OPERATIONS and LOGISTICS MANAGEMENT       Introduction Importance Scope Trends Careers Course Overview Applied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro, PhD Operations Management DEFINITION The competent and adept management of complex systems in the service, nonprofit, manufacturing, and government sectors via the effective and efficient utilization of time, labor, money, and materials in the generation of goods and/or services. Overview Operations Management plans for, and creates the competitive advantages that all businesses need for fueling profitable growth. As a result, OM is the most critical of the business functions. Studying OM means studying modern planning, decision-making and management methods in all functional areas of an organization, including strategic and tactical planning, products and services development, product and project management, process and supply chain management, and more. Why Study OM? I. Operations Management is one of the three major functions of any organization……and they are integrally related. All firms market (sell) , finance (account), and produce (operate) MARKETING The Strategic THE Triad STRATEGIC PRODUCTION TRIAD FINANCE Why Study OM? II. Operations Management shows us how goods and services are generated. Consequently, it is the……… foundation of all business! Why Study OM? III. Operations Management shows us what OM managers do. This enables us to learn the skills, techniques, and models needed to practice 21st century management, and to also explore the lucrative career opportunities in OM. Why Study OM? IV. Operations Management represents as much as 70% of the operating budget of most firms due to:  Manufacturing activity  Warehousing  Distribution  Inventories  Research and Development  Maintenance  Facilities and Equipment  Worker training  Cost and Quality Control  Planning and Scheduling Why Study OM? V. Operations Management, by virtue of its huge collective budget, provides a major opportunity for the firm to improve its profitability. In fact, OM has become the last resort for most firms that have exhausted the potential of marketing, finance, and general management. Why Study OM? VI. About 40% of all jobs in the United States are in Operations Management. Exposure to the following disciplines will enhance one’s job prospects:  Operations research  Statistics  Information systems  Economics  Logistics / Transportation  Mathematics  Accounting / Finance  Computer science  Engineering  Manufacturing What OM Managers Do  Supervise skilled trade workers & technicians.  Manage the production and technical operations.  Integrate new technology into manufacturing and service processes. What OM Managers Do  Develop, monitor, and update measures of efficiency.  Develop, monitor, and change operating plans and schedules.  Control costs and quality. What OM Managers Do  Evaluate and improve the existing operating system in terms of productivity and customer responsiveness.  Translate improved operating systems into competitive advantage in the marketplace. OM Necessary Skills  Keen understanding of people and processes.  Ability to solve problems in multi-disciplinary teams.  Strong leadership/coordinating ability.  Strong analytical and problem-solving skills.  Strong interpersonal communication skills.  Strong background in mathematics.  Strong background in computer programming.  Proficiency in one or more foreign languages.  Graduate degree in the field or a related field. Exciting New Trends in OM CAUSES FUTURE Low cost, reliable global communication and transport networks Global Focus Cost of capital puts pressure on the reduction of inventory investment Just-in-Time Shipments Exciting New Trends in OM CAUSES Quality emphasis requires that suppliers be engaged in product improvement Shorter product life cycles, computer-aided design, international collaboration and rapid communication FUTURE Supply Chain Partners Rapid Product Development Exciting New Trends in OM CAUSES Affluence and worldwide markets. Increasingly flexible production processes. Changing socio-culture milieu. An increasingly knowledge and information based society. FUTURE Mass Customization Empowered Employees, Teams, and Lean Production Career Possibilities  Business Executive  Blue-Collar Supervisor  Construction Manager  Production Manager  Operations Manager  Information System Manager  Materials Manager  Project Manager  Customer Service Mgr  Defense Analyst  Purchasing Agent  Inventory Analyst  Cost Estimator  Systems Analyst  Industrial Engineer  Quality Control Mgr  Time & Motion Analyst  Operations Scheduler  Operations Planner  Process Improvement Manager Career Possibilities In corporations, OM managers are responsible for developing new products and services, the strategic and tactical plans, and the execution of, and realization of the plans. Demand for OM concentrators is particularly high in financial services, IT, manufacturing, non-profit, government, education, and health care. Entrepreneurs will find OM knowledge pivotal. The advancement opportunities are superior and may lead all the way to the organization’s senior leadership. The Ten Critical Decisions OPERATIONS MANAGEMENT 1. SERVICE AND PRODUCT DESIGN  What goods or services should we offer?  How should we design these products? The Ten Critical Decisions OPERATIONS MANAGEMENT 2. QUALITY MANAGEMENT  Who is responsible for quality?  How do we define the quality we want in our services and products? The Ten Critical Decisions OPERATIONS MANAGEMENT 3. PROCESS AND CAPACITY DESIGN  What processes will these products require and in what order?  What equipment and technology is necessary for these processes? The Ten Critical Decisions OPERATIONS MANAGEMENT 4. LOCATION  Where should we put the facility?  On what criteria should we base the location decision? The Ten Critical Decisions OPERATIONS MANAGEMENT 5. LAYOUT DESIGN  How should we arrange the facility?  How large must the facility be to meet our plan? The Ten Critical Decisions OPERATIONS MANAGEMENT 6. HUMAN RESOURCES & JOB DESIGN  How do we provide a reasonable work environment?  How much can we expect our employees to produce? The Ten Critical Decisions OPERATIONS MANAGEMENT 7. SUPPLY CHAIN MANAGEMENT  Should we manufacture or buy a particular component or product?  Who are our good suppliers and how many should we have? The Ten Critical Decisions OPERATIONS MANAGEMENT 8. INVENTORY CONTROL AND JUST-in-TIME ( JIT )  How much inventory of each item should we have?  When do we reorder or manufacture? The Ten Critical Decisions OPERATIONS MANAGEMENT 9. INTERMEDIATE, SHORT-TERM, AND PROJECT SCHEDULING  Is subcontracting or outsourcing production a good idea?  Are we better off keeping people on the payroll during slowdowns?  Which job do we perform next? The Ten Critical Decisions OPERATIONS MANAGEMENT 10. MAINTENANCE  Who is responsible for maintenance?  When do we perform maintenance?  What are the effects of a maintenance program on productivity and efficiency? WHY AACSB ACCREDITORS STRENGTHENED OM GUIDELINES “ To sustain a career in business for many years, a business graduate needs an understanding of the analytical foundations and tools that are important for managerial decision-making.” WHY AACSB ACCREDITORS STRENGTHENED OM GUIDELINES “ The explosive growth of information technology applications is being driven by management science-based models such as decision analysis, scenario generation, simulation, and optimization ”. * * OPERATIONS MANAGEMENT WHY AACSB ACCREDITORS STRENGTHENED OM GUIDELINES “Since management science techniques are driving operations, supply chains, and e-commerce, they constitute a major driver of the entire economy.” OPERATIONS MANAGEMENT A Brief History Applied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro, PhD 1776 Adam Smith develops the concept of specialization of labor wherein the production process is broken down into discrete stages allowing specially-designed machines or narrowly-trained workers to perform each step with the least material waste and the maximum productivity. 1900 A Philadelphia engineer named Frederick W. Taylor publishes The Principles of Scientific Management , a guide to increasing the efficiency of factory workers. His methods, known as Taylorism, dominate industrial work through much of the 20th century, from automobile plants to McDonald’s. 1900 Frederick Taylor believed there were natural laws governing production systems. Once these laws were identified through experimentation and observation, the best way to perform any job or to produce any product could be found. He also called for separation of responsibilities between floor workers and managers. The latter would develop processes, jobs, work methods, and select, train, plan, coordinate, and control. 1940 Researchers in Britain and the United States build mathematical models of North American shipping lanes. Their goal: to find an optimized approach for getting convoys safely past Nazi submarines. The result is operations research, a mathematics discipline that now runs the logistics and operations of the modern world. 1950s W. Edwards Deming begins teaching statistical management in Japan. His thesis: Meticulous Control of Quality also leads to lower costs. His methods contribute to startling advances in Japanese manufacturing which later spread throughout the world. 1980s W. Edward Deming and J.M. Juran stressed that..  Everyone is responsible for quality… not just inspectors.  Product should be made right the first time to avoid rework.  Reliance on workers to make suggestions…not “experts”.  Elimination of any activity or material that does not add value to the product. 1970s Manufacturing becomes the second major functional area of business to utilize the computer. Applications include machine movement control, equipment & material monitoring, and the continuous adjustment of settings and flow rates. Early 21st Century Database systems and all manufacturing equipment and subsystems are integrated into a single system. In theory, this computer-integrated manufacturing system (CIM) would control and coordinate every phase of production from initial customer order, to custom-product design, inventory purchase orders, tooling requirements, production schedules, tracking, quality control monitoring, assembly of information on productivity, profitability, and tool wear, as well as shipping and billing. Mission / Strategy Relationship Corporate Mission and Goals Corporate Strategy External Factors Product and Service Selections Market Segment Selections Competitive Advantage Factors Policy Constraints Internal Factors Functional Strategies Operations, Marketing, Finance Strategy Implementation and Performance Measurement Data Input and Feedback Functional Strategies Corporate strategy dictates the individual strategies of the firm’s three functional units: marketing, finance, and operations. The operations functional strategy should identify tasks related to the planning, design, and operation of the production conversion system. Operations Functional Strategy  It must delineate the tasks that the operations function must do well in order to support and achieve the corporate strategy.  Almost any operations task can be used to support a firm’s strategy but most firms can compete very effectively by emphasizing one or two.  The operations functional strategy should be consistent with the marketing and finance strategies, as well. Operations Functional Strategy The ten critical decisions of operations management developed in chapter one provide an excellent checklist for identifying the particular tasks that an operations functional strategy must perform in supporting and achieving the firm’s corporate strategy. Operations Functional Strategy Checklist 1. QUALITY - customer expectations - quality systems design - quality measures and standards 2. PRODUCT - customized - standardized Operations Functional Strategy Checklist 3. SUPPLY CHAIN - sole or multiple vendors - type of distribution system 4. LABOR - specialized skills - multiple skills Operations Functional Strategy Checklist 5. MAINTENANCE - “as needed” - preventitive 6. LAYOUT - assembly line - work cells - project Operations Functional Strategy Checklist 7. INVENTORY - ordering policy - stockage levels - type of system 8. PROCESS - scale of operation - choice of technology - in-house production - outsourcing Operations Functional Strategy Checklist 9. SCHEDULING - stable - variable 10. LOCATION - near supplier - near customer The Dynamics of Strategy Strategies change over time due to two reasons: 1. changes within the organization. 2. changes in the environment. FOR EXAMPLE, CHANGES IN TECHNOLOGY, PRODUCT, OR PROCESS AFFECT A FIRM’S STRENGTHS AND WEAKNESSES, AND THEREFORE ITS STRATEGY. The Dynamics of Strategy Sales + Revenues Birth Growth Maturity THE PRODUCT LIFE CYCLE Decline Change in Corporate & OM Functional Strategies STAGE CORPORATE STRATEGY OPERATIONS STRATEGY Birth INCREASE MARKET SHARE, R+D, ENGRG FREQUENT PRODUCT AND PROCESS DESIGN CHANGES, QUALITY FOCUS, SHORT PRODUCTION RUNS Growth STRENGTHEN HOLD ON MARKET SEGMENT VIA PRICING AND QUALITY IMAGE MORE PRODUCT OPTIONS PRODUCT AND PROCESS RELIABILITY ENHANCE DISTRIBUTION INCREASE CAPACITY Maturity DEFEND MARKET SHARE CUT COSTS PRODUCT STANDARDIZATION MINOR PRODUCT CHANGES LONG PRODUCTION RUNS INCREASE PROCESS STABILITY Decline COST CONTROL EVEN MORE CRITICAL REDUCE CAPACITY ELIMINATE POOR PROFIT MAKES + MODELS COST MINIMIZATION LITTLE PRODUCT DIFFERENTIATION INTRODUCTION TO OPERATIONS MANAGEMENT Applied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD OPERATIONS and LOGISTICS MANAGEMENT EPILOGUE Applied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD What You Have Seen • • • • Decision Theory Basic Simulation Queuing Theory Manufacturing Processes What You Have Seen • Service Processes • • • • Transportation Algorithm Line Balancing Work Measurement Time Standards What You Have Seen • • • • Learning Curve Just-in-Time Systems Inventory Control Short-term Scheduling What You Have Seen • Assignment Algorithm • Project Management • Linear Programming What You Have Not Seen • • • • Decoupling Theory Outsourcing / Offshoring Telecommunications Yield Management What You Have Not Seen • • • • Data Envelopment Analysis Data Mining Internet Service Design Environmental Management What You Have Not Seen • Process Opportunities • Experiential Blueprinting • Sensitivity Analysis What You Have Not Seen • • • • Minimal Spanning Trees Maximal Flow Technique Shortest Route Technique Stochastic Inventory Control What You Have Not Seen • • • • • Advanced Transportation Theory Reliability Theory Product Development / Design Artificial Intelligence Agile Manufacturing What You Have Not Seen • • • • • Data Base Management Quality Control Game Theory Markov Processes Project Budgeting What You Have Not Seen • • • • • Project Crashing Resource Leveling Duality Goal Programming Integer Programming What You Have Not Seen • Dynamic Programming • Optimization Theory • Quantitative EXCEL programming What You Have Not Seen • • • • Survey Information Utility Theory Complex Simulation Service Systems Theory What You Have Not Seen • • • • Global Operations Logistics Supply Chain Management E-commerce What You Have Not Seen • Maintenance & Reliability Theory • Mathematical Modeling • Materials Requirements Planning What You Have Not Seen • Decision Support Systems ( DSS ) • Forecasting Methods and Models • Capacitated Transhipment Models What You Have Not Seen • Traveling Salesman Network • Enterprise Resource Systems • Ergonomics …….and so on, and so on ! Solutions to the Dilemma APPLY YOUR DEGREE CREDITS TOWARD A 2nd DEGREE IN ODS or MIS Solutions to the Dilemma  Earn an MBA or MS in: - Decision Sciences - Operations Research - Operations Management - Materials Management - Transportation - Management Science - Decision Support Systems - Logistics - Industrial engineering Solutions to the Dilemma  Earn a certificate or certification in: • • • • Supply chain management Quality control Integrated resource management Manufacturing management …..and many more ! Operations and Logistics Management Thank you ! Come again ! Applied Management Science for Decision Making, 1e © 2012 Pearson Prentice-Hall, Inc. Philip A. Vaccaro , PhD