Welcome MGT329

Operations Management: MGT329

Professor: Jeff Street Office: BA 434 Phone: X4184 Cell: (770) 654-2056 e-mail: strejeff@isu.edu

Grading
The grade received in the course will be based on:
Participation/Homework Exam

I Exam II Final Exam

(25%) (25%) (25%) (25%)

Operations Decision Making

Marketplace Corporate Strategy

MGT Macro 460

Marketing Strategy

Finance Strategy

Operations Strategy

Operations Management

MGT329

Micro

People

Plants

Parts

Processes

Materials & Customers

Planning and Control Input

Products & Services

Output

Production System

Why Study Operations Management?

Systematic Approach to Organizational Processes

Business Education

Operations Management

Career Opportunities

Cross-Functional Applications

Development of OM as a Field
Scientific Management
Moving Assembly Line Hawthorne Studies Operations Research

Computers (MRP)
JIT/TQC & Automation Manufacturing Strategy Service Quality and Productivity

TQM & Quality Certification

Business Process Reengineering Electronic Enterprise Global Supply Chain Mgmt.

Historical Underpinnings

OM's Emergence as a Field

Current Issues

Speeding up the time it takes to get new products and services into production. Developing flexible production systems to enable mass customization of products and services. Managing global production/supply networks.

Developing and integrating new production technologies into existing production systems.

Current Issues

Achieving high quality quickly and keeping it up in the face of restructuring. Managing a diverse workforce. Conforming to environmental constraints, ethical standards, and government regulations.

What is Operations Management?

Operations is a functional area of business devoted to the management of an organization's resources to create products or services. The set of resources includes an organization's know-how, facilities, workforce, materials, and equipment.

Operations Management issues permeate all levels of an organization's decision making from the long-term strategic to the tactical to the day to day operations.

Operations management is concerned with the design, operation, and improvement of the production system that creates the firms primary products and services.

[Even Mocha Madness, Kinkos, and Portneuf

Medical Center are production systems]

Do you have an example of experience in operations?

Managing Transformations The Production System

Input
Transformation Process (Value Adding)

Output

Transformation is enabled by The 5 Ps of OM:

[A.K.A. The 5 MsMan, Machines, Materials, Methods, and Management]

People Plants Parts Processes Planning and Control

Transformations

Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications

Competitive Priorities
Quality

(including Service) (speed, place) (customized)

Delivery

Flexibility

Cost

or Price

f (Q,T) V= C
Our Value Equation

Core Services Definition

Core services are basic things that customers want from products (or services) they purchase.
[What is core service you expect from me?]

Core Services Performance Objectives (Competitive Priorities)

Quality made correctly

Flexibility customized

Operations Management

Delivery Speed on-time

Price (or cost Reduction) Competitively

Value-Added Services Defined

Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way.
[What would be value-added from me to interest you in taking my MGT460 class?]

Value-Added Service Categories

Problem Solving

Information

Operations Management

Sales Support

Field Support

In closing, lets consider

McDonalds Fast-Food Restaurant
Service
The

or Manufacturing?

company certainly manufactures tangible products would we consider McDonalds a service business?

Why

Core

McDonalds Transformation?

Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications

How would an Operations Management focus apply here? [from a Micro view]
Standard execution time 2 minutes Verbalize Order 30 seconds Enter Order Prepare Food 60 seconds Collect payment 15 seconds

15 seconds Fail point Correct Order 20 seconds

Front Office

Materials (e.g., food, paper)

Line of visibility

Not seen by customer but necessary to performance

Select and purchase supplies

Back Office

Operations and Supply Strategy

Chapter 2

Operations Decision Making

Marketplace Corporate Strategy

MGT Macro 460

Marketing Strategy

Finance Strategy

Operations Strategy

Operations Management

MGT329

Micro

People

Plants

Parts

Processes

Materials & Customers

Planning and Control Input

Products & Services

Output

Production System

Operations Strategy
Customer Needs Alignment Corporate Strategy

Competitors

Operations Strategy

Core Competencies

Decisions Processes, Infrastructure, and Capabilities Effectiveness vs. Efficiency

Strategy Process
Forced-Choice Model
Environmental Assessment
Broad economic assumptions Key government and regulatory issues Major technological forces Significant market opportunities and threats Explicit strategies of competitors

Organizations Position
Statement of mission Interrelated set of financial and nonfinancial objectives Statement of strengths and weaknesses Forecast of operational needs Major future programs

Strategic options Requirements for implementing options Contingency plans

Strategy Process
Customer Needs

Example
More Product

Corporate Strategy

Increase Org. Size

SBU Operations Strategy

Increase Production Capacity

Decisions on Processes and Infrastructure

Build New Factory

Operations Priorities

Cost Quality

Delivery Speed
Flexibility

Traditional Competitive Priorities

Service

Delivery Reliability (from globalization)

f (Q,T) V= C

Coping with Changes in Demand (from Web) Flexibility and New Product Introduction Speed

A Framework for Operations Strategy

Customer Needs

New product : Old product

Competitive dimensions & requirements

Quality, Cost, Delivery, Flexibility, and Service

Enterprise capabilities Operations andSupplier capabilities Operations & Supplier Capabilities R&D R&D Technology Deployment Systems /Quality Technology Systems People People Distribution Distribution

Support Platforms Financial management

Human resource management

Information management

competitive priorities
Quality Flexibility Service
Cost Lead Times Variability Delivery Quality

Cost Flexibility

World-Class Manufacturing or Service

World-class operations no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. They have become order qualifiers.

What are the order winners in todays market? Distinctive Competency

Distinctive competency
A strength that sets a business apart from its competition
Quality, Cost, Delivery, Flexibility, and Service

McDonalds Disney World or Disney Land Southwest or Frontier Airlines Intel Corporation UPS

Strategy Begins with Priorities

Consider the case of a personal computer manufacturer.

1. How would we segment the market according to product group?

Personal use Small business Large Corporations

2. How would we identify product requirements, demand patterns, and profit margins for each group?

How do we identify order winner and order qualifiers for each group?

quality cost delivery flexibility service

What would be the winner for each market group?

Personal use Small business Large Corporations

Again, What is Operations Management?

Operations (Management) is the functional area of business devoted to the management of an organization's resources to create products or services.
Resources require allocation of capital, i.e. MONEY

What is Productivity?
A

measure of the effective use of resources, usually expressed as the ratio of output to input. Output Productivity = Input

What factors affect the productivity of a business?

work methods capital quality training technology management

Total Measure Productivity

Total measure Productivity =
or = Goods and services produced (value of) All resources used (value of) Outputs Inputs

[Productivity versus Throughput]

Partial Measure Productivity

Partial measures of productivity =
Output or Output or Output or Output Labor Capital Materials Energy

Multifactor Measure Productivity

Multifactor measures of productivity = Output + Capital or . Energy

Labor

Labor

Output + Capital

. Materials

Example of Productivity Measurement

You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 tax forms. Last week the same crew used only 2000 hours of labor to process 480 forms.

Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure. Is productivity increasing or decreasing? Answer: Last weeks productivity = 480/2000 = 0.24, and this weeks productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.

Example
10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr

What is the labor productivity?

Cost of raw material: $5,000

Cost of purchased material: $25,000

Example--Labor Productivity
10,000 units/500hrs = 20 units/hour (10,000 unit*$10/unit) (500hrs*$9/hr)

= $22.22

What do these calculations tell us?

More importantly -- What dont they tell us?

Applying Productivity Figures

Youve

just told your boss that the plant labor productivity is better than that of a plant in a related business.

What does this really mean?

Productivity measures
need

to be tracked over time need to include all possible inputs are difficult to compare between companies or industries do not (directly) include measures of timeliness or quality [th********] [sc*** and re****]

Solution for Problem #1

Labor Productivity units/hour Model Deluxe Car Limited Car Output in Units 4,000 6,000 Input in Labor Hours 20,000 30,000 Productivity (Output/Input) 0.20 0.20

Labor Productivity dollars Model Deluxe Car Output in Dollars 4,000($8000)= $32,000,000 6,000($9500)= $57,000,000 Input in Dollars 20,000($12.00)= $240,000 30,000($14.00)= $420,000 Productivity (Output/Input) 133.33

Limited Car

135.71

Solution to Problem #2
Labor Productivity Country U.S. LDC Output in Units 100,000 20,000 Input in Hours 20,000 15,000 Productivity (Output/Input) 5.00 1.33

Capital Equipment Productivity Country U.S. LDC Output in Units 100,000 20,000 Input in Hours 60,000 5,000 Productivity (Output/Input)

1.67
4.00

Solution to Problem #2
Multifactor Labor and Capital Equipment Country U.S. Output in Units 100,000 Input in Hours 20,000 + 60,000= 80,000 15,000 + 5,000= 20,000 Productivity (Output/Input) 1.25

LDC

20,000

1.00

Raw Material Productivity Country U.S. LDC Output in Units 100,000 20,000 Input in Dollars $20,000 FC $20,000/10= $2,000 Productivity (Output/Input) 5.00 10.00