Operations Management For Competitive Advantage CHASE ...

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Islamic University, Gaza - Palestine

Department of Industrial Engineering

Introduction to Operations and Productions Management Presented by First Semester 2011- 2012 Dr. Eng. Abed Schokry


Operations Advantage

CHASE

Management

AQUILANO

For

Competitive

JACOBS

McGraw Hill Higher Education, ninth edition

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Chapter 1: Learning Outcomes • You should be able to: – Define the term operations management – Compare and contrast service and manufacturing operations – Describe the operations function and the nature of the operations manager’s job – Describe the key aspects of operations management decision making – Briefly describe the historical evolution of operations management – Identify current trends in business that impact operations management


Overview

• • • • •

Introduction Historical Milestones in OM Factors Affecting OM Today Different Ways of Studying OM Wrap-Up: What World-Class Producers Do

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Introduction • Operations management is the management of an organization’s productive resources or its production system. • A production system takes inputs and converts them into outputs. • The conversion process is the predominant activity of a production system. • The primary concern of an operations manager is the activities of the conversion process.


Organizational Model

Finance HRM

Sales

OM QA

Marketing

Engineering

MIS

Accounting

MIS: Management Information System

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Historical Milestones in OM

• • • • • •

The Industrial Revolution Post-Civil War Period Scientific Management Human Relations and Behaviorism Operations Research The Service Revolution


Historical Milestones in OM and Significant Events in OM

• • • • • • •

Division of labor (Smith, 1776) Standardized parts (Whitney, 1800) Scientific management (Taylor, 1881) Coordinated assembly line (Ford 1913) Gantt charts (Gantt, 1916) Motion study (the Gilbreths, 1922) Quality control (Shewhart, 1924)

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Historical milestones in OM and significant events in OM (cont.) • • • • • •

CPM/PERT (Dupont, 1957) MRP (Orlicky, 1960) CAD Flexible manufacturing systems (FMS) Manufacturing automation protocol (MAP) Computer integrated manufacturing (CIM)


The Industrial Revolution • The industrial revolution developed in England in the 1700s. • The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories. • Adam Smith’s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. • Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.

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The Industrial Revolution • The industrial revolution spread from England to other European countries and to the United Sates. • In 1790 an American, Eli Whitney, developed the concept of interchangeable parts. • The first great industry in the US was the textile industry. • In the 1800s the development of the gasoline engine and electricity further advanced the revolution. • By the mid-1800s, the old cottage system of production had been replaced by the factory system. • . . . more


The Industrial Revolution Eli Whitney • Born 1765; died 1825 • in 1798, received government contract to make 10,000 muskets • Showed that machine tools could make standardized parts to exact specifications • Musket parts could be used in any musket

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The Industrial Revolution Frederick W. Taylor • • • • • •

Born 1856; died 1915 Known as ‘father of scientific management’ in 1881, as chief engineer for Midvale Steel, studied how tasks were done Began first motion & time studies Created efficiency principles


The Industrial Revolution Taylor: Management Should Take More Responsibility for Matching employees to right job • Providing the proper training • Providing proper work methods and tools • Establishing legitimate incentives for work to be accomplished

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The Industrial Revolution Frank & Lillian Gilbreth • • • •

Frank (1868-1924); Lillian (1878-1972) Husband-and-wife engineering team Further developed work measurement methods Applied efficiency methods to their home & 12 children


The Industrial Revolution Henry Ford (MAKE THEM ALL ALIKE!) • Born 1863; died 1947 • in 1903, created Ford Motor Company • in 1913, first used moving assembly line • to make Model T • Unfinished product moved by conveyor • past work station • Paid workers very well for 1911 ($5/day!)

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The Industrial Revolution W. Edwards Deming • • • • • •

Born 1900; died 1993 Engineer & physicist Credited with teaching Japan quality control methods in post-WW2 Used statistics to analyze process His methods involve workers in decisions


Post-Civil War Period

• During the post-Civil War period great expansion of production capacity occurred. • By post-Civil War the following developments set the stage for the great production explosion of the 20th century: – – – –

increased capital and production capacity the expanded urban workforce new Western US markets an effective national transportation system

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Scientific Management

• Frederick Taylor is known as the father of scientific management. His shop system employed these steps: – Each worker’s skill, strength, and learning ability were determined. – Stopwatch studies were conducted to precisely set standard output per worker on each task. – Material specifications, work methods, and routing sequences were used to organize the shop. – Supervisors were carefully selected and trained. – Incentive pay systems were initiated.


Scientific Management

• In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific management: – – – – – –

standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts

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Human Relations and Behavioralism

• In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production. • Researchers and managers alike were recognizing that psychological and sociological factors affected production. • From the work of behavioralists came a gradual change in the way managers thought about and treated workers.


The Service Revolution • The creation of services organizations accelerated sharply after World War II. • Today, more than two-thirds of the US workforce is employed in services. • About two-thirds of the US GDP is from services. • There is a huge trade surplus in services. • Investment per office worker now exceeds the investment per factory worker. • Thus there is a growing need for service operations management.

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The Computer Revolution

• Explosive growth of computer and communication technologies • Easy access to information and the availability of more information • Advances in software applications such as Enterprise Resource Planning (ERP) software • Widespread use of email • More and more firms becoming involved in E-Business using the Internet • Result: faster, better decisions over greater distances


Today's Factors Affecting OM

• • • • • •

Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues

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Studying Operations Management

• Operations as a System • Decision Making in OM


Operations as a System

Production System

Inputs

Conversion Subsystem

Outputs

Control Subsystem

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Operations as a System


Inputs of an Operations System

• External – Legal, Economic, Social, Technological

• Market – Competition, Customer Desires, Product Info.

• Primary Resources – Materials, Personnel, Capital, Utilities

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Conversion Subsystem

• Physical (Manufacturing) • Locational Services (Transportation) • Exchange Services (Retailing) • Storage Services (Warehousing) • Other Private Services (Insurance) • Government Services (Federal)


Outputs of an Operations System

• Direct – Products – Services

• Indirect – Waste – Pollution – Technological Advances

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Production as an Organization Function

• US companies cannot compete with marketing, finance, accounting, and engineering alone. • We focus on OM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside. • To succeed, a firm must have a strong operations function teaming with the other organization functions.


Decision Making in OM

• Strategic Decisions • Operating Decisions • Control Decisions

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Strategic Decisions

• These decisions are of strategic importance and have long-term significance for the organization. • Examples include deciding: – the design for a new product’s production process – where to locate a new factory – whether to launch a new-product development plan


Operating Decisions

• These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. • Examples include deciding: – how much finished-goods inventory to carry – the amount of overtime to use next week – the details for purchasing raw material next month

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Control Decisions

• These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. • Examples include deciding: – labor cost standards for a new product – frequency of preventive maintenance – new quality control acceptance criteria


What Controls the Operations System?

• Information about the outputs, the conversions, and the inputs is fed back to management. • This information is matched with management’s expectations • When there is a difference, management must take corrective action to maintain control of the system

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Wrap-Up: World Class Practice

• OM important in any organization • Global competition forces rapid evolution of OM • Decision based framework focus of course – Strategic, Operating, and Control


Management Concept • Planning and Decision Making: – Determining the organizational goal and deciding how best to achieve them.

• Organizing: Determine how best to group activities and resources. • Leading: Motivating members of organization to work in the best interest of organization. • Controlling: Monitoring and correcting ongoing activities. • Efficient: Using the resources wisely and without unnecessary waste. • Effective: Making the right decision and successfully implementing them.

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Objectives of the Organization

• Customer or user satisfaction • Investor's Satisfaction • Employees and workers morale


Objectives of the Organization

Customer or user satisfaction: It is essential to promote sales. The factors, which influence the customer or user satisfaction are: • Product Quality • Product Price • Delivery Schedule

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Organizational Functions • Marketing – Gets customers

• Operations – creates product or service

• Finance/Accounting – Obtains funds – Labor Cost, Production quantities, Quality


Japanese System of Management 1. Job Rotation 2. Long Term Employment 3. Promotion and Pay Increase 4. Continuing Education 5. Consensual Decision Making 6. Group Consciousness 7. Implicit Informal Controls 8. Holistic Concern for People 9. Paternalistic Employers 10. Respect of Humanity

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Contributions From • • • • • •

Human factors Industrial engineering Management science Biological science Physical sciences Information science


Why Study Operations Management? Systematic Approach to Org. Processes

Business Education

Operations Management

Career Opportunities

Cross-Functional Applications

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Why Study OM? (cont.) •OM is one of three major functions (marketing, finance, and operations) of any organization. •We want (and need) to know how goods and services are produced. •We want to understand what operations managers do. •OM is such a costly part of an organization.


Why Manufacturing Matters?

• Over 18 million workers in manufacturing jobs • Accounts for over 70% of value of U.S. exports • Average full-time compensation about 20% higher than average for all workers • Manufacturing workers more likely to have benefits • Productivity growth in manufacturing in the last 5 years is more than double that of the U.S. economy

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Why Study OM? • Every aspect of business revolves around 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


Career Opportunities in OM • • • • • • •

Industrial engineer Operations manager Production manager Inventory manager Quality analyst and or Quality manager Production analyst And others

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OM-Related Professional Societies in USA APICS - The Association for Operations Management American Society for Quality (ASQ) Institute for Supply Management (ISM) Institute for Operations Research and Management Science (INFORMS) • The Production and Operations Management Society (POMS) • The Project Management Institute (PMI) • Council of Supply Chain Management Professionals (CSCMP) • • • •


Entry-Level Jobs in OM • • • • • •

Purchasing planner/buyer Production (or operations) supervisor Production (or operations) scheduler/controller Production (or operations) analyst Inventory analyst Quality specialist

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Where Are the OM Jobs? •Technology/methods •Facilities/space utilization •Strategic issues •Response time •People/team development •Customer service •Quality •Cost reduction •Inventory reduction •Productivity improvement


Core Services Performance Objectives Quality

Flexibility

Operations Management

Speed

Price (or cost Reduction)

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Good or Service? Goods are physical items that include raw materials, parts, subassemblies, and final products. • Automobile, Computer, Oven, Shampoo

Services are activities that provide some combination of time, location, form or psychological value. • Air travel, Education, Haircut, Legal counsel


What is a Service and What is a Good?

• “If you drop it on your foot, it won’t hurt you.” (Good or service?)

• “Services never include goods and goods never include services.” (True or false?)

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Operations in the Service Sectors Continuum of Characteristics


Core Services Definition

Core services are basic things that customers want from products they purchase.

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Value-Added Services

Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way.

Islamic University, Gaza - Palestine I. Operations Strategy and Managing Change

1. Introduction to OM 2. Operations Strategy and Competitiveness

Plan of This Book

II. Product Design and Process Selection

III. Supply Chain Design

5. Manufacturing Product & Process Des.

6. Service Products and Process Design

7. Quality Managemen t 16. Consulting and Reengineering

8. Supply Chain Strategy

9. Strategic Capacity Management

4. Understanding Processes

IV. Planning and Controlling the Supply Chain

3. Project Managemen t

10. Just-in-Time Outsourcing and Lean Systems

11. Forecasting 12. Aggregate Planning

V. Revising the System 13. Inventory Control 17. Synchronous Manufacturing & Theory of Constraints

14. Materials Requirements Planning

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Basic Principles of production Management •Customers satisfaction is the prime goal of any organization, collect information about customer requirements. • Develop management commitment for product quality • Quality is the responsibility of every person in the organization • Develop the strategy for global competition • Rework and rejection are costly, so do the job right first time and every time • Set the production rate and supply in conformance with customer's demand rate • Reduce the unnecessary variety of products, parts and materials (Standardization)


Basic Principles of production Management (cont.) •Reduce set-up time and idle non-productive time • Reduce cycle time by eliminating unnecessary operations and combining operations where possible • Use the full capacity of production equipment • Select simple, low cost production equipment avoiding redundant features • Before ordering replacement of an old machine, establish the economic justification • Operational reliability and maintenance factors should be considered while ordering new equipment • Reduce variety of production equipment for low inventory of spares and ease of maintenance • Plan the layout of equipment to minimize workflow

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Basic Principles of production Management (cont.) • Use principles of motion economy to design the layout of workplaces • Assign codes to parts, material and tools to facilitate traceability • Exercise job rotation for mastery of multiple skills • Automatic gradually and only when the process variability cannot be controlled otherwise • Create more cells and workstations where waiting time and queues involve high cost • Reduce inventories to minimum workable levels • Record the performance of all-important function, particularly the output, quality appraisal and equipment breakdown and maintenance • Analyze the records and derive interfaces for future decisions • Rate the vendors and suppliers to select the best ones.


Decision Making • Most operations decisions involve many alternatives that can have quite different impacts on costs or profits • Typical operations decisions include: – What: What resources are needed, and in what amounts? – When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? – Where: Where will the work be done? – How: How will he product or service be designed? How will the work be done? How will resources be allocated? – Who: Who will do the work?

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End of Chapter 1

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