MANAGEMENT OF OPERATIONS

ICE-481 Technopreneurship
Source :
Technology Venture, Byers T.H, et. al.
www.hkilter.com

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The value chain
The purpose of a firm is to provide product
that customers value.
A value chain is a series of activities for
transforming inputs into output that
customers value.

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Custome
r
Applied
research
Product
design
Sales &
service
Distribut
ion
Marketing
& sales
Manufactu
ring
Logistics
Process
design
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Understanding the customer
Preferences
Purchase criteria
Decision-making process
Buyer behavior
Functional needs
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What is operation management?
An operation is a series of actions
Operation management is the supervising, monitoring, and
coordinating of the activities of a firm carried out along the value
chain, deals with processes that produce goods and services.
A process is any activity or set of activities that take one or more
inputs, transforms and adds value to them, and provides one or
more outputs
Function : design processes, quality control, capacity, and
operations infrastructure

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Penerapan Fungsi Manajemen dalam
MO
Fungsi perencanaan: perencanaan produksi,
perencanaan fasilitas, & perencanaan penggunaan
sumber daya produksi.
Fungsi pengorganisasian: menentukan struktur
individu, grup, seksi, bagian, divisi atau departemen
dalam subsistem operasi untuk mencapai tujuan
organisasi.
Fungsi penggerakan: memimpin, mengawasi,
memotivasi karyawan untuk melaksanakan tugas.
Fungsi pengendalian: mengembangkan standar dan
jaringan komunikasi yang diperlukan agar
pengorganisasian dan penggerakan sesuai dengan
yang direncanakan dan mencapai tujuan.

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Production of Goods vs Delivery of
Services

Wholesale/retail (clothing, food, appliances, stationery, toys, etc.).
Financial services (banking, stock brokerages, insurance, etc.).
Health care (doctors, dentists, hospitals, etc.).
Personal services (laundry, dry cleaning, hair/beauty, gardening, etc.).
Business services (data processing, e-business, delivery, employment
agencies, etc.).
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Differences Between Goods and Service
Degree of customer contact.
Uniformity of input.
Labor content of jobs.
Uniformity of output.
Measurement of productivity.
Production and delivery.
Quality assurance.
Amount of inventory.
Evaluation of work.
Ability to patent design.

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The Historical Evolution of OM
The Industrial Revolution
Craft production
Scientific Management
Mass production
Interchangeable parts
Division of labor
The Human Relations Movement
Theory X and Theory Y
Theory Z
Decision Models and Management Science
The Influence of Japanese Manufacturers
Area of Operation Management
Forecasting
Product and service design
Capacity planning
Process selection
Layout
Design of work system
Quality
Quality control


Supply chain management
Inventory management
Aggregate planning
Material requirements
planning
Just-in-time and lean
systems
Scheduling
Project management

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Forecasting
1. Determine the use of the forecast
2. Select the items or quantities that are to be forecasted.
3. Determine the time horizon of the forecast.
Short time horizon 1 to 30 days
Medium time horizon 1 to 12 months
Long time horizon more than 1 year
4. Select the forecasting model or models
5. Gather the data to make the forecast.
6. Validate the forecasting model
7. Make the forecast
8. Implement the results

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Forecasting Model Differences
Qualitative incorporates judgmental & subjective
factors into forecast.
Time-Series attempts to predict the future by using
historical data.
Causal incorporates factors that may influence the
quantity being forecasted into the model
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Forecast (Example)
Wallace Garden Supply
Forecasting
Period
Actual
Value
Nave
Forecast Error
Absolute
Error
Percent
Error
Squared
Error
January 10 N/A
February 12 10 2 2 16.67% 4.0
March 16 12 4 4 25.00% 16.0
April 13 16 -3 3 23.08% 9.0
May 17 13 4 4 23.53% 16.0
June 19 17 2 2 10.53% 4.0
July 15 19 -4 4 26.67% 16.0
August 20 15 5 5 25.00% 25.0
September 22 20 2 2 9.09% 4.0
October 19 22 -3 3 15.79% 9.0
November 21 19 2 2 9.52% 4.0
December 19 21 -2 2 10.53% 4.0
0.818 3 17.76% 10.091
BIAS MAD MAPE MSE
Standard Error (Square Root of MSE) = 3.176619
Storage Shed Sales
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Forecast Graph
Wallace Garden - Naive Forecast
0
5
10
15
20
25
February March April May June July August September October November December
Period
S
h
e
d
s
Actual Value
Nave Forecast
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Moving Averages
Wallace Garden Supply
Forecasting
Period
Actual
Value Three-Month Moving Averages
January 10
February 12
March 16
April 13 10 + 12 + 16 / 3 = 12.67
May 17 12 + 16 + 13 / 3 = 13.67
June 19 16 + 13 + 17 / 3 = 15.33
July 15 13 + 17 + 19 / 3 = 16.33
August 20 17 + 19 + 15 / 3 = 17.00
September 22 19 + 15 + 20 / 3 = 18.00
October 19 15 + 20 + 22 / 3 = 19.00
November 21 20 + 22 + 19 / 3 = 20.33
December 19 22 + 19 + 21 / 3 = 20.67
Storage Shed Sales
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Moving Averages Forecast
Wallace Garden Supply
Forecasting 3 period moving average
Input Data Forecast Error Analysis
Period Actual Value Forecast Error
Absolute
error
Squared
error
Absolute
% error
Month 1 10
Month 2 12
Month 3 16
Month 4 13 12.667 0.333 0.333 0.111 2.56%
Month 5 17 13.667 3.333 3.333 11.111 19.61%
Month 6 19 15.333 3.667 3.667 13.444 19.30%
Month 7 15 16.333 -1.333 1.333 1.778 8.89%
Month 8 20 17.000 3.000 3.000 9.000 15.00%
Month 9 22 18.000 4.000 4.000 16.000 18.18%
Month 10 19 19.000 0.000 0.000 0.000 0.00%
Month 11 21 20.333 0.667 0.667 0.444 3.17%
Month 12 19 20.667 -1.667 1.667 2.778 8.77%
Average 12.000 2.000 6.074 10.61%
Next period 19.667 BIAS MAD MSE MAPE
Actual Value - Forecast
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Operation Management Strategy
Low cost. Outsource operations to third-world countries that have low labor
costs.
Scale-based strategies. Use capital-intensive methods to achieve high output
volume and low unit costs.
Specialization. Focus on narrow product lines or limited service to achieve
higher quality.
Flexible operations. Focus on quick response and/or customization.
High quality. Focus on achieving higher quality than competitors.
Service. Focus on various aspects of service (e.g., helpful, courteous, reliable,
etc.).
Location
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Variables in MO Strategy (1)
Economic conditions. These include the general health and direction of
the economy, inflation and deflation, interest rates, tax laws, and tariffs.
Political conditions. These include favorable or unfavorable attitudes
toward business, political stability or instability, and wars.
Legal environment. This includes antitrust laws, government regulations,
trade restrictions, minimum wage laws, product liability laws and recent
court experience, labor laws, and patents.
Technology. This can include the rate at which product innovations are
occurring, current and future process technology (equipment, materials
handling), and design technology.
Competition. This includes the number and strength of competitors, the
basis of competition (price, quality, special features), and the ease of
market entry.
Markets. This includes size, location, brand loyalties, ease of entry,
potential for growth, long-term stability, and demographics.

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Variables in MO Strategy (2)
Human resources. These include the skills and abilities of managers and workers;
special talents (creativity, designing, problem solving); loyalty to the organization;
expertise; dedication; and experience.
Facilities and equipment. Capacities, location, age, and cost to maintain or replace can
have a significant impact on operations.
Financial resources. Cash flow, access to additional funding, existing debt burden, and
cost of capital are important considerations.
Customers. Loyalty, existing relationships, and understanding of wants and needs are
important.
Products and services. These include existing products and services, and the potential
for new products and services.
Technology. This includes existing technology, the ability to integrate new technology,
and the probable impact of technology on current and future operations.
Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility, and
service are typical considerations.
Other factors include patents, labor relations, company or product image, distribution
channels, relationships with distributors, maintenance of facilities and equipment,
access to resources, and access to markets.
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Strategic OM Decision Areas
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Productivity
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Next week
Review management of operations.
Read marketing and sales plans.
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