CHAPTER ONE

PRODUCTION/OPERATIONS
PRODUCTION AND OPERATIONS MANAGEMENT
MANAGEMENT
SIXTH EDITION

WILLIAM J. STEVENSON
Rochester Institute of Technology

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The McGraw-Hill
McGraw-Hill Companies,
Companies, Inc., 1999
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 PART ONE
CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
INTRODUCTION
Chapter One
Production and Operations Management
Chapter Two
Productivity, Competitiveness, and Strategy

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 CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Management

Operations function consists of all activities directly

related to producing goods or providing services.

Organization

Finance Production/ Marketing

Operations

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PRODUCTION AND OPERATIONS MANAGEMENT
Business Operations Overlap

Production/
Operations

Marketing Finance

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PRODUCTION AND OPERATIONS MANAGEMENT
Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
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Value-Added
The difference between the cost of inputs
and the value or price of outputs.

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
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PRODUCTION AND OPERATIONS MANAGEMENT
Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned vegetables
Metal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment

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Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy patients
Hospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

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 CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Interfaces
Industrial
Engineering Maintenance

Distribution
Operations Public Relations

Purchasing Personnel
Accounting
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 CHAPTER ONE
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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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 CHAPTER ONE
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Decision Making

System operation
personnel
inventory
scheduling
project
management
quality assurance

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 CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Major Characteristics of
Production Systems

Degree of standardization
Type of operation
project
job shop
repetitive production
continuous processing

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Manufacturing or Service?

Tangible Act

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Key Differences
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Quality assurance

These differences are beginning to fade

in many cases
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Manufacturing vs Service
Characteristic Manufacturing Service
Output Tangible Intangible
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 High Low
quality problems
High

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 CHAPTER ONE
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Responsibilities of
Operations Management
Planning Organizing
Capacity Degree of centralization
Location Subcontracting
Products and services Staffing
Make or buy Hiring/laying off
Layout Use of Overtime
Projects Directing
Scheduling Incentive plans
Controlling Issuance of work orders
Inventory Job assignments
Quality
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Models

A model is an abstraction of reality.

Physical
Schematic
Mathematical
Tradeoffs

What are the pros and cons of models?

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Systems Approach

The whole is greater than the sum of the parts.

Suboptimization

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Quantitative Approaches

Linear programming
Queuing Techniques
Inventory models
Project models
Statistical models

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Pareto Phenomenon

A vital few things are important for reaching

an objective or solving a problem.

80/20 Rule - 80% of problems are caused by

20% of the activities.

How do we identify the vital few?

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Recent Trends

Global competition
Operations strategy
Total quality management (TQM)
Flexibility
Time reduction Technology

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Recent Trends (Continued)

Worker involvement
Reengineering
Environmental issues
Service

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