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1-1 Introduction to Operations Management
William J. Stevenson
Operations Management
6th edition
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1-2 Introduction to Operations Management
CHAPTER
1
Introduction toOperations Management
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1-3 Introduction to Operations Management
Operations ManagementOperations Management
The management of systems or processes
that create goods and/or provide services
Organization
Finance Operations Marketing
Figure 1.1
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1-4 Introduction to Operations Management
ValueValue--AddedAdded
The difference between the cost of inputs
and the value or price of outputs.
InputsLand
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Control
Feedback
FeedbackFeedback
Value added
Figure 1.2
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1-5 Introduction to Operations Management
Steel production
Automobile fabrication
Home remodeling
Retail sales
Auto Repair
Appliance repair
Maid Service
Manual car wash
Teaching
Lawn mowing
High percentage goods
Low percentage service
GoodsGoods--service Continuumservice Continuum
Low percentage goods
High percentage service
Figure 1.3
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1-6 Introduction to Operations Management
Food ProcessorFood Processor
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
vegetablesMetal Sheets Making cansWater CuttingEnergy CookingLabor PackingBuilding Labeling
Equipment
Table 1.2
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1-7 Introduction to Operations Management
Hospital ProcessHospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patientsHospital SurgeryMedical Supplies MonitoringEquipment MedicationLaboratories Therapy
Table 1.2
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1-8 Introduction to Operations Management
Manufacturing or Service?Manufacturing or Service?
Tangible Act
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1-9 Introduction to Operations Management
Production of Goods vs. Delivery of ServicesProduction of Goods vs. Delivery of Services
y Production of goods tangible output
y Delivery of services an act
y Service job categories
y Government
y Wholesale/retail
y Financial services
y Healthcarey Personal services
y Business services
y Education
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1-10 Introduction to Operations Management
Key DifferencesKey Differences
1. Customer contact2. 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
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1-11 Introduction to Operations Management
Manufacturing vs ServiceManufacturing vs Service
Characteristic Manufacturing ServiceOutput
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivityOpportunity to correct
Tangible
Low
High
Low
High
EasyHigh
Intangible
High
Low
High
Low
DifficultLow
quality problemsHigh
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1-12 Introduction to Operations Management
y Operations Management includes:y Forecasting
y Capacity planning
y Schedulingy Managing inventories
y Assuring quality
y Motivating employeesy Deciding where to locate facilities
y And more . ..
Scope of Operations ManagementScope of Operations Management
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1-13 Introduction to Operations Management
y The operations functiony Consists of all activities directly related to
producing goods or providing services
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1-14 Introduction to Operations Management
Types of OperationsTypes of OperationsTable 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
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1-15 Introduction to Operations Management
U.S. Manufacturing vs. Service Employment
0
20
40
60
80
100
45 50 55 60 65 70 75 80 85 90 95 00
Year
Percent
Y e a r e r c e
45 79 21
50 72 28
55 72 28
60 68 3265 64 36
70 64 36
75 58 42
80 44 46
85 43 57
90 35 6595 32 68
00 30 70
Figure 1 .4
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1-16 Introduction to Operations Management
Responsibilities of Operations ManagementResponsibilities of Operations Management
Products & services
Planning Capacity
Location
Make or buy Layout
Projects
Scheduling
Controlling/Improving Inventory
Quality
Organizing Degree of centralization
Process selection
Staffing Hiring/laying off Use of Overtime
Directing Incentive plans
Issuance of work orders
Job assignments
Costs
Productivity
Table 1.6
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1-17 Introduction to Operations Management
Key Decisions of Operations ManagersKey Decisions of Operations Managers
y WhatWhat resources/what amounts
y When
Needed/scheduled/orderedy Where
Work to be done
y
HowDesigned
y Who
To do the work
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1-18 Introduction to Operations Management
Decision MakingDecision Making
System Designcapacity
location
arrangement of departments
product and service planning
acquisition and placement ofequipment
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1-19 Introduction to Operations Management
Decision MakingDecision Making
System operationpersonnel
inventory
scheduling
projectmanagement
quality assurance
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1-20 Introduction to Operations Management
Decision MakingDecision Making
y Quantitative approachesy Analysis of trade-offs
y Systems approach
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1-21 Introduction to Operations Management
Quantitative ApproachesQuantitative Approaches
Linear programming
Queuing Techniques
I
nventory models Project models
Statistical models
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1-22 Introduction to Operations Management
Systems ApproachSystems Approach
The whole is greater thanthe sum of the parts.
SuboptimizationSuboptimization
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1-23 Introduction to Operations Management
Business Operations OverlapBusiness Operations Overlap
Operations
Finance
Figure 1.5
Marketing
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1-24 Introduction to Operations Management
Operations InterfacesOperations Interfaces
Public
Relations
Accounting
IndustrialEngineering
Operations
Maintenance
Personnel
Purchasing
Distribution
MIS
Legal
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1-25 Introduction to Operations Management
Historical Evolution of Operations ManagementHistorical Evolution of Operations Management
y Industrial revolution (1770s)
y Scientific management (1911)
y Mass production
y Interchangeable parts
y Division of labor
y Human relations movement (1920-60)
y Decision models (1915, 1960-70s)
y Influence of Japanese manufacturers
Table 1.7
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1-26 Introduction to Operations Management
Trends in BusinessTrends in Business
y Major trendsy The Internet, e-commerce, e-business
y Management technology
y Globalizationy Management of supply chains
y Agility
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1-27 Introduction to Operations Management
Suppliers
SuppliersDirect
Suppliers ProducerDistributor
Final
Consumer
Simple Product Supply ChainSimple Product Supply ChainFigure 1.7
Supply Chain: A sequence of activities
And organizations involved in producing
And delivering a good or service
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1-28 Introduction to Operations Management
Stage of Production ValueAdded
Value ofProduct
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
A Supply Chain forBreadA Supply Chain forBread
