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Introduction to Operations Management. Operations Management Session 1. Objectives. The student will be able to: Define Operations Management Describe the nature and role of the operations function Construct and use transformation models

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Introduction to operations management

Introduction to Operations Management

Operations ManagementSession 1


Objectives
Objectives

The student will be able to:

  • Define Operations Management

  • Describe the nature and role of the operations function

  • Construct and use transformation models

  • Appreciate that operations produce both products and services

  • Understand the difference between micro and macro operations

  • Understand the importance of internal supplier-customer chains

  • Build a Typology of Operations based on the Four V’s

  • Appreciate how operations fit in with Operations Strategy


Topics
Topics

  • What is Operations?

  • What do Operations Managers do?

  • Operations Management in Goods and Services

  • Transformation Model

  • Business Process Analysis

  • Typology of Operations

  • Missions and Strategies


Definition
Definition

  • Operations Management (OM)management of activities that lead to the creation of goods and services through the transformation of inputs to outputs


Functions airline

Finance/

Marketing

Operations

Accounting

Flight

Ground

Facility

Catering

Operations

Support

Maintenance

Functions - Airline


Om critical decisions
OM - Critical Decisions

  • Managing quality

  • Design of goods and services

  • Process and capacity design

  • Layout design

  • Human resources

  • Location strategies

  • Supply-chain management

  • Inventory management

  • Scheduling

  • Maintenance


The critical decisions 1
The Critical Decisions - 1

  • Quality management

    • Who is responsible for quality?

    • How do we define quality?

  • Goods and services design

    • What product or service should we offer?

    • How should we design these products and services?


The critical decisions 2
The Critical Decisions - 2

  • Process and Capacity design

    • What processes will these products require and in what order?

    • What equipment and technology is necessary for these processes?


The critical decisions 3
The Critical Decisions - 3

  • Layout design

    • How should we arrange the facility?

    • How large a facility is required?

  • Human resources and job design

    • How do we provide a reasonable work environment?

    • How much can we expect our employees to produce?


The critical decisions 4
The Critical Decisions - 4

  • Supply chain management and JIT “Just-in-time” Inventory, Material Requirements Planning

    • Should we make or buy this item?

    • Who are our good suppliers and how many should we have?

    • How much inventory of each item should we have?

    • When do we re-order?


The critical decisions 5
The Critical Decisions - 5

  • Immediate, short term, and project scheduling

    • Is subcontracting production a good idea?

    • Are we better off keeping people on the payroll during slowdowns?

  • Maintenance

    • Who is responsible for maintenance?

  • Location

    • Where should we put the facility

    • On what criteria should we base this location decision?


Output of most operations a mixture of goods and services

PURE GOODS

Tangible

Can be stored

Production precedes consumption

Low customer contact

CRUDE OIL PRODUCTION

Can be transported

ALUMINIUM SMELTING

Quality is evident

SPECIALIST MACHINE TOOL

MANUFACTURER

RESTAURANT

COMPUTER SYSTEMS SERVICES

Intangible

Cannot be stored

MANAGEMENT CONSULTANCY

Production and consumption are simultaneous

PSYCHOTHERAPY CLINIC

High customer contact

Cannot be transported

Quality difficult to judge

PURE SERVICES

Output of most Operations a Mixture of Goods and Services


Goods versus services 1
Goods Versus Services - 1

Good Service

  • Can be resold

  • Can be inventoried

  • Some aspects of quality measurable

  • Selling is distinct from production

  • Reselling unusual

  • Difficult to inventory

  • Quality difficult to measure

  • Selling is part of service


Goods versus services 2
Goods Versus Services - 2

Good Service

  • Product is transportable

  • Site of facility important for cost

  • Often easy to automate

  • Revenue generated primarily from tangible product

  • Provider, not product is transportable

  • Site of facility important for customer contact

  • Often difficult to automate

  • Revenue generated primarily from intangible service.


The transformation model
The Transformation Model

Input Resources

Output Services

+ Products

Input Transformed Resources

Materials

Information

Customers

Transformation

Process

Customers

Input Transforming Resources

Facilities

Staff


Economic system transforms inputs to outputs
Economic System Transforms Inputs to Outputs

Inputs

Process

Outputs

Economic system transforms inputs to outputs at about an annual 1% increase in productivity:- capital 1/6 of 1%- labour 1/6 of 1%- management 2/3 of 1%

Land, Labour, Capital, Management

Goods and Services

Feedback Loop


Macro and micro operations
Macro and Micro Operations

  • Micro

    • An operation or process that can not be split up into smaller operations and processes

  • Macro

    • An operation or process that can be split up into smaller operations and processes

  • All Macro operations are made up of many Micro operations


Internal customer concept
Internal Customer Concept

  • To treat internal suppliers and customers as if they were independent external organisations

  • Each micro-operation should identify its internal customers and internal suppliers

  • Discuss with them what they need and what they can offer

  • Related to Business Process Re-engineering (BPR)


The four v s
The Four V’s

  • Volume of demand

    • How many the organisation makes

    • Service vs. Mass Production

  • Varietyin operations

    • The ability to adapt the transformation process to meet needs of the customer

    • Taxi vs. Train

  • Variation in demand

    • Adapting to changing demand

  • Visibility of transformation

    • How much of the operations functions are visible to the customer

    • Some operations have mixed high/low visibility eg Restaurant Front and Kitchen

Often they are in conflict


A typology of operations

Television plant

Fast food restaurant

Routine surgery

Mass rapid transport

Off-the-peg suit plant

University lectures

Financial audits

Jeans shop

Bespoke tailor

University tutorials

Corporate tax advice

Department store

Bread bakery

Consultancy advice

Shopping mall security

Trucking operation

Electricity utility

Financial audits

Emergency service

London underground

Most manufacturing

Prepackaged sandwich

maker

Dental technicians

Distance learning

Health care

"Cook at your table" restaurant

Dentist

Music teacher

A Typology of Operations

Electricity generator factory

Gourmet restaurant

Pioneering surgery

Taxi service

Volume

Low

High

Variety

High

Low

Variationin Demand

High

Low

Visibility

High

Low


The most important conflict

Project

Job

Batch

Mass

Continuous

Product

Unique

Unique aspect to each product

Made to order

Made to stock

Commodity

Volume

Very low

Very low to low

Low to med

High

Very high

Variety

Infinite

Very high to high

Medium to high

Low

Very low

The Most Important Conflict

Volume vs Variety


Process types products
Process Types - Products

Project

High

Job

Batch

Variety

Mass

Continuous

Low

Volume

High

Low


Process types services
Process Types - Services

Professional

High

Service (e.g shops)

Variety

Mass Services

Low

Volume

High

Low


Organisation mission statement
Organisation Mission Statement

  • Mission – the purpose or rationale for an organisation’s existence

  • Example Mission Statement –“To manufacture and service a growing and profitable worldwide microwave communications business that exceeds our customers’ expectations”


Operations management mission statement
Operations Management Mission Statement

  • General –To produce products consistent with the company’s mission as the worldwide low-cost manufacturer

  • Specific – To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production and field service opportunities


Strategies
Strategies

  • Strategy – How an organisation expects to achieve its missions and goals

  • Generic Strategies –

    • Competing on price

    • Competing on differentiation

    • Competing on response


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