Chapter 1 – Production and Operations Management
Operations Management (OM) – the management of systems or processes that create goods and/or provide services.
Three Basic Functions within Business Organizations The functions must interact to achieve the goals and objectives of the organizations, and each makes an important contribution. 1. Operations – consists consists of all activities directly directly related related to producing goods or providing providing services. a. Good oriented oriented – manufacturin manufacturing g and assembly assembly operat operations ions b. Service-or Service-oriented iented – health health care, care, transporta transportation, tion, food food handling handling and retailin retailing g It is responsible for the creation of an organization’s goods or services. Inputs are used to obtain finished goods or services using one or more transformation process. To ensure that the desired outputs are obtained, measurements are taken at various points in the formation process (feedback ) and then compared with previously established standards to determine whether corrective action is needed (control). The essenc essence e of the operat operation ionss functio function n is to add value value during during the transf transform ormati ation on process. Value-added is the term used to describe the difference between the cost of inputs and the value or price of outputs. 2. Finance – comprises activities related to securing resources at favorable prices and allocating those resources throughout the organization. a. Budgeting b. Econom Economic ic analys analysis is of investm investment ent propo proposal salss c. Prov Provis isio ion n of of fun funds ds 3. Mark Market etin ing g – cons consis ists ts of sell sellin ing g and/ and/or or prom promot otin ing g the the good goodss or serv servic ices es of an organization. It is responsible to for assessing customer wants and needs, and for communicating those to operations people ( short-term) and to design people (long term). One important piece of information marketing needs from operations is manufacturing or service lead time. Lead time is the time necessary to deliver and order to perform a service. Marketing, operations, and finance must interface on product and process design, forecasting, setting realistic schedules, quality and quantity decisions, and keeping each other informed on the other’s strengths and weaknesses. Other Functions a. Accoun Accounting ting – prepar preparing ing the finan financia ciall stateme statements nts b. Purchasing Purchasing – for for procurem procurement ent of material materials, s, supplies, supplies, and and equipment equipment c. Person Personnel nel – recrui recruitme tment nt and trainin training g of personnel personnel,, labor labor relation relations, s, contr contract act negot negotia iati tion ons, s, wage wage and and sala salary ry admin adminis istr trat atio ion, n, assi assist stin ing g in manp manpow ower er projections and ensuring the health and safety of employees. d. Publ Public ic rela relati tion onss – buil buildi ding ng and and maint maintai ainin ning g a posi positi tive ve publ public ic imag image e of the organizations e. Indust Industria riall Enginee Engineerin ring g – concer concerned ned with with schedul scheduling, ing, performa performance nce standards standards,, work methods, quality control, and material handling f. Distribution Distribution – shipping shipping of goods goods to warehous warehouse, e, retail retail outlets, outlets, or final custome customers rs g. Mainten Maintenanc ance e – genera generall upkeep and repair repair of equipmen equipment, t, building building and grounds grounds,, heating and air-conditioning; removing toxic wastes; parking; and security
Operations manager – responsible for the creation of goods and services, and also to guide the system by decision making.
System design – decisions concerning capacity, location, arrangement of departments, product and service planning, and acquisition and placement of equipment. System operation – decisions concerning management, and quality assurance.
personnel,
inventory,
scheduling,
project
Features of Production Systems 1. Degree of Standardization Standardized output – means that there is high degree of uniformity in goods or services. a. Standardized goods (radios, canned foods, pens) b. Standardized services (automatic car washes, televised newscasts) Advantages: contribute higher volumes and lower unit costs Customized output – means that the product or service is designed for a specific case or individual. a. Customized goods (eyeglasses, custom-fitted clothing) b. Customized services (tailoring, taxi rides, surgery) Advantages: workers must be more skilled; works moves slower; work is less susceptible to mechanization 2. Type of Operation a. Project – a set of activities directed toward a unique goal, usually large scale, with a limited time frame. (development of new product, installation of computerized production line) b. Job shop – an organization that renders unit or lot production or service with varying specifications, according to customer needs. (health care, do repair work such appliances and automobiles) c. Batch processing – as system used t produce moderate volumes of similar items. (Food processors such bakeries; magazines) d. Repetitive processing – a production system that renders one or a few highly standardized products or services. (operation confine output to one or a relatively small number of similar products or services) e. Continuous processing – a system that produces highly uniform products or continuous services, often performed by machines. (processing of chemicals, newsprint, continuous cleaning) 3. Manufacturing versus service operation Manufacturing implies of production of a tangible output, service implies an act. Manufacturing and service are often similar in terms of what is done but different in terms of how it is done. a. customer contact b. uniformity of input c. labor content of jobs d. uniformity of output e. measurement of productivity f. quality assurance
Difference between Manufacturing and Services Characteristics Manufacturing Output tangible Customers contact low Uniformity of input high Labor content low Uniformity of output high
Services intangible high low high low
Measurement of productivity easy Opportunity to correct quality high problems before delivery of customer
difficult low
Operations Manager . The planner and decision maker. He must coordinate the use of resources through the management process of planning, organizing, staffing, directing and controlling. General Approaches to Decision Making 1. Use of Models Model is an abstraction of reality, a simplified version of a real phenomenon. a. Physical model. Look like their real life counterparts.(miniature car) b. Schematic model. More abstract than their physical counterparts, that is, they have less resemblance to the ph ysical reality. (graphs and charts) c. Mathematical model. Most abstract, they do not look at all like their real-life counterparts. (numbers, formulas, symbols) For each model, try to learn: 1. its purposes 2. how it is used to generate to results 3. how these results are interpreted and sued 4. what assumptions and limitation apply Models are beneficial. 1. They are generally easy to use and less expensive than dealing directly with the actual situations. 2. Require users to organize and sometimes quantify information and, in the process, often indicate areas where additional information is neede d. 3. Provides a systematic approach to problem solving. 4. Increase understanding of the problem 5. Enable managers to analyze “what if” questions 6. Require users to be very specific about objective 7. Serve as a consistent too for evaluation 8. Enable users to bring the power of mathematics to bear on a problem 9. Provide a standardized format for analyzing a problem Limitations 1. Quantitative information may be emphasized at the expense of qualitative informative. 2. Models may be incorrectly applied and the results misinterpreted. 3. Model building can become an end in itself. 2. a. b. c. d. e. f.
Quantitative Approaches Linear programming and related mathematical techniques. Used for optimum allocation of scarce resources. Queuing techniques. Analyzing situations in which waiting lines form Inventory models. Used to control inventories. Project models such as PERT and CPM. Useful for planning, coordinating and controlling large-scale projects. Forecasting techniques. Used in planning and scheduling Statistical models. Used in many areas of decision making.
For large measurement: 1. Calculators 2. High-speed computers 3.
Analysis of Trade-offs
4.
System Approach System is a set of interrelated parts that must work together. 5. Establishing Priorities Pareto Phenomenon . A few factors are very important, many factors are much less important.
Recent Trends 1. Global marketplace 2. Operations strategy 3. TQM (Total Quality Management) 4. Flexibility 5. Time reduction 6. Technology 7. Worker Involvement 8. Reengineering 9. Environmental issues Decision of labor. Breaking up a production process into small tasks, so that each worker performs a small portion of the overall job. Interchangeable parts . Parts of a product made to such precision that they do not have to be custom fitted. Flexibility. The ability to adapt quickly to change.
