Operations Management (MD021)

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Operations Management (MD021)

• Introduction

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Lets start out with some discussion!

• How many of you religiously watch
• Mad Money with Jim Cramer on CNBC?
• How Its Made on Discovery Science channel?
• Why?

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Lets start out with some discussion!

• Would you rather own stock in
• General Motors?
• Hyundai?
• Toyota?
• What are the risks and potential benefits of each?

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Lets start out with some discussion!

• 30 of 500 top-level executives said their dream
  job is to be a winemaker/brewmaster
  (Businessweek, 8/10/2006).
• Would you rather buy and operate
• a California vineyard?
• an upper New York state vineyard?
• a French vineyard?
• a South African vineyard?
• Mywinepod.com?

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Lets start out with some discussion!

• As a venture capitalist, would you invest 10
  million in an e-commerce startup (SpotScout.com)
  that plans a subscription/auction service to
  locate Boston parking spots for drivers?
• How will the Mobile Web (.mobi addresses) affect
  these operations?

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Why ask such questions?

• Well thought out answers for each most likely
  will involve a knowledge of operations and
  operations management in that industry

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What is Operations?
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Operations

• Any transformation process that converts inputs
  to outputs
• Systems or processes that create products
• Products consist of
• goods and/or
• services and/or
• e-service

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Types of Products The Goods-Services Continuum
NOTE I use the term product to refer to a
portfolio of goods, services, and
information/electronic services
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Production of Goods vs. ServicesKey Differences
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Types of Operations
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Manufacturing OperationsFood Manufacturing
Processes
Outputs
Inputs
Processing
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Service OperationsHospital Processes
Inputs
Processing
Outputs
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Operations along a Supply Chain
Supply Chain A sequence of activities and
organizations involved in producing and
delivering a good or service
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Which businesses have operations?

• EVERY BUSINESS HAS OPERATIONS

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What is Operations Management?
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Operations Management
The management (design and control) of systems or
processes that create goods and/or provide
services
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Operations Management Task Add Value to the Firm
Value Added the difference between the cost of
inputs and the value or price of outputs.
Also want to eliminate non-value-added steps
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Much of World History Concerns the History of
Operations Management

• Production by craftsmen and apprentices
• Industrial revolution (1770s)
• Scientific management (1911 - present)
• Mass production
• Interchangeable parts standardization
• Division of labor
• Human relations movement (1920-60)
• Decision models (1915, 1960-70s)
• Influence of Japanese manufacturers (1970s-1980s)
• Coordination of Operations via the Internet
  (1990s-2000s)
• Rise of China and India (2000s)
• Focus on Mass Customization (2000s)

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Major Themes of Operations Management Throughout
History

• Introduce science and technology into
  production/management methods.
• Improve speed of processing.
• Reduce variability improve conformance quality.
• of consumer demand
• within the production process
• Improve value-added steps of the process.
  Eliminate non-value added steps from the process.
• Improve inventory management. Reduce inventory
  levels.
• Improve flexibility of the process support
  faster delivery support customized product
  designs.

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The Operations Management Discipline
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Some Careers in Operations and Operations
Management

• Operations
• Assembly Line Worker
• Customer Service
• Plant Maintenance
• Operations Management
• Shop Floor Manager
• Retail Store Manager
• VP of Manufacturing
• President and COO

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Topic Scope of Operations Management

• Operations Management includes
• Forecasting demand
• Deciding what product(s) to make
• Deciding where to locate facilities
• Capacity planning
• Scheduling
• Managing inventories
• Assuring quality
• Motivating employees
• And many more . . .

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Key Decisions of Operations Managers

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

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Operations Management System Design vs. System
Control

• System Design
• capacity
• facility location
• arrange departments
• product planning
• acquisition and placement of processing equipment

• System Control
• personnel
• inventory management
• scheduling of jobs
• quality assurance
• project management

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What MD021 focuses on

• Understanding and Analysis of trade-offs
• Models
• Quantitative approaches
• Qualitative approaches
• Prioritization/Pareto phenomenon
• 80/20 Rule - 80 of problems are caused by 20 of
  the activities
• Systems thinking approach
• Focus on optimizing the system as a whole, not
  just certain parts

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On to the Syllabus
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My Background
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My Background

• Educational Background
• PhD, Operations and Management Science,
  University of Minnesota (1999)
• AB, Economics, The University of Chicago (1989)
• Practical Experience
• Paid for college by working in manufacturing
  plants, service facilities, and performing
  maintenance
• Work-Study student in U. of Chicago B-School
  admissions department (1986-1989)
• Economic/econometric consulting (RCF Economic and
  Financial Consulting, Inc., 1989-1992)
• Rock and Roll band (1995-1996)
• Served on Board of Directors of Minnesota Music
  Academy, a 501(c)(3) nonprofit corporation
  (1996-1999)
• Helped start up one for-profit corporation
  (2004-2006)

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Your Background

• What type of operations have you worked in?
• Maintenance?
• Manufacturing?
• Retailing?
• Non-retail Service Operations?
• Event?
• Other?