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Chapter 1. Introduction. The 3 Dimensions of Operations. The Realm of Operations. The Operations Function. Marketing. Operations. Finance. -Creating Demand-Production of goods -Acquisition and -Generating Sales & services, 80% of allocation of

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Chapter 1

Introduction


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The 3 Dimensions of Operations


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The Realm of Operations


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The Operations Function

Marketing

Operations

Finance

-Creating Demand-Production of goods -Acquisition and

-Generating Sales & services, 80% of allocation of

both physical & capital

human resources


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Tangible

Act

Manufacturing Service

  • Production of goods – tangible output

  • Delivery of services – an act


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Goods vs Service

Steel productionAutomobile fabrication

Home remodelingRetail sales

Auto Repair

Appliance repair

Maid Service

Manual car wash

Teaching

Lawn mowing

High percentage goods

Low percentage service

Low percentage goods

High percentage service


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Output

Intangible

Tangible

Customer contact

High

Low

Uniformity of input

Low

High

Labor content

High

Low

Uniformity of output

Low

High

Measurement of productivity

Difficult

Easy

Opportunity to correct

Low

High

quality problems

Manufacturing vs Service

Characteristic

Manufacturing

Service


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An Operation As A Productive System

Inputs

Outputs

Energy

Transformation (Conversion) Process

Materials

Labor

Goods or Services

Capital

Information

Feedback information for control of process inputs and process technology


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What is Operations Mgmt.?

  • Creation and Distribution of Goods and Services

  • Procurement of Required Materials


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What is Operations Mgmt.?

  • The Traditional Model

    OM transforms factors of production into goods or services of higher value

  • The Business Process Model of the Firm OM is involved in doing or supporting the four core sets of business processes

    • Determining customer needs

    • Developing product strategy (product innovation)

    • Managing the entire supply chain

    • Managing non-value adding support activities


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Implications of the Business Process Perspective

  • Operations Managers Must Maintain a Cross-functional perspective

    • Concern about pleasing the customer is paramount

    • A resource balancing act: things, humans and information

    • The Operations Manager must wear many hats

    • Profit = MS1 x MS2x MS3

      = market size x market share x margin on sales

      where margin on sales = price – cost


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Managing the Operations Subsystem

  • Functions of the operations manager:

    • Planning

      • Product Planning

      • Facilities Design

    • Organizing

      • Determines the activities required to achieve the operations subsystem’s goals.

      • Assign authority for carrying them out.

    • Controlling

      • Measure the outputs to see if theyconform to what has been planned.


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Functions of the operations manager

Planning & Organizing Inputs

-Management

-Labor

-Capital

-Land

Planning & Organizing

The Conversion

Process

Outputs

-Goods

-Services

Feedback to enhance control


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General Model for Production/Operations Management


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Tactical & Strategic Decisions


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Operations Management Decisions

Indep.

Demand

Materials

Requirement

Planning

Process

Capacity

-Process Selection

-Choice of Tech.

-Layout

Facilities Decision

Sched. Oper.

Proj. Sched.

Inventory

Job

Design

Work Measure

Managing Work Force

Planning Quality

Quality Control

Quality

Work Force


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Criteria for Operations Decisions

  • Cost

  • Quality

    • Concerned with the quality of product or service produced by operations

  • Dependability

    • May be measured by:

      • Percentage of stockout

      • Percentage of delivery promises met


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Criteria for Operations Decisions

  • Flexibility

    • Involves the ability of operations to make changes in product design or in the volume of product delivery


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Strategy Operations Management

  • Evolution of Strategy

    • Know thy enemy/Know the customer

  • Forces impacting strategy

    • Information technology/e-commerce

    • Increase customer participation/demands

    • Market growth opportunities may be limited

      • Your markets might be maturing

      • Geographic expansion opportunities may be limited

  • Two Basic Approaches

    • Focus on your core competencies (stick to your knitting)

    • Demand innovation—investigate your customers’ total needs and expand your product offering scope


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POM: An Evolutionary Perspective


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A More Complicated World

Common

Market

U.S.A.

CA.

Eastern

Block

Remants

Moslem

World

China

Other Southern

Hemisphere States

Japan/Korea


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The Impact of Pace

  • Dimensions of Pace

    • Rate of new product introductions

    • Rate of new process technology introductions

    • Rate of new players—often global, introductions

  • Consequences thereof on:

    • Organization structure

    • Strategic processes

    • Manufacturing processes


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Future Challenges

  • To the OM function

    • Scarcity of worthwhile human resources

    • Deflation, inflation and/or currency fluctuations

    • A wired supply chain (is B2B still valid?)

    • Increased customer involvement

    • New product/process technologies

    • The Intellectual Property Challenge

    • Globalism

      • China / Japan / Europe / Mexico /So-called 3rd world


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