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◦ Introduction to Operations Management, ◦Why Study Operations Management?◦Organizational Model/OM in the Organizational Chart, ◦Why study OM?◦Operations/Production Systems, ◦Historical Development of OM, ◦Current Issues in Operations Management
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Operations management is the management of an organization’s productive resources or its production system.
A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production
system. The primary concern of an operations manager is the activities of the
conversion process.
[email protected] +919867570665
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Operations Management (OM)is the process, which combines and transforms various resources (inputs) used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organizationis that function of an organization, which is concerned with the transformation of a range of inputs into the required products/services having the requisite quality levelIs the set of interrelated management activities, which are involved in this transformation processis defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services
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Operations & Supply Management (OSM) is defined as the design, operations and improvement of the system that create and deliver the firm’s primary products and serviceslike other line functions viz. Marketing, Finance, is also a functional field with clear line management responsibilities
Operations & Supply Management (OSM) Vs. Operations Research (OR), Management Science (MS) and Industrial Engineering (IE)While OSM is a field of Management whereas OR/MS is the applications of quantitative methods to decision making in all the fields and IE is an engineering disciplineWhile OSM managers uses decision making tools of OR/MS (Critical path scheduling) and are concerned with many of the issues of IE (factory automation), OSM’s distinct management role distinguishes it from others
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MarketingMarketing
MISMISEngineeringEngineering
HRMHRM
QAQA
AccountingAccounting
SalesSales
FinanceFinance
OMOM
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OM in the Organization Chart
OperationsOperations
Plant Manager
Plant Manager
OperationsManager
OperationsManager
DirectorDirector
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Finance Marketing
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Business Education
Systematic Approach to Org. Processes
Career Opportunities
Cross-Functional Applications
OperationsManagement
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Purchasing planner/buyer Production (or operations) supervisor Production (or operations) scheduler/controller Production (or operations) analyst Inventory analyst Quality specialist
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Operations as a System Decision Making in OM
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InputsInputsInputsInputs OutputsOutputsOutputsOutputsConversionConversionSubsystemSubsystemConversionConversionSubsystemSubsystem
Production SystemProduction System
ControlControlSubsystemSubsystem
ControlControlSubsystemSubsystem
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External◦Legal, Economic, Social, Technological
Market◦Competition, Customer Desires, Product Info.
Primary Resources◦Materials, Personnel, Capital, Utilities
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A transformation process uses resources to convert inputs into some desired outputs
Inputs may be raw material, efforts, knowledge or finished product from some other system
Categories of Transformation Process◦ Physical (as in manufacturing)◦ Locational (as in transportation)◦ Exchange (as in retail)◦ Storage (as in distribution)◦ Physiological (as in health care)◦ Informational (as in Telecommunication)
These Transformations are not mutually exclusive (Example : Departmental Store – allows price comparison by shoppers(informational), Stores SKUs (Storage), Sells goods (exchange)
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Direct◦Products◦Services
Indirect◦Waste◦Pollution◦Technological Advances
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Companies cannot compete with marketing, finance, accounting, and engineering alone
We focus on OM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside
To succeed, a firm must have a strong operations function teaming with the other organization functions
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Strategic DecisionsThese decisions are of strategic importance and have long-term significance for the organization.Examples include deciding:
◦ the design for a new product’s production process
◦ where to locate a new factory◦ whether to launch a new-product
development plan
Operating DecisionsThese decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits
Examples include deciding:◦ how much finished-goods inventory to
carry◦ the amount of overtime to use next
week◦ the details for purchasing raw material
next monthControl Decisions These decisions concern the day-to-
day activities of workers, quality of products and services, production and overhead costs, and machine maintenance
Examples include deciding:◦ labor cost standards for a new product◦ frequency of preventive maintenance◦ new quality control acceptance criteria
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Information about the outputs, the conversions, and the inputs is fed back to management.
This information is matched with management’s expectations When there is a difference, management must take corrective action
to maintain control of the system
Set Goals (Management Expectations-
Targets)
Measure (Info on O/P,I/P &
Conversion)
Compare with Goals & Identify
Gaps
Implement Corrective Actions for Variances
Closed LoopControl Process
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Example : Typical SystemsSystem Primary Input Resources Primary Transformation
Function(s)Typical desired Output
Hospital Patients Doctors, Nurses, Medical Supplies, Equipment
Health care (physiological) Healthy Individual
Restaurant Hungry Customer
Food, Chef, Waiters, Environment
Well prepared, well served food, good environment (Physiological & exchange)
Satisfied Customers
College or University
High school Grads
Teachers, Books, classrooms
Imparting Knowledge & skills (Informational)
Educated Individuals
Distribution Center
Stock keeping units (SKUs)
Storage bins, stock pickers
Storage & redistribution(Storage)
Fast Delivery, Availability of SKUs
Airlines Travelers Airplanes, Crews, Scheduling/ticketing system
Move to destination(Locational)
On-time, safe delivery to destination
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Five differencesFirst, Service is an intangible process that cannot be weighed or measured while good is a physical output of a process that has physical dimensions
◦ Service innovation unlike product innovation can not be patented imposing threat of competition replicating it
◦ Intangibility is a problem for customer as service can not be tried out and tested before it is purchased
Second, Service requires some interaction with customers for it to be a service and must be designed to handle customer presence. Goods, however are a re generally produced in facilities separate from customerThird, Services are inherently heterogeneous, they vary from day to day and even hour by hour, as a function of attitude of customers and the servers.. Thus even the highly scripted work such as that in call centers can produce unpredictable results. Goods however can be produced with very tight specifications and with essentially zero variability w.r.t. timeService as a product are perishable and time dependent unlike Goods and can not be storedSpecifications of a service are defined and evaluated as a package of features that effect the five senses (Perception)
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Core services are basic things that customers want from products they purchase
Core Services Performance Objectives
OperationsManagement Flexibility
Quality
Speed
Price (or cost Reduction)
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Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way
Value-Added Service Categories
OperationsManagement Information
Problem Solving
Sales Support
Field Support
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JIT and TQC Manufacturing Strategy Paradigm Service Quality and Productivity Total Quality Management and Quality Certification Business Process Reengineering Six-Sigma Quality Supply Chain Management Electronic Commerce Service Science
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Service science, Management & Engineering (SSME) is a term introduced by IBM to describe service science, an interdisciplinary approach to the study, design, and implementation of services systems – complex systems in which specific arrangements of people and technologies take actions that provide value for others
SSME has been defined as the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another
Today, SSME is a call for academia, industry, and governments to focus on becoming more systematic about innovation in the service sector, which is the largest sector of the economy in most industrialized nations, and is fast becoming the largest sector in developing nations as well
SSME is also a proposed academic discipline and research area that would complement – rather than replace – the many disciplines that contribute to knowledge about service
The interdisciplinary nature of the field calls for a curriculum and competencies to advance the development and contribution of the field of SSME
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Year Concept Tool Originator
1910's Principles of scientific mgmt Formalized time-study and work-study Frederick Taylor
Industrial psychology Motion study Frank & Lillian Gilbreth
Moving assembly line Activity scheduling chartHenry Ford & Henry Gantt
Economic lot size EOQ applied to inventory control F.W. Harris
1930's Quality controlSampling inspection & statistical tables for quality control
Walter Shewhart, H.F. Dodge, & H.G. Romig
Hawthorne Studies of worker motivation
Activity sampling for work analysisElton Mayo & L.H.C. Tippett
1940'sMultidisciplinary team approaches to complex system problems
Simplex method of lineary programmingOperations research groups and George B. Dantzig
1950's-60's
Extensive development of operations research tools
Simulation, waiting-line theory, decision theory, mathematical programming, project scheduling & CPM
Many researchers
1970'sWidespread use of computers in business
Shop scheduling, inventory control, forecasting, project management, MRP
Led by computer manufacturers
Service quality & productivity Mass production in the service sector McDonalds
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Year Concept Tool Originator
1980's Manufacturing strategy paradigm Manufacturing as a competitive weapon Harvard Business
JIT, TQC, and factory automationKanban, poka-yokes, CIM, FMS, CAD/CAM, robots, et
Tai-Ichi Ohno, W.E. Deming, J.M. Juran
Synchronous manufacturingBottleneck analysis, OPT, theory of constraints
Eliyahu M. Goldratt
1990's Total quality managementBaldrige quality award, ISO 9000, QFD, value & concurrent engineering, continuous improvement
NIST, ASQ, ISO
Business process reengineering Radical changeM. Hammer & major consulting firms
Electronic enterprise Internet, WWWUS Government, Netscape, Microsoft
Supply chain management SAP/R3, client/server SAP, Oracle
2000's E-commerce Internet, WWWAmazon, eBay, AOL, Yahoo
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Synergies must exist with other functional areas of the organization
Operations account for 60-80% of the direct expenses that burden a firms profit.
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Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues
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Coordinate the relationships between mutually supportive but separate organizations
Optimizing global supplier, production, and distribution networks
Increased co-production of goods and services Managing the customers experience during the service
encounter Raising the awareness of operations as a significant
competitive weapon
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OM important in any organization Global competition forces rapid evolution of OM Decision based framework focus of course
◦Strategic, Operating, and Control
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A major objective of today’s topic is to show how smart
managers can do which of the following?
a.Improve efficiency by lowering costs
b.Improve effectiveness by creating value
c.Increasing value by reducing prices
d.Serving customers well
e.All of the above
Answer: e. All of the above
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In the Input-Transformation-Output Relationship, a typical “input” for a Department Store is which of the following?a.Displaysb.Stocks of goodsc.Sales clerksd.All of the abovee.None of the above
Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”.)
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In which of the following decades did the concept of quality control originate?
a. 1920’sb. 1930’sc. 1940’sd. 1950’se. 1970’s
Answer: b. 1930’s (Tools such as sampling inspection and statistical tables where first developed by Walter Shewhart, H. F. Dodge, and H. G. Romig.)