Operations Management Operations and Productivity Chapter 1

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Operations ManagementOperations and
ProductivityChapter 1
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Outline

• Global company profile Whirlpool
• What is Operations Management?
• The heritage of Operations Management
• Why study OM?
• What Operations Managers do
• Organizing to produce goods and services
• Where are the OM jobs?
• Exciting new trends in Operations Management
• Operations in the service sector
• The Productivity challenge

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Learning Objectives

• When you complete this chapter, you should be
  able to
• Identify or Define
• Production and productivity
• Operations Management (OM)
• What operations managers do
• Services
• Describe or Explain
• A brief history of operations management
• The future of the discipline
• Measuring productivity

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Whirlpool Case Example

• Change in attitude - employees live quality
• Training - use your heads as well as your hands
• Flexible work rules
• Gain-sharing
• Global procurement
• Role of information/information technology
• Adoption of a Worldwide strategy

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What Is Operations Management?

• Production is the creation of goods and services

Lets define goods and services with specific
examples
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Characteristics of Goods

• Tangible product
• Consistent product definition
• Production usually separate from consumption
• Can be inventoried
• Low customer interaction

e.g. Pencil Production
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Characteristics of Service

• Intangible product
• Produced consumed at same time
• Often unique
• High customer interaction
• Inconsistent product definition
• Often knowledge-based
• Frequently dispersed

e.g. Taxi Service
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Goods Versus Services
Goods
Service

• Can be resold
• Can be inventoried
• Some aspects of quality measurable
• Selling is distinct from production

• Reselling unusual
• Difficult to inventory
• Quality difficult to measure
• Selling is part of service

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Goods Versus Services - Continued
Goods
Service

• Product is transportable
• Site of facility important for cost
• Often easy to automate
• Revenue generated primarily from tangible product

• Provider, not product is transportable
• Site of facility important for customer contact
• Often difficult to automate
• Revenue generated primarily from intangible
  service.

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What Is Operations Management?

• Operations management

• There are two ways to define operations
  management (OM).
• by what it does. Put simply, operations
  management is the business function that manages
  that part of a business that transforms raw
  materials and human inputs into goods and
  services of higher value. (Traditionally)
• A second way to define operations management is
  to do so in context of the overall activities of
  the firm.
• The second approach starts by recognizing that a
  business is really a set of processes, Each
  process has a job to do and each should be
  measured on how effective it is in achieving the
  desired outcomes.
• Most companies are engaged in four core business
  processes
• Attract customers
• Design and develop products
• Factors of production and transformation into
  products of value,
• Providing business support services needed to
  effectively operate as a business.

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Significant Events in OM

• Division of labor (Smith, 1776)
• Standardized parts (Whitney, 1800)
• Scientific management (Taylor, 1881)
• Coordinated assembly line (Ford 1913)
• Gantt charts (Gantt, 1916)
• Motion study (the Gilbreths, 1922)
• Quality control (Shewhart, 1924)

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Significant Events - Continued

• CPM/PERT (Dupont, 1957)
• MRP (Orlicky, 1960)
• CAD
• Flexible manufacturing systems (FMS)
• Manufacturing automation protocol (MAP)
• Computer integrated manufacturing (CIM)

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Why Study OM?

• OM is one of three major functions (marketing,
  finance, and operations) of any organization
• We want (and need) to know how goods and services
  are produced
• We want to know what operations managers do
• OM is such a costly part of an organization

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What Operations Managers Do

• Plan (For effective planning seeks we should
  answer these questions)
• What should the firm do?
• When must the firm achieve these goals?
• Who is responsible for doing it?
• How should this be done?
• How should performance be measured?
• Organize
• Staff
• Lead
• Control

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Ten Critical Decisions

• Service, product design
• Quality management
• Process, capacity design
• Location
• Layout design
• Human resources, job design.
• Supply-chain management
• Inventory management
• Scheduling
• Maintenance

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Organizational Functions

• Marketing
• Gets customers
• Operations
• creates product or service
• Finance/Accounting
• Obtains funds
• Tracks money

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Where Are the OM Jobs?

• Technology/methods
• Facilities/space utilization
• Strategic issues
• Response time
• People/team development
• Customer service
• Quality
• Cost reduction
• Inventory reduction
• Productivity improvement

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New Challenges in OM
From
To

• Local or national focus
• Batch shipments
• Low bid purchasing
• Lengthy product development
• Standard products
• Job specialization

• Global focus
• Just-in-time
• Supply chain partnering
• Rapid product development, alliances
• Mass customization
• Empowered employees, teams

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Development of the Service Economy
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The Economic System Transforms Inputs to Outputs
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Productivity

• Measure of process improvement
• Represents output relative to input
• Productivity increases improve standard of living
  
• From 1889 to 1973, U.S. productivity increased at
  a 2.5 annual rate

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Measurement Problems

• Quality may change while the quantity of inputs
  and outputs remains constant
• External elements may cause an increase or
  decrease in productivity
• Precise units of measure may be lacking

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Productivity Variables

• Labor - contributes about 10 of the annual
  increase
• Capital - contributes about 32 of the annual
  increase
• Management - contributes about 52 of the annual
  increase

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Jobs in the U.S
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Productivity Growth 1971- 1992
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Service Productivity

• Typically labor intensive
• Frequently individually processed
• Often an intellectual task performed by
  professionals
• Often difficult to mechanize
• Often difficult to evaluate for quality