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Introduction to Operations
Management
PowerPoint presentation to accompany
Heizer and Render
Operations Management, 10e, Global Edition
Principles of Operations Management, 8e, Global Edition
PowerPoint slides by Jeff Heyl
© 2011 Pearson Education
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Why Study OM?
1. OM is one of three major functions of
any organization, we want to study
how people organize themselves for
productive enterprise
2. We want (and need) to know how
goods and services are produced
3. We want to understand what
operations managers do
4. OM is such a costly part of an
organization
© 2011 Pearson Education
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Ten Critical Decisions
Ten Decision Areas
1. Design of goods and services
2. Managing quality
3. Process and capacity
design
4. Location strategy
5. Layout strategy
6. Human resources and
job design
7. Supply-chain
management
8. Inventory, MRP, JIT
9. Scheduling
10. Maintenance
© 2011 Pearson Education
Chapter(s)
5
6, Supplement 6
7, Supplement 7
8
9
10
11, Supplement 11
12, 14, 16
13, 15
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Table 1.2
1-3
Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100%
75
50
25
0
25
50
75
100%
|
|
|
|
|
|
|
|
|
Percent of Product that is a Good Percent of Product that is a Service
© 2011 Pearson Education
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Ethics and
Social Responsibility
Challenges facing
operations managers:
 Developing and producing safe,
quality products
 Maintaining a clean environment
 Providing a safe workplace
 Honoring stakeholder commitments
© 2011 Pearson Education
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Scope of Operations
Management
The scope of operations management ranges across
the organization.
The operations function includes many interrelated activities
such as:









Forecasting
Capacity planning
Facilities and layout
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
And more . . .
Student Slides
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Role of the Operations Manager
The Operations Function consists of all activities directly related
to producing goods or providing services.
A primary function of the operations manager is to guide the
system by decision making.
– System Design Decisions
– System Operation Decisions
Student Slides
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Why Study OM?
• Every aspect of business affects or is affected by operations
• Many service jobs are closely related to operations
–
–
–
–
Financial services
Marketing services
Accounting services
Information services
• There is a significant amount of interaction and collaboration
amongst the functional areas
• It provides an excellent vehicle for understanding the world in
which we live
Student Slides
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OM and Supply Chain
Career Opportunities
•
•
•
•
•
•
•
•
•
Operations manager
Supply chain manager
Production analyst
Schedule coordinator
Production manager
Industrial engineer
Purchasing manager
Inventory manager
Quality manager
Student Slides
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Historical Evolution of OM
•
•
•
•
•
Industrial Revolution
Scientific Management
Human Relations Movement
Decision Models and Management Science
Influence of Japanese Manufacturers
Student Slides
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Key Issues for Operations
Managers Today
•
•
•
•
•
Economic conditions
Innovating
Quality problems
Risk management
Competing in a global economy
Student Slides
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The Need for Supply Chain Management
• In the past, organizations did little to manage
the supply chain beyond their own operations
and immediate suppliers which led to
numerous problems:
– Oscillating inventory levels
– Inventory stockouts
– Late deliveries
– Quality problems
Student Slides
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What is Operations Management?
“ Operation Management is the set of
activities that create goods and services
through the transformation of inputs into
outputs.”
(Slack, 2001)
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Typical Organization Chart
Source: Reid and Sanders, 2005.
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Activities of Operations manager





Understand the operation’s strategic objectives
Developing an operation’s strategy for the
organization
Designing the operation’s products, services and
processes
Planning and controlling the operation
Improving the performance of the operation.
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Some Activities of an Operations Manager
Design elegant products
which can be flat packed
efficiently
Storage
Quality
Design Store Layout
Site Location
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The input-transformation-output model
Transformed
resources
Materials
Information
Customers
Input
Transforming
resources
Facilities
Staff
Source: Slack, 2001
Transformation
process
Output
Goods
and
services
Similarities-Service/Manufacturers






All use technology
Both have quality, productivity, & response
issues
All must forecast demand
Each will have capacity, layout, and location
issues
All have customers and suppliers
All have scheduling and staffing issues
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Historical Development of OM














Industrial revolution
Scientific management
Human relations movement
Management science
Computer age
Just-in-Time Systems (JIT)
Total quality management (TQM)
Reengineering
Flexibility
Time-Based Competition
Supply chain Management
Global Competition
Environmental Issues
Electronic Commerce
Late 1700s
Early 1900’s
1930s to 1960s
Mid-1900s
1970s
1980s
1980’s
1990s
1990s
1990s
1990’s
1990s
1990s
Late 1990s
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Today’s OM Environment

Customers demand better quality,
faster deliveries, and lower costs
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Competitive Priorities- The Edge


Four Important Operations Questions:
Will you compete on –
Cost?
Quality?
Time?
Flexibility?
All of the above? Some? Tradeoffs?
Source: Reid and Sanders, 2005.
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Lower prices
(or higher profits)
Faster customer
response
Cost
Speed
Quality
Error-free products
and services
Dependability
On-time
deliveries
Flexibility
Wider variety
More customisation
More innovation
Cope with volume
fluctuations
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Are There Priority Tradeoffs?




Which priorities are “Order Qualifiers”?
e.g. Must have excellent quality since everyone expects it
Which priorities are “Order Winners”?
e.g. Dell competes on all four priorities
Southwest Airlines competes on cost
McDonald’s competes on consistency
FedEx competes on speed
Custom tailors compete on flexibility
Can you have both high quality and low cost?
e.g. Yes, Coke and Pepsi are good examples
Can you offer design flexibility and short delivery?
e.g. Yes, modular housing manufacturers do it
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Measuring Productivity

Productivity is a measure of how efficiently inputs are
converted to outputs
Productivity = output/input

Total Productivity Measure
Total Productivity = $sales/inputs $

Partial Productivity Measure
Partial Productivity = cars/employee

Multifactor Productivity Measure
Multi-factor Productivity = sales/total $costs
Source: Reid and Sanders, 2005.
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Highlights




Business Strategy is a long
range plan. Functions
develop supporting plans
Strategy must address
mission, environment, and
core competencies
Business strategy provides a
guide for designing
operations strategy
Operations strategy must
consider which competitive
priorities are essential to
meet business objectives



Competitive priorities are
cost, quality, time, and
flexibility
Productivity measures how
effectively a firm is using
resources
Productivity is computed as
a ratio of outputs divided by
inputs
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References


Reid R.D., and Sanders N. R., (2005) Operations
Management, 2nd Edition, Wiley Publication.
Slacks Nigel and Lewis Mike, (2002) Operations
Management, Prentice Hall.
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