Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver

the firms primary products and services.

Operations is one of the principal business functions along with marketing and finance. Operations is the most interesting business function because we actually make something: transform inputs into outputs. Operations management is planning, coordinating, and executing all the activities that create goods and services.

A production system is defined as a user of resources to transform inputs into some desired outputs.

Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications

Classifying productive systems by volume and customization by good vs. service Identifying the operations deliverables Linking deliverables, strategy, and decisionmaking. Hierarchy of production decisions.

Project: unique goal, large scale, on-site, e.g. new parking garage Job shop: small quantities, customized product, jobs vary with customer, e.g. print shop, health care. Batch processing: moderate amounts of similar products, output may be standardized or customized, e.g. food processors, bakeries, text books.

Repetitive Process: one or only a few standardized products/services. May involve automation or use of specialized equipment, e.g. semiconductor manufacturing. Continuous process: highly uniform product/service, e.g. oil, sugar refineries.

Low Volume

Project
Job Shop Batch Repetitive Process

Customized

High Volume

Continuous Process

Standardized

Low Volume
Customized

Project planning and activity scheduling

Capacity management/server scheduling

Batch sizing and capacity planning

Production control and procurement planning High Volume Standardized Procurement planning and job scheduling

If you drop it on your foot, it wont hurt you. (Good or service?)

Services never include goods and goods never include services. (True or false?)

Goods Product oriented tangible Uniform input Uniform outputs Easy to measure productivity Able to correct problems before delivery.

Services Activity oriented intangible Variable input Variable output Difficult to measure productivity Unable to correct problems before delivery.

Careful attention to measuring productivity and quality -- subjective/qualitative. Must measure and control variability from one server to another and within the same server over time. Capacity planning is very important because there is no inventory or storage.

Quality

Flexibility

Operations Management

Speed

Price (or cost Reduction)

Value-Added Services

Problem Solving

Information

Operations Management

Sales Support

Field Support

Low Cost High Quality

VALUE

Delivery speed and reliability Flexibility in Volume Variety

AVAILABILITY

Lets look at the structure of decision-making first.

Decision Variables or Policies: What do we have to select...

How much do we make in January? How much do we plant? Do we build a warehouse in Chicago or St. Louis?

Objectives: The basis for selecting between alternative policies.

Minimize cost Maximize revenue Maximize quality Minimize lead or queue time

Constraints: Boundaries within which we must select a policy (resource constraints)

Quality must be no less that 99% conformance Cost must be no more that $5.00 per bushel Lead time must be no more that 7 days.

Capabilities/Deliverables translate into Objectives and Constraints depending upon the nature of the market/customer.

Customer or Market Requirements

Organization Goals/Objectives

Policies and Procedures

Internally inconsistent
Policies and Procedures do not contribute to organizational objectives and goals. For example, organizational goal may be to be high quality producer; but manufacturing policies stress rapid delivery.

Externally inconsistent
Organizational goals are inconsistent with customer needs. For example, customer wants high quality but organization emphasizes low cost.

Lack of communication about customer needs. Lack of understanding of customer needs. Incentive systems that do not support organizational objectives.

Forecast Aggregate Plan Master Prod Sched Procurement Plan

Operations Sched

Industrial revolution Scientific management 1900s

Human relations movement Management science Computer age Environmental Issues JIT & TQM*
Hawthorne Effect

Late 1700s Early

1930s1940s1960s1970s1980s1930s

*JIT= Just in Time, TQM= Total Quality Management

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Reengineering Global competition 1980Flexibility Time-Based Competition 1990Supply chain Management 1990Electronic Commerce Outsourcing & flattening of world 2000-

19901990-

2000-

For long-run success, companies must place much importance on their operations

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Customers demand better quality, greater speed, and lower costs Companies implementing lean system concepts a total systems approach to efficient operations Recognized need to better manage information using ERP and CRM systems Increased cross-functional decision making

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