Operations Management includes all of the activities managers engage in to produce goods (products) and services.

1
What is Production?

• Operations Management includes all of the
  activities managers engage in to produce goods
  (products) and services.
• Planning takes place before anything is produced
  and during the production process.

2
What is Production? (continued)

• Product Lexus IS 300
• Manufacturer Toyota
• Marketing research must determine if customers
  are willing to pay 30,000 and what special
  features they want.
• Operations Manager turns the concept into
  reality and must make sure the organizations
  goal is achieved.
• For the IS300 such things as product quality,
  performance standards, inventory of both raw
  materials and finished product, and production
  costs.

3
Competition in the Global Marketplace

• Successful companies must focus on the following
• Reduce production costs by selecting suppliers
  that offer higher-quality raw materials and
  components at reasonable prices.
• Use state-of-the-art manufacturing equipment.
• Use computer-aided and flexible manufacturing
  systems that allow more customization.
• Improve control procedures to help cut
  manufacturing costs.
• Build new manufacturing facilities in foreign
  countries where labor costs are lower.

4
Manufacturing Processes

• Analytical Process a process in operations
  management in which raw materials are broken down
  into different parts (milk, oil, etc)
• Synthetic Process a process in operations
  management in which raw materials or components
  are combined to create a finished product.
  (cars, electronic equipment, etc)

5
The Conversion Process

• To have something to sell, a business must
  convert resources into goods and services.
• The purpose of this conversion of resources is to
  provide utility to customers.

6
The Conversion Process (continued)

• Utility is the ability of a good (product) or
  service to satisfy a human need.
• Operations Management focuses primarily on Form
  Utility which is created by converting raw
  materials, people, finances and information into
  finished products.

7
The Conversion Process (continued)

• The Nature of Conversion
• The focus or major resource used in the
  conversion process.
• Its magnitude of change
• The number of production processes employed.

8
The Conversion Process (continued)

• Focus the resource or resources that make up
  the major or most important input.
• NBB financial resources are major resource
• BAPCO material resources
• UoB information resources
• ABCO or Bayt.com human resources

9
The Conversion Process (continued)

• Magnitude of Change degree to which the
  resources are physically changed.
• Glad Cling Wrap various chemicals in liquid or
  powder from are combined to form long, thin
  sheets of plastic.
• Gulf Air produces no physical change in its
  original resources simply provides a service and
  transports people from one place to another.

10
The Conversion Process (continued)

• Number of Production Processes
• A single firm may employ one process or many.
• In general, larger firms that make a variety of
  products use multiple production processes.

11
Increased Importance of Services

• Service Economy is one in which more effort is
  devoted to the production of services than to the
  production of goods (products).
• 1900s only 28 of US workers were employed in
  the service industry.
• 2001 over 80 of US workers were employed in
  the service industry.

12
Goods Production vs Services Production

• Services are consumed immediately and cannot be
  stored.
• Services are provided where and when the customer
  desires the service. Customers may not travel as
  far to obtain a service as they would to purchase
  a product.
• Services are usually labor intensive because the
  human resource is often the most important
  resource used in the production of services.
• Services are intangible so it is more difficult
  to measure customer satisfaction.

13
Goods Production vs Services Production

• Service firms often listen more carefully to
  customers and respond more quickly to the
  markets changing needs.
• Manufacturing companies are responding to
  customers needs for better service by doing
  customer surveys and providing 800 numbers.
• They are also providing better after-sale service
  to those who buy their products.

14
Planning for Production

• Only a few of the many ideas for new products,
  refinements and extensions ever reach the
  production stage.
• Planning for Production involves three (3) major
  phases
• Design planning
• Facilities planning and site selection
• Operational planning

15
Planning for Production. . .(continued)

• Design Planning the development of a plan for
  converting a product idea into an actual product.
  Major decisions deal with
• Product Line
• Required Capacity
• Use of Technology

16
Planning for Production. . .(continued)

• Product Line a group of similar products that
  differ only in relatively minor characteristics.
• Management must decide how many different product
  variations there will be.
• Must balance customers preferences with
  production requirements.
• Product design is the process of creating a set
  of specifications from which the product may be
  produced.

17
Planning for Production. . .(continued)

• Capacity the amount of products and services
  that an organization can produce in a given
  period of time.
• A decision about capacity will determine the size
  of the production facility.
• Capacity is critical for manufacturing firms and
  service businesses.

18
Planning for Production. . .(continued)

• Use of Technology the degree to which
  automation will be used to produce a product or
  service.
• Labor-intensive technology is a process in which
  people must do most of the work. (housecleaning,
  haircutting, etc.)
• Capital-intensive technology is a process in
  which machines and equipment do most of the work.
  (dairy, car manufacturers, assembly plants for
  TVs and other electronic equipment, etc.)

19
Planning for Production. . .(continued)

• Facilities Planning and Site Selection
• Management must decide whether to build a new
  plant or refurbish an existing one.
• Generally, decision to build a new plant will
  depend on whether the existing plant has extra
  capacity to produce a new product or the cost of
  updating the old plant is less than building a
  new one.

20
Planning for Production. . .(continued)

• Where to Locate Production Facilities?
• Location of major customers
• Transportation costs to deliver finished products
  to customers
• Geographic locations of suppliers of parts or raw
  materials
• Availability and cost of skilled and unskilled
  labor (HR function)
• Quality of life for employees and management in
  the proposed location
• The cost of both land and construction required
  to build a new production facility
• Environmental regulations and zoning laws
• Financial support, if any, offered by local and
  state governments
• Special requirements used in the production
  process (i.e., great amounts of water or energy
  used in the production process)

21
Planning for Production. . .(continued)

• Plant Layout is the arrangement of machinery,
  equipment and personnel within a production
  facility
• Three designs of plant layout include
• Process Layout body work in a garage
• Product Layout assembly line in car production
• Fixed-Position Layout large products - ASRY

22
Planning for Production. . .(continued)

• Operational Planning deciding on the amount of
  products or services each facility will produce
  during a specific period of time.
• Step 1 selecting a Planning Horizon the time
  period during which a plan will be in effect.
• Step 2 estimating Market Demand the quantity
  customers will purchase at the going price.
  (usually sales projections prepared by Marketing
  Managers)

23
Planning for Production. . .(continued)

• Step 3 Comparing Market Demand with Capacity
  of the Plant
• Three possible outcomes
• Demand may exceed capacity
• Capacity may exceed demand
• Capacity and demand may be equal operate at
  full capacity
• If market demand and capacity are not equal,
  adjustments may have to be necessary.

24
Planning for Production. . .(continued)

• Adjusting Products or Services to Meet Demand
• Biggest reason for changes to a firms production
  schedule is a change in the amount of products or
  services that a company sells to its customers.
• When market demand exceeds capacity, production
  or services may be increased by operating
  overtime shifts with existing personnel or adding
  a second or third shift subcontracting to other
  manufacturers, or if the demand is permanent,
  expanding the plant facilities.
• When capacity exceeds market demand, a decision
  may be made to reduce output temporarily, lay off
  workers, shut down part of the plant, shift to
  production of other products or services, or
  selling unused facilities.