APICS defines Operations Management as:

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APICS defines Operations Management as
An Introduction to Operations Management (OM)

• The planning, scheduling and control of
  activities that transform inputs into finished
  goods and services

APICS The Association for Operations Management
is the global leader and premier source of the
body of knowledge in operations management,
including production, inventory, supply chain,
materials management, purchasing, and logistics.
Since 1957, individuals and companies have relied
on APICS for its superior training,
internationally recognized certifications,
comprehensive resources, and worldwide network of
accomplished industry professionals. For
information about student membership and
certifications visit www.apics.org
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Operations A systems view

• Inputs
• Operations
• Extraction
• Growth and change
• Tangible conversion
• Intangible conversion
• Output

Input
Process
Output
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Bessemer Process From Wikipedia, the free
encyclopedia
The Bessemer process was the first inexpensive
industrial process for the mass-production of
steel from molten pig iron. The process is named
after its inventor, Henry Bessemer, who took out
a patent on the process in 1855. The process is a
development of a practice known in China as early
as the 200s. The key principle is removal of
impurities from the iron by oxidation through air
being blown through the molten iron. The
oxidation also raises the temperature of the iron
mass and keeps it molten
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Before the Bessemer process, steel was
manufactured by heating bars of wrought iron
together with charcoal for periods of up to a
week in a long stone box. This produced blister
steel. Up to 3 tons of expensive coke was burnt
for each ton of steel produced. Such steel when
rolled into bars was sold at 50 to 60 a long
ton. This process was refined in the 1700s with
the introduction of Benjamin Huntsman's crucible
steel making technique, which added an additional
three hours firing time, and additional massive
quantities of coke. In making crucible steel, the
blister steel bars were broken into pieces and
melted in small crucibles each containing 20 kg
or so. This produced higher quality crucible
steel, and increased the cost. The Bessemer
process reduced to about 1/2 hour the time to
make steel of this quality, while requiring only
the coke needed initially to melt the pig iron.
The earliest Bessemer converters produced steel
for 7 a long ton, although they priced it
initially at around 40 a ton.
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The process is carried on in a large ovoid steel
container lined with clay or dolomite called the
Bessemer converter. The capacity of a converter
was from 8 to 30 tons of molten iron with a usual
charge being around 15 tons. At the top of the
converter is an opening, usually tilted to the
side relative to the body of the vessel, through
which the iron is introduced and the finished
product removed. The bottom is perforated with a
number of channels through which air is forced
into the converter. The converter is pivoted on
trunnions so that it can be rotated to receive
the charge, turned upright during conversion, and
then rotated again for pouring out the molten
steel at the end. The oxidation process removes
impurities such as silicon, manganese, and carbon
as oxides, these oxides either escape as gas or
form a solid slag.
Bessemer Converter, Kelham Island Museum,
Sheffield, England Photo by Wikityke.
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The refractory lining of the converter also plays
a role in the conversion - the clay lining is
used in the acid Bessemer, in which there is low
phosphorus in the raw material. Dolomite is used
when the phosphorus content is high in the basic
Bessemer. In order to give the steel the desired
properties, other substances could be added to
the molten steel when conversion was complete,
such as spiegeleisen (an iron-carbon-manganese
alloy). When the required steel has been formed
it is poured out into ladles and then transferred
into molds and the lighter slag is left behind.
The conversion process (called the "blow") was
completed in around twenty minutes. During this
period the progress of the oxidation of the
impurities is judged by the appearance of the
flame issuing from the mouth of the converter
the modern use of photoelectric methods of
recording the characteristics of the flame has
greatly aided the blower in controlling the final
quality of the product. After the blow, the
liquid metal is recarburized to the desired point
and other alloying materials are added, depending
on the desired product.
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Operations A wider systems view
Finance
Financial Outputs
Financial Inputs
Sales and Marketing
Feedback
Purchasing
Production and Operations
Inbound Logistics
Outbound Logistics
Physical Inputs
Physical Outputs
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Why are we studying OM?

• Operations is the core of most organizations
• Important for all professionals to understand the
  vocabulary and issues of operations
• Operations directly employs a large percentage of
  business professionals
• For most organizations it absorbs a huge
  percentage of required capital
• It is responsible for the customer fulfillment
  aspects of an organization. Thus, it manages
  customer satisfaction.

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• Operational decision-making requires a long-term
  perspective and requires inputs from all business
  functions
• Decisions tend to be costly and difficult to
  reverse
• Short-term alterations can destroy long-term
  competitiveness
• Desire to use all capacity (100 utilization)
• Cut costs to improve short-term performance
  (eliminate training remove inventory, capital
  equipment, employees)

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In the words of scholar John Nicholas
From the experts

• Paying attention to customers and knowing what
  they want is a fundamental and important
  beginning. However, given that several competing
  companies pay attention to what customers want,
  the key to competitiveness then becomes
  production capability. What differentiates
  winners from losers is that winners are better
  able to consistently provide products and
  services that are competitive with regard to
  quality, price, time and agility

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From a survey of 1400 randomly selected CFOs
nationwide, Robert Half Management Resources,
Menlo Park, California, www.rhmr.com, 2003
In addition to accounting and finance know-how,
chief financial officers said the following areas
of expertise would help them in their roles.
46
28
26
24
6
InformationTechnology
Sales and Marketing
Other / Dont know
Operations
Legal
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Productivity Measurement

• The most fundamental measure in operations is
  productivity defined as the ratio of outputs to
  inputs (output/input).
• Single factor productivity may be expressed in
  any unit
• Multi-factor productivity must be expressed in
  some common unit (such as )

1000 tons of steel 200 hours of labor
5 tons per labor hour
1000 tons of steel (10200 labor hours)(1500
in material)
.2857 tons per
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Productivity measurement example

• Contrast the productivity of the following two
  processes

Requirements Output labor
energy material
Process 1 4000 tons 20 hours 400 kw
800 lbs
Process 2 1500 tons 12 hours 60 kw
400 lbs
Cost 24.00/hr 2.60/kw 2.00/lb
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Single factor productivity
labor energy
material
Process 1 4000/20200 4000/40010
4000/8005
Process 2 1500/12125 1500/6025
1500/4003.75
Multi-factor productivity
Process 1 4000/(20(24)400(2.6)800(2))
4000/(48010401600) 1.28 Process
2 1500/(12(24) 60(2.6)400(2)) 1500/(288
156 800) 1.21
How much would the cost of energy need to
increase to make process 2 as productive as
process 1?
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4000/(480400x1600) 1500/(28860x800) 4000/(2
080400x) 1500/(108860x) 3,120,000 600,000x
4,352,000240,000x 360,000x 1,232,000 X3.43
Process 1 4000/(20(24)400(3.43)800(2))
4000/(48013721600) 1.16 Process
2 1500/(12(24) 60(3.43)400(2)) 1500/(288
205 800) 1.16
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Goods and services
It is often difficult to exactly specify the
difference between a good and a service - we
shall use a scale
Airline Hotel Law Firm
Steel Producer Mining Firm Farmer
services
goods
Fast Food Newspaper
Automobile Mfg Computer Hardware
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Service firm managers encounter significantly
different challenges than managers within goods
producers
Pure service firms

• Produce intangible output
• Output tends to be variable and non-standardized
• High customer contact and customer participation
• Firm generally sells skill to the customer
• No mass production and labor intensive
• Personal judgement used by employee providing the
  service
• Facilities tend to be decentralized and close to
  the customer
• Measures of effectiveness tend to be subjective
  and perceptual
• Firms may use elaborate pricing options to manage
  demand

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Strategic answers lead to OM questions
Business Strategy Determines long-range plan
for the company

• Defining a mission
• What is our business?
• Who is our customer?
• How will our beliefs define our business?
• Assessing the environment
• Who are our competitors?
• What opportunities and threats must we be aware
  of?
• Identifying/building distinctive competencies
• What are our strengths and weaknesses?
• How can we promote our strengths in the long
  run?
• What are our competitive priorities?
• Organizing appropriate OM strategies and tactics
• What are our process constraints?
• Can our process constraints be broken?
• What resources do we need?
• How do we manage our resources effectively?

Operations Strategy Develops a plan for the
operations function to support the business
strategy
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Dimensions of Differentiation

• High quality
• performance
• features
• reliability
• conformance
• durability
• serviceability
• aesthetics
• perceived quality
• Cost

• Time-based
• fast delivery
• consistent delivery
• delivery reliability
• development speed
• Flexibility
• product customization
• service customization
• volume flexibility

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Porters Generic Strategies

• Cost leadership
• efficient facilities, low overhead, low-cost
  design with low labor costs, automation and
  global scale
• Differentiation
• select attribute important to buyer,
  differentiate at a premium price (gt cost)
• Focus
• serve one segment at exclusion of others

Terry Hill

• Two major questions that must be answered
• What are the order qualifying criteria?
• What are the order winning criteria?

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Order winners?

• Coke
• The Coca-Cola Company exists to benefit and
  refresh everyone who is touched by our business.
  Founded in 1886, our Company is the world's
  leading manufacturer, marketer, and distributor
  of nonalcoholic beverage concentrates and syrups,
  used to produce nearly 300 beverage brands. Our
  corporate headquarters are in Atlanta, with local
  operations in nearly 200 countries around the
  world.(www.Cocacola.com)
• CIA
• We support the President, the National Security
  Council, and all who make and execute US national
  security policy by
• Providing accurate, evidence-based,
  comprehensive, and timely foreign intelligence
  related to national security and
• Conducting counterintelligence activities,
  special activities, and other functions related
  to foreign intelligence and national security as
  directed by the President.

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A few critical operational decisions

• Where should we locate our facility
• How much capacity do we need
• What should we make, what should we buy
• What technology should we use
• How do we insure appropriate quality
• Who should we use as vendors
• How much inventory do we need
• How should we schedule our resources