Operations

Management
Operations and
Productivity
Professor Ahmadi

Learning Objectives

Definition of Operations Management (OM)

Organizational Functions
Why Study OM?
A brief history of operations management
The future of the discipline
Goods Versus Services
Measuring productivity
Career opportunities in operations
management

What Is Operations Management?

Production is the creation of goods and

services

Operations management is the set of

activities that creates value in the form of
goods and services by transforming
inputs into outputs

Organizing to Produce Goods and

Services
(Organizational Functions)

Essential functions:
Operations creates the product
Marketing generates demand
Finance/accounting tracks
organizational performance, pays bills,
collects money

Functions - Bank

Commercial Bank

Marketing

Teller
Scheduling

Operations

Check
Clearing

Transactions
Processing

Finance/
Accounting

Security

Functions - Airline

Airline

Marketing

Flight
Operations

Operations

Ground
Support

Facility
Maintenance

Finance/
Accounting

Catering

Functions - Manufacturer

Manufacturing

Marketing

Manufacturing

Finance/
Accounting

Operations

Production
Control

Quality
Control

Purchasing

Why Study OM?

OM is one of three major functions
(marketing, finance, and operations)
of any organization.
We want (and need) to know how
goods and services are produced.
We want to understand what
operations managers do.
OM is such a costly part of an
organization.
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What Operations Managers Do

Basic Management Functions

Planning
Organizing
Staffing
Leading
Controlling

The Critical Decisions

Quality management
Service and product design
Process and capacity design
Location
Layout design
Human resources and job design
Supply chain management
Inventory, material requirements planning,
Intermediate, short term, and project
scheduling
Maintenance

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Major Events in OM
Standardized parts (Eli Whitney
1800)
Scientific Management (Frederick
Taylor 1881)
Coordinated assembly line ( Henry
Ford 1903)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian
Gilbreth 1922)
Quality control (Deming 1950)
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Major Events in OM (Continued)

CPM/PERT (DuPont 1957)
Material requirements planning
(Orlicky 1960)
Computer aided design (CAD 1970)
Flexible manufacturing system (FMS
1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing
(1990)
Globalization (1992)
Internet (1995)
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New Challenges in OM
From

Local or national focus

Batch shipments
Low bid purchasing
Lengthy product development
Standard products
Job specialization

To

Global focus
Just-in-time

Supply chain partnering

Rapid product development

Mass customization
Empowered employees,
teams

Others:
Environmental
Sensitivity
Ethics

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Goods Versus Services

Goods

Can be resold
Can be inventoried

Services

Some aspects of
quality measurable
Selling is distinct
from production

Reselling unusual
Difficult to inventory
Quality difficult to
measure
Selling is part of
service

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Goods Versus Services - Continued

Goods

Services

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.

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Productivity Measurement

Units produced
Productivity =
Input used

Measure of process improvement

Represents output relative to input
Only through productivity increases can our
standard of living improve

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Multi-Factor Productivity

Output
Productivity =
Labor + Material + Energy
+ Capital + Miscellaneous
Also known as total factor productivity
Output and inputs are often expressed
in dollars
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Productivity Variables

Labor - contributes about 10% of the annual

increase
Capital - contributes about 32% of the annual
increase
Management - contributes about 52% of the
annual increase

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Entry-Level Jobs in OM

Purchasing planner/buyer
Production (or operations) supervisor
Production (or operations) scheduler/controller
Production (or operations) analyst
Inventory analyst
Quality specialist
Others

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