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Introduction to Operations Management

Operations Management
William J. Stevenson

Muhammad Ali

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Introduction to Operations Management

CHAPTER

Introduction to
Operations Management

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Introduction to Operations Management

Operations Management
The management of systems or processes
that create goods and/or provide services
Organization

Finance

Operations

Marketing

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Introduction to Operations Management

Value-Added
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Land
Labor
Capital

Transformation/
Conversion
process

Outputs
Goods
Services

Feedback

Control
Feedback

Feedback

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Introduction to Operations Management

Manufacturing Vs. Service

Food Processor
Inputs

Processing

Outputs

Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment

Cleaning
Making cans
Cutting
Cooking
Packing
Labeling

Canned
vegetables

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Introduction to Operations Management

Manufacturing Vs. Service

Hospital Process
Inputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories

Processing

Outputs

Examination
Surgery
Monitoring
Medication
Therapy

Healthy
patients

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Introduction to Operations Management

Key Differences
Characteristic

Manufacturing Service

Output

Tangible

Customer contact

Low

High

Uniformity of input

High

Low

Labor content

Low

High

Uniformity of output

High

Low

Measurement of productivity

Easy

Difficult

Opportunity to correct
quality problems

High

Low

High

Intangible

Introduction to Operations Management

Manufacturing Vs Service
U.S. Manufacturing vs. Service Employment
Year Mfg. Service
45
79
21
50
72
28
55
72
28
60
68
32
65
64
36
70
64
36
75
58
42
80
44
46
85
43
57
90
35
65
95
32
68
00
30
70

100
80
Percent

1-8

60
40
20
0
45

50 55

60

65 70

75

Year

80 85

90

95 00

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Introduction to Operations Management

Scope of Operations Management

Operations Management includes:

Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
And more . . .

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Responsibilities of Operations Management

Planning

Capacity
Location
Products & services
Make or buy
Layout
Projects
Scheduling

Controlling/Improving

Inventory
Quality
Costs
Productivity

Organizing

Degree of centralization
Process selection

Staffing

Hiring/laying off
Use of Overtime

Directing

Incentive plans
Issuance of work orders
Job assignments

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Key Decisions of Operations Managers

What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
Who
To do the work
How
Design
How Much
Production

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Decision Making
System Design

capacity
location
arrangement of departments
product and service planning
acquisition and placement of
equipment

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Decision Making
System operation

personnel
inventory
scheduling
project
management
quality assurance

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Operations Interfaces
Industrial
Engineering
Maintenance

Distribution

Purchasing

Operations

Public
Relations

Legal
Personnel
Accounting

MIS

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Historical Evolution of Operations

Management

Industrial revolution (1770s)

Scientific management (1911)

Mass production
Interchangeable parts
Division of labor

Human relations movement (1920-60)

Decision models (1915, 1960-70s)
Influence of Japanese manufacturers

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Trends in Business

Major trends
The Internet, e-commerce
Management technology
Globalization
Management of supply chains
Agility