?
 What equipment and technology is
necessary for these processes?
4. Location strategy
 Where should we put the facility?
 On what criteria should we base the
location decision?
Table 1.2 (cont.)
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 The Critical Decisions
5. Layout strategy
 How should we arrange the facility?
 How large must the facility be to meet
our plan?
6. Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our
employees to produce?
Table 1.2 (cont.)
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 The Critical Decisions
7. Supply-chain management
 Should we make or buy this component?
 Who should be our suppliers and how can
we integrate them into our strategy?
8. Inventory, material requirements
planning, and JIT
 How much inventory of each item should
we have?
 When do we re-order?
Table 1.2 (cont.)
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 The Critical Decisions
9. Intermediate and short–term
scheduling
 Are we better off keeping people on
the payroll during slowdowns?
 Which jobs do we perform next?
10. Maintenance
 How do we build reliability into our
processes?
 Who is responsible for maintenance?
Table 1.2 (cont.)
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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 1 - 16
Opportunities

Figure 1.2

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Significant Events in OM

Figure 1.3
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 The Heritage of OM
 Division of labor (Adam Smith 1776; Charles
Babbage 1852)
 Standardized parts (Whitney 1800)
 Scientific Management (Taylor 1881)
 Coordinated assembly line (Ford/ Sorenson
1913)
 Gantt charts (Gantt 1916)
 Motion study (Frank and Lillian Gilbreth
1922)
 Quality control (Shewhart 1924; Deming
1950)
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 The Heritage of OM
 Computer (Atanasoff 1938)
 CPM/PERT (DuPont 1957, Navy 1958)
 Material requirements planning (Orlicky 1960)
 Computer aided design (CAD 1970)
 Flexible manufacturing system (FMS 1975)
 Baldrige Quality Awards (1980)
 Computer integrated manufacturing (1990)
 Globalization (1992)
 Internet (1995)
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 New Challenges in OM
From To
 Local or national focus  Global focus
 Batch shipments  Just-in-time
 Low bid purchasing  Supply-chain
partnering
 Lengthy product  Rapid product
development development,
alliances
 Standard products  Mass customization
 Empowered
 Job specialization employees, teams
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 Industry and Services as
Percentage of GDP
90 −
Services Manufacturing
80 −
70 −
60 −
50 −
40 −
30 −
20 −
10 −

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1 - 22
 Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100% 75 50 25 0 25 50 75 100%
| | | | | | | | |
Percent of Product that is a Good Percent of Product that is a Service

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 Changing Challenges
Traditional Reasons for Current
Approach Change Challenge
Ethics and Public concern over High ethical and
regulations pollution, corruption, social responsibility;
not at the child labor, etc. increased legal and
forefront professional
standards
Local or Growth of reliable, low Global focus,
national cost communication and international
focus transportation collaboration

Lengthy Shorter life cycles; Rapid product

product growth of global development;
development communication; CAD, design
Internet collaboration
Figure 1.5
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 Changing Challenges
Traditional Reasons for Current
Approach Change Challenge
Low cost Public sensitivity to Environmentally
production, environment; ISO 14000 sensitive
with little standard; increasing production; green
concern for disposal costs manufacturing;
environment; sustainability
free resources
(air, water)
ignored
Low-cost Rise of consumerism; Mass
standardized increased affluence; customization
products individualism

Figure 1.5
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 Changing Challenges
Traditional Reasons for Current
Approach Change Challenge
Emphasis on Recognition of the Empowered
specialized, employee's total employees;
often manual contribution; knowledge enriched jobs
tasks society
“In-house” Rapid technological Supply-chain
production; change; increasing partnering; joint
low-bid competitive forces ventures, alliances
purchasing
Large lot Shorter product life Just-In-Time
production cycles; increasing need performance; lean;
to reduce inventory continuous
improvement

Figure 1.5
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 New Trends in OM
 Ethics
 Global focus
 Environmentally sensitive production
 Rapid product development
 Environmentally sensitive production
 Mass customization
 Empowered employees
 Supply-chain partnering
 Just-in-time performance
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