OPSM 301 Operations Management
Class 1:
Introduction: What is operations management?
Chapter 1
Koç University
Zeynep [email protected]
What is the OPSM301 course about?
The role of the operations function may be
defined as the design, operation, and
improvement of the production system that
creates the firm’s primary products and services
We will study how organisations “actually do
things”
Operations as a Competitive Weapon
Dell Computers
Innovative Supply Chain Strategy (direct model) Southwest Airlines
Leader in lowfare flights, by elimination of all waste Zara
Can deliver new styles in 3-6 weeks (compared to 5-12 months for competitors)
Tansas Markets (now part of Migros)
Inventory Control system cuts stock-outs to 7.2% from 19% Vestel Durable Goods
Distribution optimization leads to increased customer satisfaction as well as lower costs
Management Decisions
Strategic (long-term) decisions Tactical (intermediate-term) decisions Operational planning and control (short-term)
decisions
A Process Management Perspective
We all manage processes...
Inputs Outputs
GoodsServices
Labor & CapitalResources
Informationstructure
Network ofActivities and Buffers
Flow units(customers, data,
material, cash, etc.)
ProcessManagement
Process Management
A business process is a network of
activities performed by resources that
transforms inputs into outputs…
Process Management is a set of
managerial policies specifying how a
process should be operated over time...
Products
Products are the desired set of process outputs Product Types
– Goods versus Services
Product Attributes– Cost– Delivery response time– Variety– Quality
Inputs-Outputs
Tangible Inputs– People– Raw material
Intangible Inputs– Information– Time
Tangible Outputs– Buildings– Cars
Intangible Outputs– Outgoing patient (hospital)– Delivered message (advertising company)
Transformations
Physical--manufacturing
Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications
All Managers are Ops Managers!
All managers must transform inputs into outputs Example: Accounting Manager
– Inputs: data, information, labor– Transformation: application of accounting principles and
knowledge– Outputs: accounting reports, knowledge of performance, ...
Therefore, all managers are in some sense Operations managers
All managers have an “operation” to run
Value Proposition System Design Planning & Control
Operations StrategyOperation Priorities
CostQualityDeliveryFlexibilityInnovationService
Product/
Service DesignProcess
SelectionTQMFacility
locationFacility LayoutJIT
Aggregate PlanningInventory SystemsProject ManagementSchedulingMRP Statistical Process Control
Operations Management
Characteristics of Goods
Tangible product Consistent product
definition Production usually
separate from consumption
Can be inventoried Low customer
interaction© 1995 Corel Corp.
Characteristics of Service
Intangible product Produced & consumed at
same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed
© 1995 Corel Corp.
Goods Contain Services / Services Contain Goods
0 25 50 75 100255075100
AutomobileComputerInstalled Carpeting
Fast-food MealRestaurant Meal
Auto RepairHospital Care
Advertising AgencyInvestment Management
Consulting ServiceCounseling
Percent of Product that is a Good Percent of Product that is a Service
1850 75 1900 25 50 75 2000 40 50 60 70 1970 75 80 85 90 95 2000Percent
United States
Canada
France
Italy
Britain
Japan
W Germany19702000
Services
Industry
Farming
250
200
150
100
50
0
80
%70
60
50
40
30
20
10
0
U.S. Employment, % Share Services as a Percent of GDP U.S. Exports of ServicesIn Billions of Dollars
Year 2000 data is estimated
Development of the Service Economy
Measure of process improvement Represents output relative to input
Only through productivity increases can our standard of living improve
Productivity
ProductivityProductivityProductivityProductivity UnitsUnits producedproducedUnitsUnits producedproducedInput usedInput usedInput usedInput used= = = =
Multi-Product (Total Factor) Productivity
Productivity =
Output
Labor + material + energy + capital + miscellaneous
Example 1
Mis Hali cleaned 65 rugs in October, consuming the following resources:– Labor: 520 hours at 13 YTL per hour– Solvent: 100 liters at 5 YTL per liter– Machine rental: 20 days at 50 YTL per day
a. What is the labor productivity per dollar? (0.0096 )
b. What is the total factor productivity? (0.00787)
Example 2
Because of its excellent location and products, a bakery in Sariyer experienced a 25% increase in demand in the last year. Customers are unable to find the product of their choice on many occasions. Space limitations preclude the possibility of adding another oven. A new process is proposed by an employee which allows several loaves to be baked simultaneously, however requires additional manpower. If the bakery made 1500 loaves this time last year with a labor productivity of 2.344 loaves per labor hour, how many workers will the bakery need to add, assuming each worker works 160 hours per month.
(1 worker)