PRODUCTION/OPERATIONS CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

MANAGEMENT
SIXTH EDITION

WILLIAM J. STEVENSON
Rochester Institute of Technology

Irwin/McGraw-Hill
Irwin/McGraw-Hill ©The
©The McGraw-Hill
McGraw-Hill Companies,
Companies, Inc.,
Inc., 1999
1999
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 PART ONE
CHAPTER ONE
INTRODUCTION
PRODUCTION AND OPERATIONS MANAGEMENT
•Chapter One
•Production and Operations Management

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©The McGraw-Hill Companies, Inc.,
 CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Management

 Operations function consists of all activities directly

related to producing goods or providing services.

Organization

Finance Production/ Marketing

Operations

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PRODUCTION AND OPERATIONS MANAGEMENT
Business Operations Overlap

Production/
Operations

Marketing Finance

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PRODUCTION AND OPERATIONS MANAGEMENT
Types of Operations
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
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Value-Added
• The difference between the cost of inputs
and the value or price of outputs.

Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
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Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned vegetables
Metal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment

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Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy patients
Hospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

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Operations Interfaces

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Decision Making

• System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment

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 CHAPTER ONE
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Decision Making

• System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance

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 CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Major Characteristics of
Production Systems

• Degree of standardization
• Type of operation
– project
– job shop
– repetitive production
– continuous processing

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Manufacturing or Service?

Tangible Act

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Key Differences
• Customer contact
• Uniformity of input
• Labor content
• Uniformity of output
• Measurement of productivity
• Quality assurance

These differences are beginning to fade

in many cases
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Manufacturing vs Service
Characteristic Manufacturing Service
Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
High

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Responsibilities of
Operations Management
• Planning • Organizing
– Capacity – Degree of centralization
– Location – Subcontracting
– Products and services • Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects • Directing
– Scheduling – Incentive plans
• Controlling – Issuance of work orders
– Inventory – Job assignments
– Quality
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Models

• A model is an abstraction of reality.

– Physical
– Schematic
– Mathematical
Tradeoffs

What are the pros and cons of models?

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Systems Approach

“The whole is greater than the sum of the parts.”

Suboptimization

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Quantitative Approaches

• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models

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Pareto Phenomenon

• A vital few things are important for reaching

an objective or solving a problem.

• 80/20 Rule - 80% of problems are caused by

20% of the activities.

How do we identify the vital few?

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Recent Trends

• Global competition
• Operations strategy
• Total quality management (TQM)
• Flexibility
• Time reduction Technology

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Recent Trends (Continued)

• Worker involvement
• Reengineering
• Environmental issues
• Service

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