Faculty, Department of Management Institute of Business Administration, Karachi Operations Management Operations Management is: The management of systems or processes that create goods and/or provide services
Operations Management affects: Companies ability to compete Nations ability to compete internationally Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 2 The Organization Three Basic Functions Organization Finance Operations Marketing Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 3 Value-Added Process The operations function involves the conversion of inputs into outputs Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback Feedback Feedback Value added Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 4 Value-Added & Product Packages Value-added is the difference between the cost of inputs and the value or price of outputs. Product packages are a combination of goods and services. Product packages can make a company more competitive. Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 5 Automobile assembly, steel making Home remodeling, retail sales Automobile Repair, fast food Goods-service Continuum Computer repair, restaurant meal Song writing, software development Goods Service Surgery, teaching Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 6 Hospital Process Inputs Processing Outputs Doctors, nurses Examination Healthy patients Hospital Surgery Medical Supplies Monitoring Equipment Medication Laboratories Therapy Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 7 Manufacturing or Service? Tangible Act Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 9 Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction Characteristics of Goods Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 10 Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Characteristics of Service rameezkhalid@iba.edu.pk 11 Goods Vs. Service Characteristic Goods Service Customer contact Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Output Tangible Intangible Measurement of productivity Easy Difficult Opportunity to correct problems High Low Inventory Much Little Evaluation Easier Difficult Patentable Usually Not usual 1-12 Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities Supply chain management And more . . . Scope of Operations Management Example: Airline Company Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 13 Year Mfg. Service 45 79 21 50 72 28 55 72 28 60 68 32 65 64 36 70 64 36 75 58 42 80 44 46 85 43 57 90 35 65 95 25 75 00 30 70 02 25 75 U.S. Manuf acturing vs. Service Employment 0 10 20 30 40 50 60 70 80 90 45 50 55 60 65 70 75 80 85 90 95 00 02 05 Year P e r c e n t Mfg. Service Manufacturing Vs. Service Jobs Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 14 Decline in Manufacturing Jobs Productivity Increasing productivity allows companies to maintain or increase their output using fewer workers Outsourcing Some manufacturing work has been outsourced to more productive companies
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 15 Operations Management Decision Making Models Quantitative approaches Analysis of trade-offs Systems approach Establishing priorities Ethics
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 17 1. Design of goods and services 2. Managing quality 3. Process and capacity design 4. Location strategy 5. Layout strategy 6. Human resources and job design 7. Supply chain management 8. Inventory management 9. Scheduling 10.Maintenance Ten Critical Decisions Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 18 Models A model is an abstraction of reality.
Physical
Schematic
Mathematical What are the pros and cons of models? Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 19 Models Are Beneficial Easy to use, less expensive Require users to organize Increase understanding of the problem Enable what if questions Consistent tool for evaluation and standardized format Power of mathematics
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 20 Limitations of Models Quantitative information may be emphasized over qualitative Models may be incorrectly applied and results misinterpreted Nonqualified users may not comprehend the rules on how to use the model Use of models does not guarantee good decisions
Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 21 Quantitative Approaches Linear programming Queuing Techniques Inventory models Project models Statistical models Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 22 Analysis of Trade-Offs Decision on the amount of inventory to stock Increased cost of holding inventory Vs. Level of customer service While purchasing an equipment, evaluate the merits of extra features relative to their cost Tradeoffs Unit-1: Intro. to TOM 23 Systems Approach System: Set of interrelated parts that must work together System consists of subsystems Impact of changes must be evaluated for all parts of the system Synergy: Whole is greater than the sum of the parts. Big Picture Unit-1: Intro. to TOM 24 Pareto Phenomenon A few factors account for a high percentage of the occurrence of some event(s). 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few? Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 25 Ethical Issues Financial statements Worker safety Product safety Quality Environment Community Hiring/firing workers Closing facilities Workers rights Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 26 Operations Interfaces Public Relations Accounting Industrial Engineering Maintenance Personnel Purchasing Distribution MIS Legal Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 28 Historical Evolution of Operations Management Industrial revolution (1770s) Scientific management (1911) Mass production Interchangeable parts Division of labor Human relations movement (1920-60) Decision models (1915, 1960-70s) Influence of Japanese manufacturers Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 29 Management of Technology Technology: The application of scientific discoveries to the development and improvement of goods and services Product and service technology Process technology Information technology Unit-1: Intro. to TOM rameezkhalid@iba.edu.pk 30 REFERENCES
Operations Management William J . Stevenson
Operations Management Barry Render & J ay Heizer rameezkhalid@iba.edu.pk 32