Transcript Presentation

Operations
Management
Operations and Productivity
Chapter 1
1
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
Management
trends
in
Operations
 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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Whirlpool’s Management Team
 Whirlpool Corporation’s management team
believes in the company’s values-based
strategy.
 Teamwork: From the first to the last,
they take each step forward as a team.
 Innovation is a key strategy of Whirlpool
Corporation, and an essential part of the
company's long-term growth.
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What Is Operations
Management?
 Production is the creation of goods and
services
 Operations management is the set of
activities that creates goods and services
by transforming inputs into outputs
Raw materials
Human inputs
INPUTS
Transformation
process
Goods
Services
OUTPUTS
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Significant Events I
The origins of Operations Management can be traced back
to the Industrial Revolution (in the late 18th and early 19th
centuries )
 Division of labor (Smith, 1776)
Ada Smith treats the topic of the division of labor
 Standardized parts (Whitney, 1800)
Eli Whitney introduced concept of standard interchangeable
parts in 1799
 Scientific management (Taylor, 1881)
He described how the application of the scientific method to the
management of workers greatly could improve productivity
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Significant Events II
 Coordinated assembly line (Ford 1913)
Manufacturing process in which interchangeable parts are added to a
product in a sequential manner to create a finished product faster than with
handcrafting-type methods
 Gantt charts (Gantt, 1916)
Gantt designed his charts so that foremen or other supervisors could quickly know
whether production was on schedule, ahead of schedule or behind schedule
 Motion study (the Gilbreths, 1922)
From their various studies the Gilbreths developed, the laws of human
motion from which evolved the principles of motion economy
 Quality control (Shewhart, 1924)
Father of statistical quality control
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Significant Events III
 CPM / PERT (Dupont, 1957)
CPM: Critical Path Method, is used to determine what is the shortest time to
carry out the project
PERT: Program (or Project) Evaluation and Review Technique, is a technique
developed in the mid-50, used to program and control programmes to be
carried out
 MRP (Orlicky, 1960)
Material Requirements Planning (MRP) is a software based production
planning and inventory control system used to manage manufacturing
processes.
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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
managers do
 OM is such
organization
a
what
costly
operations
part
of
an
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Why do I need OM in the future?
 Many graduates are expected to rise to senior
management levels
 OM is the central core function of every
company
 Regardless of whether your area of expertise is,
the techniques and concepts of OM will help
you in your business career
 Knowledge of OM will allow your future
company to offer products and services
cheaper, better, and faster.
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What Operations Managers Do?
 Plan:
planning
the
schedule
according to sales demand (defining
priorities)
 Organize:
ensuring
effective
production of goods and services
 Staff: motivating and monitoring
 Lead: developing and cascading the
organizations strategy
 Control: creating and maintaining a
positive flow of work
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Ten Critical Decisions
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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. It includes
advertising, distribution and selling
 Operations
– Creates product or service
– Is is the activity you carry out
 Finance/Accounting
– Obtains funds funds for business
– Tracks money
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Where are the OM Jobs?
As we said, OM is the central core function of
every company, so there are a great variety of jobs
in this field:
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
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
Before
 Local or national
focus
 Batch shipments
 Low bid purchasing
After
 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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Characteristics of Goods
 Tangible product
 Consistent product definition
 Production usually separate from
consumption
 Can be inventoried
thereby giving system
designers additional degrees of freedom
 Low customer interaction
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Characteristics of Goods
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Characteristics of Service
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Intangible product. No physical form
Produced & consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based. Labor intensive (welltrained humans)
 Frequently dispersed
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Characteristics of Service
 Service transactions are repetitive.
Service needs are continuous.
 The arrival rate of service request is
random.
 Nature of service demand is
heterogeneous. Customers have unique needs.
 Cannot be inventoried. Cannot be stored.
 Service quality is difficult to assess.
Subjective.
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Characteristics of Service
 A service is defined as a transaction in
which the customer largely perceives
the dominant value-adding component
as being the intangible part of the
product bundle.
 Each total product experience has a
tangible
component
but
their
dominant component is intangible.
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Examples of Services
 Tourist Office
Officer’s advice
Flying tickets
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Goods Versus Services
Goods
 Can be resold
 Can be
inventoried

 Some aspects of
quality
measurable
 Selling is distinct
from production
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
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
Service
 Provider, not
product is
transportable
 Site of facility
important for
customer contact
 Often easy to
 Often difficult to
automate
automate
 Revenue
generated primarily  Revenue
from tangible
generated primarily
product
from intangible
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service.
Development of the Service
Economy
Increasing
exports +
employment in
services sector
U.S. Employment, % Share
80
United States
%70
60
Services
50
40
Canada
250
France
200
Italy
150
Industry
Britain
30
20
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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
Japan
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 and creates income.
 From 1889 to 1973, U.S. productivity
increased at a 2.5% annual rate
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Factors affecting Productivity
 Capital investments in
production/technology/equipment/
facilities.
e.g. Automatization & Computerization (minimizes tasks
performed by employees).
 Workforce knowledge and skill
 Social environment. Making employees comfortable
+ work methods.
 Quality of
products/processes/management
 Geographic factors
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Measurement Problems
 Quality may change while the quantity of
inputs and outputs remains constant. And
will affect productivity.
 External elements may cause an increase
or decrease in productivity
 Precise units of measure may be lacking. It
can only be measured indirectly, that is, by measuring other
variables and then calculating productivity from them.
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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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