Fundamentals of Operations Management BUS 3

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Fundamentals ofOperations ManagementBUS 3
140Mr. Jess MarinoFall, 2007
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Agenda

• Introduction
• Green Sheet review and other administrative items
• Additional comments on the course
• Initial Lecture

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Introduction
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Marino Background
Academics

• Graduate in Production and Operations Management
• Product of CSU system (San Diego State)
• Developed and presented several courses as a
  Management Consultant

Supply Chain Experience

• Over 25 years as a practitioner at all levels of
  responsibility
• Leadership in small and large organizations
• Many different hourly and professional jobs
• Over eight years as a Management Consultant
• Certified in Production and Operations Management
  by the Association for Operations Management
  (APICS)
• Exposure to many industries and organizations
• Have done business in 13 countries throughout the
  world

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Positions Held
Director of Operations
Director of Supply Chain Management
Director of Materials
Production Control Manager
Executive Director of Fulfillment
Production Supervisor
Buyer
Production Controller
Material Controller
Stockroom Manager
Machine Operator
Mail Room Clerk
Production Expediter
Warehouse Clerk
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Have conducted Business in 13 Countries, Worldwide
SCOTLAND
CANADA
ENGLAND
HOLLAND
FRANCE
UNITED STATES
CHINA
TAIWAN
MEXICO
THAILAND
HONG KONG
SINGAPORE
MALAYSIA
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Green Sheet Review
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Student Information Sheet
NAME MAJOR (and Emphasis) CURRENT JOB (Company
Optional) PREVIOUS SUPPLY CHAIN JOBS /
EXPEIRIENCE OTHER
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Course Overview and Objectives

• Understanding how the Operations function
  interrelates with other functional organizations
  in a business
• Understanding how an organization uses its
  resources, processes, data, and technologies to
  create goods and provide services to customers
• Understanding how operational effectiveness can
  be a critical success factor in determining an
  organizations Revenue, Profitability, and
  Shareholder return
• Understanding the managerial responsibility for
  Operations, even when production is outsourced,
  or done in regions far from corporate
  headquarters

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Student Learning Objectives for the Course

• Understand how Operations is relevant to all
  functions of a business
• Understand Operations Management and how it fits
  within the overall organization strategy,
  objectives, and competitiveness
• Develop an interest in Operations and apply that
  understanding, whether in a manufacturing or
  service career

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Course Introduction
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Operations is a Key Element of a Supply Chain
Revenue Utilization of Assets (People, Plant,
Equip)
Cash Inventory
BALANCING keeping Customers completely satisfied
and Resources optimally utilized . against
spending the least amount of Cash and carrying
the least amount of Inventory
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Scope of this Course
Customer Demand
Production Scheduling
Materials Mgmt
Production
Shipping
Customer Service

• Process Layout
• Work System Design
• Lean Operations
• Quality

• Inventory Mgmt
• MRP
• ERP

• Forecasting
• Aggregate Planning
• Strategic Capacity Planning

• Demand Supply Matching
• Scheduling
• Just In Time (JIT)
• Project Mgmt

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Introduction toOperations Management
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Highest Level Operations Management Process (Fig
1.2)
Process (Transformation)
Inputs
Outputs
Feedback
Feedback
Feedback
Control
There is a CONVERSION that takes Information,
Intelligence, Resources, and Activities and
turns them into something VALUABLE to Customers
and / or Society
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Inputs / Process / Outputs (Table 1.1)
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Operations are managed for both Production and
Services
Outputs
Process
Inputs

• Raw vegetables
• Metal sheets
• Water
• Energy
• Labor
• Building
• Equipment

• Cleaning
• Making cans
• Cutting
• Cooking
• Packing
• Labeling

Canned Vegetables
Food processing Plant
PRODUCTION
Result is TANGIBLE OUTPUT
Outputs
Process
Inputs

• Doctors, nurses
• Hospital
• Medical supplies
• Equipment
• Laboratories

• Examination
• Surgery
• Monitoring
• Medication
• Therapy

Treated Patients
Hospital
SERVICE
Result implies an ACT
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Differences between Goods and Service (Book Table
1.3)
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Goods and Services continuum (Fig 1.3)
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Combination of Production and Service
Stage of Production Value Added Value of Product
Farmer produces and harvests wheat 0.15 0.15
Wheat transported to mill 0.08 0.23
Mill produces flour 0.15 0.38
Flour transported to baker 0.08 0.46
Baker produces bread 0.54 1.00
Bread transported to grocery store 0.08 1.08
Grocery store displays and sells bread 0.21 1.29
Total Value-Added 1.29
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Manufacturing Jobs
U.S. Manufacturing vs. Service Employment
90
gt 70
80
Mfg.
70
Service
60
50
Percent
40
30
20
10
0
45
50
55
60
65
70
75
80
85
90
95
00
02
05
Year

• Greater PRODUCTIVITY allows for increased output
  with fewer workers
• Many manufacturing jobs have moved OFFSHORE to
  lower labor cost areas

From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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How Operations Interacts with Other
Organizations
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Key intersections with Sales Marketing and with
Finance
FINANCE ACCOUNTING

• Budgeting
• Authorizing Capital spending
• Authorizing major inventory buys
• Cost accounting
• Make vs. Buy decisions
• Location planning
• Managing international trade
• Analyzing trade-off decisions

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Key intersections with Sales Marketing and with
Finance
SALES MARKETING

• Forecasting Demand
• Influencing demand
• Committing supply
• Negotiating schedules with customers
• Providing competitive information
• Requesting new products and services
• Opening new markets

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Interaction with other Functional Organizations
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Competitiveness, Strategy,and Productivity
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Strategy Terms

• Mission
• The reason for existence for an organization
• Mission Statement
• States the purpose of an organization
• Goals
• Provide detail and scope of mission
• Strategies
• Plans for achieving organizational goals
• Tactics
• The methods and actions taken to accomplish
  strategies

From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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How terms have meaning to the business
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
MarketingStrategies
OperationsStrategies
Tactics
Tactics
Tactics
Operatingprocedures
Operatingprocedures
Operatingprocedures
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Competitiveness
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How Operations impacts Competitiveness

• Cost
• Quality
• Product design
• Response Time
• Flexibility
• Scalability
• Service
• Location

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Factors that impact Operations Strategy
The strategy is tied to where a COMPETITIVE
EDGE can be gained or maintained
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Operations Strategies vary by mission of the
Business (2.4)
From Stevenson, Operations Management, Ninth
Edition, McGraw Hill Irwin
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Operations Strategies can also vary by Industry
Relative weight and importance can vary. For some
Items and Industries, it can be primarily Price
for others Delivery, etc
QUALITY
SERVICE
PRICE
QUANTITY
DELIVERY
QUALITY
QUANTITY
DELIVERY
SERVICE
PRICE
QUALITY
QUANTITY
DELIVERY
SERVICE
PRICE
QUALITY
QUANTITY
SERVICE
PRICE
DELIVERY
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Productivity
Productivity is a RATIO of Inputs and Outputs
Output
Productivity
Input
Inputs and Outputs can be measured at different
degrees
Output
Output
Output
Output
Partial Measures
Labor
Machine
Capital
Energy
Output
Output
Multifactor Measures
Labor Machine
Labor Capital Energy
Goods or services produced
Total Measure
All inputs used to produce them
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Additional Productivity Terms
Efficiency
Performance to a Standard (e.g. Time to assemble
a Computer, POs placed per hour, etc.) Emphasis
is Value-Added activities
Utilization
Per cent of time that is devoted to Value-Added
activities
Productivity
Efficiency Utilization
Effectiveness
The Contribution that the activity /
department provides to the overall mission of the
business
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Steps for Improving Productivity

• Measure key outputs and indicators
• Analyze the production system as a whole
• Benchmark Best In Class processes within and
  across industries
• Solicit ideas from everyone in the organization
• Set achievable, stretch goals
• Ensure executive supporrt
• Measure the improvements
• Publicize the improvements