Certification Study Group

Operations Management

Operations Management (OM)

Refers to the development and administration of the activities involved in transforming resources into goods and services.

Key OM Terms

Manufacturing

The activities and processes used in making tangible products; also called production

Operations

The activities and processes used in making both tangible and intangible products

The Transformation Process

The process through which inputs are converted into outputs.

Inputs are resources money, materials, and Outputs are goods, ideas that result from of inputs

such as labor, energy. services, and the conversion

Transformation Process
Inputs land labor capital raw materials time information energy Transformation or Conversion procedures equipment facilities technology knowledge Outputs goods services ideas

Conversion Process

Customer

Control standards

(Feedback)

This process creates utility.

Operations Management in Service Businesses

Service providers use human and mechanical processes to provide products that are intangible

Service Businesses: Labor Requirements

Service providers are generally more labor intensive. A manufacturer is likely to be more capital intensive.

Planning and Designing Operations Systems

Operations planning

Before a company can make a product, it must decide what it will produce for what group of customers, what processes it will use to make the products, and what facilities it needs for production.

Steps in Planning and Designing Operations Systems

1. Planning the product 2. Designing the operations process a. Standardization b. Modular design c. Customization 3. Planning capacity 4. Planning facilities a. Facility location

Steps in Planning and Designing Operations Systems

4. Planning facilities b. 1. 2. 3. c. 1. 2. 3. 4. Facility layout Fixed position layout Process layout Product layout Technology Cad Cam Flexible manufacturing CIM

Choosing The Best Location Factors

Transportation Transportation

Human Resources Human Resources

Physical Factors Physical Factors

Technology and the Production Process

Robots Computer aided design Computer aided manufacturing Flexible manufacturing system Computer integrated manufacturing

Logistics
Purchasing Management Inventory Control Management Routing and Scheduling Distribution Management
The McGraw-Hill Companies, 2000

The Objectives of Purchasing

1. 2. 3. 4. 5.

Buying the right items Obtaining desired quality Buying the right quantity Paying the lowest price Obtaining inventory at the right time

Logistics and Purchasing

Make, buy, or lease decision this is the decision of choosing whether to manufacture a needed product in house, purchase it from a supplier, or to lease it If the decision is made to purchase a component it is important to maintain more than one source of supply

Types of Inventory

raw raw materials materials

work in work in process process

finished finished goods goods

transformation process
The McGraw-Hill Companies, 2000

Inventory Control

Inventory control Perpetual inventory Vendor managed inventory Material-requirements planning (MRP) Economic order quantity (EOQ) model JIT

Managing Inventory

Just-in-time (JIT) inventory management eliminates waste by using smaller quantities of materials that arrive just in time for use in the transformation process

Routing and Scheduling

Routing is the sequence of operations through which the product must pass. Scheduling is the process of assigning work to be done to departments or even specific machines or persons.

Routing and Scheduling PERT

Program Evaluation and Review Technique (PERT) a popular scheduling technique is that evaluates the sequence of activities required to complete a project to find the most efficient, or critical, path. The path that requires the longest time from start to completion is called the critical path because it determines the minimum amount of time in which the process can be completed.

A Hypothetical PERT Diagram for a McDonalds Big Mac

Grill beef patties (120) 2

9-13

Remove buns, 2 beef patties, cheese, sauce, Start lettuce, 1 onions, pickle (20)

4 Place cooked patties on bun (5)

5 Top with cheese and vegetables (15) 5

E n d

3 Apply sauce to bun (10)

Place Place Big Mac in package package in heated (5) bin (5)

Serve to customer (5)

Critical path

Activity

Event

(185) Time to complete event (seconds)

The McGraw-Hill Companies, 2000

Importance of Quality

Quality control - involves measuring goods and services against established quality standards Starts with senior management, but everyone must be involved

TQM

Total quality management (TQM) is the organizational philosophy that quality control should be incorporated throughout the transformation process

Handling Quality Issues

Statistical process control management collects and analyzes information about the production process to pinpoint quality problems.

Establishing Standards

A company must determine what standard of quality it desires and then assess whether its products meet that standard

Strategic Importance of the Production Function

The productions and operations manager is responsible for coordinating the creation of a good and service which creates profits for the company Profits are needed to survive Effective management can lower the cost of production, boost quality, and allow the firm to respond to customer demands

Certification Study Group

Organizational Leadership

The Nature of Leadership

The Meaning of Leadership

Process: what leaders actually do.

Use noncoercive influence to shape the groups or organizations goals. Motivate others behavior toward goals. Help to define organizational culture. The set of characteristics attributed to individuals perceived to be leaders.

Property: who leaders are.

The Nature of Leadership

The Meaning of Leadership

Leaders

People who can influence the behaviors of others without having to rely on force. People who are accepted as leaders by others.

Leadership Versus Management

Leadership and management are related, but different. For example, the management side of executing plans focuses on monitoring results, comparing them with goals, and correcting deviations. In contrast, the leadership side of the same activity focuses on energizing people to overcome bureaucratic hurdles to help reach goals.

Distinctions Between Management and Leadership

Leadership
Establishing direction and vision for the organization Aligning people through communications and actions that provide direction Motivating and inspiring by satisfying needs Produces useful change and new approaches to challenges

Activity
Creating an agenda Developing a human network for achieving the agenda

Management
Planning and budgeting, allocating resources Organizing and staffing, structuring and monitoring implementation Controlling and problem solving Produces predictability and order and attains results

Executing plans

Outcomes

Source: Adapted from A Force for Change: How Leadership Differs from Management by John P. Kotter. Copyright 1990 by John P. Kotter, Inc. Reprinted with permission of The Free Press, a division of Simon & Schuster Inc.

Types of Power in Organizations

Power is the ability to affect the behavior of others.

Source: Van Fleet, David D., and Tim Peterson, Contemporary Management, Third Edition. Copyright 1994 by Houghton Mifflin Company. Used with permission.

Forms of Power

Legitimate power is granted through the organizational hierarchy. Reward power is to give or withhold rewards. Coercive power is the capability to force compliance by means of psychological, emotional, or physical threat. Referent power is based on identification, imitation, loyalty, or charisma. Expert power is derived from information or expertise.

Leadership Schools

Trait Model Behavioral Models

Michigan Studies (Likert) Ohio State Studies Leadership Grid Leadership Continuum (Tannenbaum & Schmidt) Least Preferred Coworker Theory (Fiedler) Path Goal Model (Evans & House) Vroom-Yetton-Jago Model

Situational (Contingency) Models

Trait Approach

Assumed that a basic set of personal traits that differentiated leaders from nonleaders could be used to identify leaders and predict who would become leaders. The list had as many exceptions as items and soon became too long to be useful. The trait approach was unsuccessful in establishing empirical relationships between traits and persons regarded as leaders. Despite weaknesses, leaders today are often chosen on various traits.

Traits
intelligence supervisory ability initiative drive individuality

self confident risk taker motivated hard working self assurance

Leadership Behaviors

Michigan Studies (Rensis Likert)

Identified two forms of leader behavior

Job-centered behavior managers who pay close attention to subordinates work, explain work procedures, and are keenly interested in performance. Employee-centered behavior managers who focus on the development of cohesive work groups and employee satisfaction.

Michigan Studies
A Behavioral Approach to Leadership
The two forms of leader behaviors were considered to be at opposite ends of the same continuum.

Employee-centered behavior Job-centered behavior

Ohio State Studies

A Behavioral Approach to Leadership

Did not interpret leader behavior as being onedimensional as did the Michigan State studies. Identified two basic leadership styles that can be exhibited simultaneously:

Initiating-structure

Individual clearly defines leader-subordinate role, formalizes communications, and sets the working agenda Shows concern for subordinates and attempts to establish friendly and supportive climate.

Consideration

Ohio State Studies

Initial assumption was that the most effective leaders who exhibit high levels of both behaviors. Subsequent research indicated that:
Employees of supervisors ranked high on initiating structure were high performers, yet they expressed low levels of satisfaction and higher absenteeism. Employees of supervisors ranked high on consideration had low- performance ratings, yet they had high levels of satisfaction and less absenteeism. Other situational variables make consistent leader behavior predictions difficult. There is no universal or one best way model of leadership.

Leadershi p Grid
The Leadership Grid is a method of evaluating leadership styles. The Grid is used to train managers so that they are simultaneously more concerned for people and for production (9,9 style on the Grid).

High

9 8

1,9

Team Management

9,9

Country Club Management

Thoughtful attention to the needs of people for satisfying relationships leads to a comfortable, friendly organization atmosphere and work tempo.

Concern for people

Work accomplishment is from committed people; interdependence through a common stake in organization purpose leads to relationships of trust and respect.

Middle of the Road Management

5,5

Adequate organization performance is possible through balancing the necessity to get out work with maintaining morale of people at a satisfactory level.

Authority-Compliance

Impoverished Management
Exertion of minimum effort to get required work done 1,1 is appropriate to sustain organization membership. 1 2 3 4 5 6

Source: From Leadership Dilemmas Grid Solutions by Robert R. Blake and Anne Adams McCanse. (Formerly the Managerial Grid by Robert R. Blake and Jane S. Mouton.) Houston: Gulf Publishing Company, p. 29. Copyright 1991 by Scientific Methods, Inc. Reproduced by permission of the owners.

Efficiency in operations results from arranging conditions of work in such a way that human elements 9,1 interfere to a minimum degree. 7 8 9 High

0 Low Low Concern for production

Situational Approaches to Leadership

Situational Models of Leader Behavior

Assume that:

Appropriate leader behavior varies from one situation to

another.

Key situational factors that are interacting to determine appropriate leader behavior can be identified.

Situational Approaches to Leadership

Situational Variables:

Personality of leader Task to be accomplished Expectations, needs, and attitudes of followers Environment where leadership takes place

Employee Characteristics
L E A D E R S H I P S T Y L E

Experience Ability Personality Group cohesiveness

Productivity & Employee Satisfaction

Goal Clarity Task Structure

Job Characteristics

Political Behavior in Organizations

Political Behavior

The activities carried out for the specific purpose of acquiring, developing, and using power and other resources to obtain ones preferred outcomes. Common Political Behaviors

Inducementoffering to give something to someone else in return for that persons support. Persuasionpersuading others to support a goal on grounds that are objective and logical as well as subjective and personal.

Political Behavior in Organizations

Political Behavior

Common Political Behaviors

Creation of an obligationproviding support for another persons position that obliges that person to return the favor at a future date. Coercionusing force to get ones way. Impression managementmaking a direct and intentional effort to enhance ones image in the eyes of others.

Political Behavior in Organizations

Managing Political Behavior

Be aware that even if actions are not politically motivated, others may assume that they are. Reduce the likelihood of subordinates engaging in political behavior by providing them with autonomy, responsibility, challenge, and feedback. Avoid using power to avoid charges of political motivation.

Political Behavior in Organizations

Managing Political Behavior

Get disagreements and conflicts out in the open so that subordinates have less opportunity to engage in political behavior. Avoid covert behaviors that give the impression of political intent even if none exists.

A Model of Ethical Political Behavi or

Source: Gerald F. Cavanaugh, Denis J. Moberg, and Manuel Velasquez, The Ethics of Organizational Politics, Academy of Management Review, July 1981, p. 368. Used with permission.