1-1 Introduction to Operations Management

CHAPTER
1

Introduction to
Operations Management

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
1-2 Introduction to Operations Management

Operations Management
Figure 1.1

The management of systems or processes

that create goods and/or provide services

Organization

Finance Operations Marketing

1-3 Introduction to Operations Management

Value-Added
Figure 1.2
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
1-4 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
1-5 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
1-6 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
1-7 Introduction to Operations Management

Key Differences

1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
1-8 Introduction to Operations Management

Manufacturing vs Service

Characteristic Manufacturing Service

Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
High
1-9 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 . . .
1-10 Introduction to Operations Management

 The operations function

 Consists of all activities directly related to
producing goods or providing services
1-11 Introduction to Operations Management

Types of Operations
Table 1.4
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
1-12 Introduction to Operations Management

Responsibilities of Operations Management

Table 1.6

Planning Organizing
– Capacity – Degree of centralization
– Location – Process selection
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling/Improving – Issuance of work orders
– Inventory – Job assignments
– Quality
– Costs
– Productivity
1-13 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
1-14 Introduction to Operations Management

Decision Making

System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
1-15 Introduction to Operations Management

Decision Making

System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance
1-16 Introduction to Operations Management

Quantitative Approaches

• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models
1-17 Introduction to Operations Management

Business Operations Overlap

Figure 1.5

Operations

Marketing Finance
1-18 Introduction to Operations Management

Operations Interfaces
Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS
1-19 Introduction to Operations Management

Historical Evolution of Operations Management

Table 1.7
 Industrial revolution (1770’s)
 Scientific management (1911)
 Mass production
 Interchangeable parts

 Division of labor

 Human relations movement (1920-60)

 Decision models (1915, 1960-70’s)

 Influence of Japanese manufacturers