Introduction to operations management

Learning objectives Define operations management (om) Explain the role of om in business Describe the differences between service & manufacturing operations Describe the type of decisions made in om Identify major historical developments & current trends in om Describe the information flows between operations & other business functions

Om defined Operations management: the business function responsible for planning, coordinating, and controlling the resources needed to produce a companys products and services Simplified organizational chart Information flows Information flows to & from operations The role of om in the business Value added defined

Service - manufacturing Services: Intangible product

No inventories High customer contact Short response time

Labor intensive Manufacturing: Tangible product Can be inventoried Low customer contact Capital intensive Long response time Service-manufacturing continuum Om decisions Strategic decisions:

Decisions that set the direction for the entire company. Broad in scope & long-term in nature
Tactical decisions:

Short-term & specific in nature Bound by the strategic decisions

Example

Major historical developments Industrial revolution late 1700s

Scientific management early 1900s Human relations movement 1930s to 1960s Management science mid-1900s Computer age 1970s Just-in-time systems 1980s Total quality management (tqm) 1980s Reengineering 1980s Flexibility 1990s Time-based competition 1990s Supply chain management 1990s Global competition 1990s Environmental issues 1990s Electronic commerce late 1990s early 21st century

Industrial revolution late 1700s Replaced traditional craft methods Substituted machine power for labor Major contributions:

James watt (1764): steam engine Adam smith (1776): division of labor Eli whitney (1790): interchangeable parts
Scientific management early 1900s Separated planning from doing Managements job was to discover workers physical limits through measurement, analysis & observation Major contributors:

Fredrick taylor: stopwatch time studies

Henry ford: moving assembly line

Human relations movement 1930s to 1960s Recognition that factors other than money contribute to worker productivity Major contributions:

Understanding of the hawthorn effect: Job enlargement Job enrichment

Management science mid-1900s

study of western electric plant in hawthorn, illinois intended to study impact of environmental factors (light & heat) on productivity, but found workers responded to managements attention regardless of environmental changes

Developed new quantitative techniques for common om problems:

Major contributions include: inventory modeling, linear programming,

played a large role in supporting american military operations during world war ii

project management, forecasting, statistical sampling, & quality control techniques

Computer age 1970s Provided the tool necessary to support the widespread use of management sciences quantitative techniques the ability to process huge amounts of data quickly & relatively cheaply Major contributions include the development of material requirements planning (mrp) systems for production control

Developments: 1980s japanese influence Just-in-time (jit):

Techniques designed to achieve high-volume production using coordinated material flows, continuous improvement, & elimination of waste

Total quality management (tqm):

Techniques designed to achieve high levels of product quality through shared responsibility & by eliminating the root causes of product defects

Business process reengineering: clean sheet redesign of work processes to increase efficiency, improve quality & reduce costs

Developments: 1990s Flexibility:

Offer a greater variety of product choices on a mass scale (mass customization)

Time-based competition: Developing new product designs & delivering customer orders more quickly than competitors

Supply chain management Cooperating with suppliers & customers to reduce overall costs of the supply chain & increase responsiveness to customers

Developments: 1990s Global competition:

International trade agreements open new markets for expansion & lower barriers to the entry of foreign competitors (e.g.: nafta & gatt)

Creates the need for decision-making tools for facility location, compliance with with local regulations, tailoring product offerings to local tastes, managing distribution networks,

Environmental issues:

Pressure from consumers & regulators to reduce, reuse & recycle solid wastes & discharges to air & water

Electronic commerce Internet & related technologies enable new methods of business transactions:

E-tailing creates a new outlet for retail goods & services with global access and 24-7 availability Internet provides a cheap network for coordinating supply chain management information

Developing influence of broadband & wireless