1. Introduction to
Operations Management

2. OM Defined
Operations management:
The business function responsible for
planning, coordinating, and controlling
the resources needed to produce a
company’s products and services

3. Simplified Organizational Chart

4. Information Flows
To & From Operations

5. The Role of OM in the Business

6. Transformation Process
Physical: as in manufacturing operations
Locational: as in transportation operations
Exchange: as in retail operations
Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication

7. Service - Manufacturing
Services: Manufacturing:
• Intangible product • Tangible product
• No inventories • Can be inventoried
• High customer • Low customer
contact contact
• Short response time • Capital intensive
• Labor intensive • Long response time

8. Service-Manufacturing Continuum

9. What Operations Managers
Do
Plan - Organize - Staff - Lead -
Control

10. 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

11. The Critical Decisions
• Quality management
– Who is responsible for quality?
– How do we define quality?
• Service and product design
– What product or service should we offer?
– How should we design these products and
services?

12. The Critical Decisions - Continued
• Process and capacity design
– What processes will these products require
and in what order?
– What equipment and technology is
necessary for these processes?
• Location
– Where should we put the facility
– On what criteria should we base this
location decision?

13. The Critical Decisions - Continued
• Layout design
– How should we arrange the facility?
– How large a facility is required?
• Human resources and job design
– How do we provide a reasonable work
environment?
– How much can we expect our employees
to produce?

14. The Critical Decisions - Continued
• Supply chain management
– Should we make or buy this item?
– Who are our good suppliers and how many
should we have?
• Inventory, material requirements
planning,
– How much inventory of each item should
we have?
– When do we re-order?

15. Example

16. 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

17. 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

18. Scientific Management
Early 1900s
• Separated ‘planning’ from ‘doing’
• Management’s job was to discover
worker’s physical limits through
measurement, analysis & observation
• Major contributors:
– Fredrick Taylor: stopwatch time studies
– Henry Ford: moving assembly line

19. Human Relations Movement
1930s to 1960s
• Recognition that factors other than
money contribute to worker productivity
• Major contributions:
– Understanding of the Hawthorn effect:
Study of Western Electric plant in Hawthorn, Illinois intended
to study impact of environmental factors (light & heat) on
productivity, but found workers responded to management’s
attention regardless of environmental changes
– Job enlargement
– Job enrichment

20. Management Science
Mid-1900s
• Developed new quantitative techniques
for common OM problems:
– Major contributions include: inventory
modeling, linear programming, project
management, forecasting, statistical
sampling, & quality control techniques

21. Computer Age
1970s
• Provided the tool necessary to support the
widespread use of Management Science’s
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

22. 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

23. 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

24. 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

25. 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

26. Trends in Business
• Major trends
– The Internet, e-commerce, e-business
– Management technology
– Globalization
– Management of supply chains
– Outsourcing
– Agility
– Ethical behavior
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27. Management Technology
• Technology: The application of scientific
discoveries to the development and
improvement of goods and services
• Product and service technology
• Process technology
• Information technology
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28. Simple Product Supply Chain
Suppliers’ Direct Final
Producer Distributor
Suppliers Suppliers Consumer
Supply Chain: A sequence of activities
And organizations involved in producing
And delivering a good or service
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29. Other Important Trends
• Working with fewer resources
• Revenue management
• Process analysis and improvement
• Increased regulation and product liability
• Lean production
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