Operations Management MBA 642

Dr. Michael Busing

01-14-03

Some Definitions of Operations Management

• Management of productive resources

• Design and control of systems responsible for productive use of:– raw materials (or supplies for service operations)– people (direct and indirect workforce)– equipment/facilities (factories or service branches)– information (planning and control systems)

Operations Management (MBA 642)versus Management Science (MBA 610)

• OM is a field of management

• Management Science is the application of quantitative methods to decision making in all fields

• OM decisions are made in the context of the firm as a whole -- starting with customers (i.e., the marketplace) and explicitly considering a firm’s corporate strategy.

The Production System

• The production system is the heart of OM.– Uses resources to transform inputs into some

desired output.

Inputs

• RMH - patients

• BW3 - hungry/thirsty customers

• General Motors - sheet steel, engine parts

• JMU – MBA Students

• Pier One - shoppers

• Target Distribution Center - stockkeeping units (SKU’s)

Transformations

• RMH - health care procedures • BW3 - preparation/service of food/drink• General Motors - fabrication and assembly

of cars• JMU - imparting of knowledge and skills• Pier One - filling of orders• Target Distribution Center - storage and

redistribution

Desired Outputs

• RMH - healthy individuals

• BW3 - satisfied customers

• General Motors - high quality cars

• JMU - educated and employable individuals

• Pier One - sales to satisfied customers

• Target Distribution Center - right item at right place at right time.

Why Study Operations Management?

• OM activities are at the core of all business organizations regardless of what business they are in

• At least 35% of all jobs are in OM related areas

– customer service, quality assurance, production planning and control, scheduling, job design, inventory management

• Other functional areas such as information systems, finance, accounting, human resources, logistics, marketing, purchasing, etc. are all interrelated with OM activities.

Operations Management Professional Societies

• American Production and Inventory Control Society (APICS)

• American Society for Quality (ASQ)

• National Association of Purchasing Management (NAPM)

Functions Within Business Organizations

• Organizations are formed to pursue goals that are achieved more efficiently by the concerted efforts of a group of people than by individuals working alone.

• Organizations are either profit or nonprofit.

Functions Within Business Organizations

• Three Basic Functions– finance– marketing– production/operations

• Functions must interact to achieve the goals and objectives of the organization.

• Success depends not only on the individual functional area, but on the interface.

Operations as it Relates to Other Disciplines

Functions Within Business Organizations

Personnel/Human Resources

OM/Finance Interrelationship

• Budgeting: Operating performance - standard costs versus actual costs

• Economic Analysis: Evaluation of various plant/equipment alternatives

• Funding/Provision of funds: Cash Flow issues - how much/when

OM/Marketing Interrelationship

• Advertising/pricing decisions are made by marketing people.

• Marketing is closest to customer wants/needs and can communicate these to operations (short and long term requirements).

• Marketing is in tune with competition.

OM/HR Relationship

• Aggregate Planning– Hiring/Firing Decisions– Undertime/Overtime Issues

• Workplace Safety Issues

• Quality/Training Programs

• Productivity/Motivation Issues

Current Event

Operations System design versus operation

• System Design Decisions: involves decisions that relate to system capacity, geographic location of facilities, arrangement of departments and placement of equipment, product and service planning, and acquisition of equipment.

Operations System design versus operation

• System Operation Decisions: management of personnel, inventory planning and control, scheduling, project management, and quality assurance

Operations System design versus operation

• System design essentially determines many of the parameters of system operation.– e.g., cost, space capacities, and quality

Differentiation Features of Operations Systems

• Degree of Standardization (standardized versus customized) - volume versus cost

• Type of operation (job shop versus assembly line versus flow)

• Goods versus Services– customer contact, uniformity of input, labor

content, uniformity of output, measurement of productivity, quality assurance.