Introduction to the field You will become aware of the concepts and tools that are now being employed by companies around the world as they craft efficient and effective operations. Efficiency means doing something at the lowest possible cost. Effectiveness means doing the right things to create the most value for the company.

The field of operations management Related to efficiency and effectiveness is the concept of value, which can be defined as quality divided by price. A major objective of OM is to show how smart management can achieve high levels of value. Reasons for studying this field are: 1. A business education is incomplete without an understanding of modern approaches to managing operations.

Continue 2. Operations management provides a systematic way of looking at organizational processes. 3. Operations management presents interesting career opportunities. 4. The concepts and tools of OM are widely used in managing other functions of a business.

What is OM? Operations management is Defined as the design, operation and improvement of the systems that create and deliver the firms primary products and services. OM is a functional field of business. OM is frequently confused with operations research and management science (OR/MS) and industrial engineering (IE). The essential difference is that OM is a field of management.

Continue Whereas OR/MS is the application of quantitative methods to decision making in all fields, and IE is an engineering discipline. Thus, while operations managers use the decision making tools of OR/MS (such as CP scheduling) and are concerned with many of the same issues as IE (such as factory automation), OMs distinct management role distinguishes it from these other disciplines.

Decisions Operations decisions are made in the context of the firm as a whole. Starting at the top of Exh., the marketplace (the firms customers for its products or services) shapes the firms corporate strategy. This strategy is based on the corporate mission, and in essence, it reflects how the firm plans to use all its resources and functions (marketing, finance, and operations) to gain competitive advantage.

5 Operations Decision Making Marketplace Corporate Strategy Operations Strategy Operations Management Marketing StrategyFinance Strategy People PlantsPartsProcesses Planning and Control Production System Materials & Customers Input Products & Services Output

Continue The operations strategy specifies how the firm will employ its production capabilities to support its corporate strategy. (Similarly, the marketing strategy addresses how the firm will sell and distribute its goods and services, and the finance strategy identifies how best to utilize the firms financial resources).

Decisions Within the operations function, management decisions can be divided into three broad areas: 1. Strategic (long-term) decisions. The strategic issues are usually very broad in nature, addressing such questions as: How will we make the product? Where do we locate the facility? How much capacity do we need?

Strategic decisions The time frame for strategic decisions very long – usually several years or more, depending on the specific industry. Operations management decision at the strategic level impact the companys long- range effectiveness in terms of how it can address its customers needs.

Tactical decisions 2. Tactical (intermediate-term) decisions. In the decision-making process, tactical planning primarily addresses how to efficiently schedule material and labor within the constraints of previously made strategic decisions. Issues on which OM concentrates on this level are: How many workers do we need? When do we need them? When should we have material delivered?

Operational decisions 3. Operational planning and control (short- term) decisions. Management decisions with respect to operational planning and control are narrow and short-term by comparison. Issues at this level include: What jobs do we work on today or this week? Who do we assign to what tasks? What jobs have priority?

Production systems Production systems are used in all types of businesses. The heart of OM is the management of production systems. A production system uses operations resources to transform inputs into some desired output. An input may be a raw material, a customer, or a finished product from another system.

Five Ps Operations resources consist of what we term the five Ps of operations management: people, plants, parts, processes, and planning and control systems. People are the direct and indirect workforce. Plants include the factories or service branches where production is carried out. Parts include the materials that go through the system.

6 OM Involves Managing Transformations InputOutput People Plants Parts Processes Planning and Control Transformation Process (Value Adding) Transformation is enabled by The 5 Ps of OM:

Continue Processes include the equipment and steps by which production is accomplished. Planning and control systems are the procedures and information management uses to operate the system. Transformation that take place include: Physical, as in manufacturing. Location, as in transportation.

Transformations Exchange, as in retailing. Storage, as in warehousing. Physiological, as in health care. Informational, as in telecommunications. System – Automobile factory Primary inputs – sheet steel, engine parts Resources – tools, equipment, workers

Differences between services and goods production Primary transformation functions – fabrication and assembly of cars Typical desired output – high-quality cars. The essential difference between the two is that service is an intangible process, while a good is the physical output of a process. McDonalds manufactures a tangible product, but because it is designed to have some contact with the customer to complete the service production process, the firm is in the service category.

Operations as service The core services customers want are products that are made correctly, are customized to their needs, are delivered on time, and are priced competitively. These are commonly summarized as the classic performance objectives of the operations function: quality, flexibility, speed, and price.

Continue Value-added services are services that simply make the external customers life easier or, in the case of internal customers, help them to better carry out their particular function. Value-added services can be classified into four broad categories: information, problem solving, sales support, and field support.

Continue 1. Information is the ability to furnish critical data on product performance, process parameters, and cost to internal groups (such as R&D) and to external customers, who then use the data to improve their own operations or products. 2. Problem solving is the ability to help internal and external groups solve problems, especially in quality.

Continue 3. Sales support is the ability to enhance sales and marketing efforts by demonstrating the technology, equipment, or production systems the company is trying to sell. 4. Field support is the ability to replace defective parts quickly.