Lecture 1
Introduction to
Operations
Management
2
Administrative Issues
• Getting to know the teaching team:
–Jeff WANG, weeks 1-3
–Frank CHEN, weeks 4-6
–Sally TSANG, weeks 7-12
• Best way to contact the teaching team:
[email protected] • Consultation hours:
– By appointment, or after class.
3
Course Assessment
Assessment Type Assessment Task Weighting
Individual In-class Participation 5%
(week 2 to 12)
Individual Final Examination 50%
Group In-class exercises 15%
(week 3 to 11)
Group Final project 30%
4
Course Assessment - Details
• In-class Participation 5%
– Based primarily on your scores from review questions
– It is important to attend class punctually
– Starting Week 2
• In-class Exercise 15%
– At least one member of your group should bring a laptop to class.
– The in-class exercises are to be submitted as a PPT/PPTX file on
Canvas.
– Only one of the group members needs to submit the assignment for the
whole group.
– Assignment submission through email is strictly prohibited and will not be
graded.
– Late submissions are subject to a 10% deduction of marks.
– Starting Week 3.
5
Course Assessment - Details
• Final Group Project
–Study a specific operations practice in a real
organization
–Video + One-page Summary Report
–No more than 6 members
–Details provided in Group Project Guidelines
–Examples of previous years’ submissions: weeks 7-
12
–Form Groups
• end of the lecture
6
Normal Course Structure
Time Content
0:00 – 0:15 Review questions
0:15 – 0:30 Review questions’ answers
0:30 – 1:50 Class with one break
1:50 – 2:50 In-class exercise (ICE)
2:50 – 3:15 ICE submission
3:15 – 3:30 ICE late submission
Lecture Schedule
7
8
Textbook
For the course CB2201, we recommend a
customized textbook from McGraw-Hill. The
customized textbook consists of chapters taken
from several different textbooks. The title of the
textbook is "CB2201 Operations Management".
You can purchase it at the CityU Book Store
located opposite to the library.
Please do not commit copyright infringement by
for example photocopying the hard copy textbook
and selling it. Copyright infringement is a criminal
offense in Hong Kong. For more information
about copyright infringement, read the webpage
Copyright in Hong Kong.
Front cover
Course Structure
Module 1:
Introduction & Module 2: Capacity Module 3: Product & Module 4: Control &
Operational Planning Service Delivery Sustainability
Planning
Introduction Process Flow Service Operations
to OM Analysis Delivery Strategy
Product & Lean & Six Distribution &
Supply Chain
Service Sigma Inventory
Strategy
Design Management
Facility Demand & Globalization
Process Location Revenue &
Structures Planning Management Sustainability
9
Important tips for you
• Always use a laptop or desktop computer for your lecture.
Using hand phone is not recommended. (Notes: there will
be online quizzes, in-class exercises and activities)
• Do NOT skip any online class participation as they will all
be counted towards your course assessment.
• Review your course notes / textbook before and after each
lecture.
• Actively participate in-class discussion to reinforce your
learning.
• Apply what you have learned in your daily life.
• Always provide your learning feedback and comments.
PALSI Classes
• You are strongly advised to register for one of the Peer-
Assisted Learning scheme using Supplemental Instruction
(PALSI) classes. The PALSI class will be held two hours a
week, and run during weeks 4-12. Your PALSI leaders are
the students who received outstanding grades in CB2201.
They will share with you their learning tips and strategies
for CB2201.
• If you wish to join PALSI, please refer to your canvas
course site under “Course Information” -> “PALSI classes”.
• For more information about PALSI, please refer to
http://www.cityu.edu.hk/edge/palsi/index.htm.
11
Learning Objectives
• Identify what products and services are
and their characteristics.
• Explain what operations management is
and why it is important.
• Describe the common challenges that
operations managers have faced.
12
Operations Management at its best:
Apple’s Success Story
PRODUCT
DESIGN/MIX
LOW
VOLUME COST
SUPPLY
DEMAND
SUPPLIERS VISIBILITY
read totheMktquickly
“Operations expertise is as big an asset for Apple as
product innovation or marketing.”
13
Operations Management (OM)
is everywhere – Part I
PRODUCTS: Everything you wear, eat, sit on or in,
use, read, or knock about on a sports field comes
to you by courtesy of operations.
SERVICES: Every book you borrow from the
library, every medical treatment you receive, every
lecture you attend at a university, every service you
receive comes to you by courtesy of operations.
14
Characteristics of Products & Services
Product / Services
Goods
Core Goods Core Services
• Tangible • Intangible
• Can be inventoried • Cannot be inventoried
• Little customer contact • Extensive customer contact
• Long lead time order receive • Short lead time
• Often capital-intensive • Often labor intensive
• Quality easily assuredCvmeasure • Quality harder to assess
• Material is transformed • Information or customer is
transformed 15
Manufacturing and Services
Continuum of Characteristics
Service
Orientation
Mining (coal)
Automobiles
Fast Food
Banking
Consulting
Manufacturing
Orientation
16
Service-Product Bundle
Element Core Goods Core Service
Example Example
Business Automobile (e.g. Toyota) Hair Salon
Core Motor cars Hair treatment
Non-core Car accessories Shampoo &
Goods conditioner
Non-core Warranty / Manicure
Service Maintenance
service
Goal: Add value to customers 17
Goods vs. Services:
Total Product Experience
• Total product experience refers to all the
outputs of an operation, both goods and
services, that are combined to define a
customer’s complete consumption
experience.
• The experience includes all aspects of
purchasing, consuming, and disposing of
the product.
18
19
Trends in National Employment by Sector
- The Migration
Services:
Value from enhancing the
capabilities and interactions among people
Goods:
Percent
Value from
making a product
Agriculture:
Value from
harvesting nature
Year 2012
20
Percentage Employment in Services
Top Ten Postindustrial Nations
Country 1965 1975 1985 1995 2005
United States 59.5 66.4 70.0 74.1 78.6
United Kingdom 51.3 58.3 64.1 71.4 77.0
The Netherlands 52.5 60.9 68.3 73.4 76.5
Sweden 46.5 57.7 66.1 71.5 76.3
Canada 57.8 65.8 70.6 74.8 76.0
Australia 54.6 61.5 68.4 73.1 75.8
France 43.9 51.9 61.4 70.0 74.8
Japan 44.8 52.0 57.0 61.4 68.6
Germany 41.8 n/a 51.6 60.8 68.5
Italy 36.5 44.0 55.3 62.2 65.5
Operations Management (OM)
is everywhere – Part II
Schools Construction
Restaurants
Hospitality Banks
Military
Agriculture Transportation
Health Sport Teams
Care Municipalities
Government
Manufacturers Services Not-for-Profit Entertainment
Retail
Organizations
21
Operations Management (OM):
A Basic Definition
Operations
Management (OM):
is the management of
processes used to
design, supply,
produce, and deliver
valuable goods and
services to customers
22
What is Operations?
Inputs Transformation Outputs
A process is a system of activities that transforms
inputs into valuable outputs. 23
What is Operations? (Cont’d)
INPUTS OUTPUTS
Materials
Goods
Labor
Transformation
Processes
Capital
Services
Knowledge
24
What is Operations Management (OM)?
Operations
Management
Transformation
Process
Inputs Outputs
25
Transformation Processes: Examples
Production Primary Inputs Transformation Primary Outputs
System
Automobile Purchased parts Fabrication and Automobiles
Factory raw materials, tools, assembly
equipment, workers
Restaurant Hungry customers, Transform raw Satisfied
raw materials, materials into food customers
workers, equipment and serve the
customers
University Students, teachers, Transmit information, Educated
staff, books, supplies, develop knowledge individuals
buildings and skills
26
Operations Management (OM):
Common Challenges
• Lowering costs
• Improving quality
• Enhancing product
desirability
• Aligning OM with the
company’s competitive
strategy
• Evolving with the needs of
customers, competition, and
technology
But, some companies do a lot
better than their competitors. 27
General Motors versus Toyota
GM, Toyota,
Framingham Takaoka
Assembly hours 31 16
per auto
Assembly space 8.1 4.8
per auto
Assembly defects 135 45
per 100 autos
Average inventory 2 weeks 2 hours
of parts
Source: International Motor Vehicle Program, MIT,
28
1990
29
General Motors versus Toyota (2005)
Toyota GM
Revenue (billion $) 179.1 192.6
Net income (billion $) 16 -1.2
Number of employees 285,977 335,000
Revenue per employee $626,274 $574,925
Income per employee $55,945 -$3,582
Market capitalization (in billion $) $176.79 $17.23
Days of inventory 35 71
Source: finance.yahoo.com
30
PC Industry 2005
Dell IBM HP
Revenue (billion $) 55.9 91.1 88.7
Net income (billion $) 3.6 8.0 3.7
Number of employees 65,200 341,750 150,000
Revenue per employee $857,362 $266,569 $591,333
Income per employee $55,215 $23,409 $24,667
Days of inventory 4.6 19 38
Source: finance.yahoo.com
31
Airline industry
• In 2005, Southwest Airlines posted a profit for its 33rd
consecutive year
• In the first half of 2005, the ten largest airlines lost nearly
US$10 billion
• Some airlines filed for bankruptcy protection, and many
were undergoing massive efforts to restructure their
business
Source: http://biz.yahoo.com/
See also:
http://www.cbsnews.com/stories/2007/08/30/sunday/main3221531.shtml
32
Airline Industry – Cont.
What are they doing to survive?
• Charge for check-in bags
33
Airline Industry – Cont.
34
Airline Industry – Cont.
What are they doing to survive?
• Charge for check-in bags
what is your strategy to avoid this charge?
• Boarding with order
35
Airline Industry – Cont.
“Southwest says that if its
boarding times increased
by 10 minutes per flight, it
would need 40 more planes
at a cost of $40 million each
to run the same number of
flights it does currently.”
Can they do better?
36
Airline Industry – Cont.
What are they doing to survive?
• Charge for check-in bags
what is your strategy as response?
• Boarding with order
• Dynamic pricing
37
Dynamic Pricing
Compare the price of each ticket in two
situations:
• 10 tickets 4 weeks from departure
vs. 10 tickets 1day from departure
Ticket value drops with time if there are no
sales.
• 10 tickets 4 weeks from departure
vs. 5 tickets 4 weeks from departure
Ticket value rises if a sale is made.
Why study OM?
• OM involves using resources and managing
organizational relationships
• When done well, effective OM can:
–Use resources more efficiently
–Improve business processes effectiveness
–Improve relationships between business entities
–Help meet strategic goals
–Increase customer service
38
Key Take-away
• Characteristics of Products & Services
• Service-Product Bundle
• OM definition and challenges
39
Appendix
Careers in Operations
Management
Careers in Operations Management
Chief Operating Business
Branch manager Project manager
Officer Consultant
Call center Supply chain Hotel Front Quality control
manager manager Office Manager manager
Lean Business
process Production
Plant manager improvement
improvement control analyst
manager
analyst
Facilities Purchasing Hospital Department
manager manager administrator store manager
