Transcript Chapter 1, Heizer/Render, 5th edition

Operations
Management
Operations and Productivity
Chapter 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
Let’s 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
e.g. :Taxi Service
 Often knowledge-based
 Frequently dispersed
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Goods Versus Services
Goods
Can be resold
 Can be
inventoried
 Some aspects of
quality
measurable
 Selling is distinct
from production
Service
Reselling
unusual
Difficult to
inventory
 Quality difficult to
measure
 Selling is part of
service
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Goods Versus Services - Continued
Goods
 Product is
transportable
 Site of facility
important for cost
 Often easy to
automate
 Revenue generated
primarily from
tangible product
Service
 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
 Local or national
focus
 Batch shipments
 Low bid purchasing
To
 Global focus
 Just-in-time
 Supply chain
partnering
 Lengthy product
development
 Rapid product
development,
alliances
 Standard products
 Job specialization
 Mass
customization
 Empowered
employees, teams
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Development of the Service
Economy
U.S. Employment, % Share
80
United States
%70
60
Services
50
40
Canada
250
France
200
Italy
150
Industry
30
Britain
20
Japan
10
U.S. Exports of Services
In Billions of Dollars
Services as a Percent of GDP
Farming
0
1850 75 1900 25 50 75 2000
100
50
W Germany
1970
1991
40 50 60 70
Percent
0
1970 75 80 85 90 95 2000
Year 2000 data is estimated
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The Economic System Transforms
Inputs to Outputs
Inputs
Land, Labor,
Capital,
Management
Process
The economic system
transforms inputs to outputs
at about an annual 1.7%
increase in productivity
(capital 38% of 1.7%), labor
(10% of 1.7%), management
(52% of 1.7%)
Outputs
Goods and
Services
Feedback loop
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Productivity
 Measure of process improvement
 Represents output relative to input
Productivity
Units produced
= Input used
 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
6%
5%
Education, Health, etc.
5%
Manufacturing
3%
1%
6%
Retail Trade
State & Local Gov't
14%
Finance, Insurance
26%
Wholesale Trade
Transport, Public Util.
16%
Construction
Federal Government
18%
Mining
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Productivity Growth 1971- 1992
Labor
5
4,5
% per year
4
3,5
3
United States
West Germany
Japan
2,5
2
1,5
1
0,5
0
Whole Economy
Manufacturing
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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
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