2. Instructor:
Dr. Muhammad Salman Khan
Assistant Professor
PhD Mechanical Engineering
(Damage Mechanics of Composite Materials for Aerospace Applications)
Email: muhammad.salman@smme.nust.edu.pk
Department of Design and Manufacturing Engineering
SMME-NUST, Islamabad
DME 842: Operations Management
(Week-01)
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3. Today’s Lecture
Class Introduction
Course Introduction
Topics Covered:
• Course outlines
• Introduction to operations management
• What is Operations Management (OM)
• What Operations Managers do?
• Operations of Good and services
• The challenge of productivity
• Measuring productivity
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4. Course Introduction and Outline
Lesson/Teaching Plan
Reading Material:
– Books
– Research articles
– Case studies
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5. Rules and regulation
Classroom rules
➢ Turn off your cell phones and put on front table during class
➢ Attendance will be marked at the start of lecture
➢ Question answer session will be in the mid and end of lecture
➢ Students with less than 75 % are not allowed in exam
➢ Ensure attendance and be in class before five minutes a lecture starts
➢ Do participate in class activities because it will add value to your grades
➢ Any misconduct or inconvenient behavior in class will result into the
“no attendance” and student will not be allowed to attend future class
and exam.
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6. Project
➢ Form a group of 3-4 students
(Submit team member list in 4th week)
➢ Choose an organization for project
1. Service organizations
2. Manufacturing Industries
(Submit industry name in 5th week)
Visit the industry/organization and identify the problems within industry
(Project progress report 9th week)
➢ Suggest a solution using any operation management tool
➢ Present the solution and prove that your solution has improved the firm performance
(Final presentation and report submission 16th -17th week)
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7. Course description
This course covers the production & services
operation management. The major application
areas of this course are
1. Manufacturing Industries
2. Banks
3. Hospitals and pharmaceutical chains
4. Restaurants & hotels
5. Airlines
6. Schools & Universities
7. Transportation companies
8. Construction & software projects
9. IT industries
10. Agriculture operations
The production of goods and services requires operations management
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8. Introduction
➢ What is operations management ?
Operations management (OM) is the set of activities that manages to create
value in the form of goods and services by transforming inputs into outputs.
➢ Production is the creation of
goods and services.
➢ The efficient production of goods
and services requires effective
applications of the concepts,
tools, and techniques of OM.
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9. Introduction
Essential functions of a firm:
1. Marketing – generates demand
2. Production/operations – creates the product
3. Finance/accounting – tracks how well the organization is
doing, pays bills, collects the money
4. Human Resources – provides labor, daily wages, salary
administration and job evaluation
The production functions more obvious in Manufacturing (tangible product) and may be less obvious for services.
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10. Essential functions of a service firm
Commercial Bank
Operations
• Teller Scheduling
• Check Clearing
• Collection
• Transaction processing
• Facilities design/layout
• Vault operations
• Maintenance
• Security
Finance
• Investments
• Security
• Real estate
• Accounting
• Auditing
Marketing
• Loans
• Commercial
• Industrial
• Financial
• Personal
• Mortgage
• Trust Department
Human Resources
• Recruitment
• Job evaluation
• Performance evaluation
• Wage and Salary Adm.
• Personnel records
10
Introduction
11. Essential functions of a manufacturing firm
Manufacturing
Operations
Facilities
Construction; maintenance
Production and inventory control
Scheduling; materials control
Quality assurance and control
Supply-chain management
Manufacturing
Tooling; fabrication; assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space,
and personnel
Process analysis
Development and installation of
production tools and equipment
Finance/ accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Marketing
Sales
promotion
Advertising
Sales
Market research
Human Resources
Recruitment
Job evaluation
Performance evaluation
Wage and Salary Adm.
Personnel records
11
Introduction
12. Why operation management ?
➢ OM is one of major functions of any organization, we want to
study how people organize themselves for productive
enterprise
➢ We want (and need) to know how goods and services are
produced
➢ We want to understand what operations manager do
➢ OM is a costly part of an organization
12
Introduction
13. What operation managers do ?
➢ Planning
➢ Organizing
➢ Staff Enrollment
➢ Leading
➢ Controlling
Basic Management Functions
https://www.youtube.com/watch?v=FbbGlVle3oU
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Introduction
14. 1. Design of goods and services
– What good or service should we offer?
– How should we design these products and services?
2. Managing quality
– How do we define quality?
– Who is responsible for quality?
3. Process and capacity design
– What process and what capacity will these products require?
– What equipment and technology is necessary for these
processes?
4. Location strategy
– Where should we put the facility?
– On what criteria should we base the location decision?
Key areas of OM
14
Introduction
15. 5. Layout strategy
– How should we arrange the facility?
– How large must the facility be to meet our plan?
6. Human resources and job design
– How do we provide a reasonable work environment?
– How much can we expect our employees to produce?
7. Supply-chain management
– Should we make or buy this component?
– Who should be our suppliers and how can we integrate them
into our strategy?
8. Inventory, material requirements planning, and JIT
– How much inventory of each item should we have?
– When do we re-order?
15
Introduction
16. 9. Intermediate and short–term scheduling
– Are we better off keeping people on the payroll during
slowdowns?
– Which jobs do we perform next?
10. Maintenance
– How do we build reliability into our processes?
– Who is responsible for maintenance?
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Introduction
17. ➢ Technology/methods
➢ Facilities/space utilization
➢ Strategic issues
➢ Response time
➢ People/team development
➢ Customer service
➢ Quality
➢ Cost reduction
➢ Inventory management
➢ Productivity improvement
Where are the OM Jobs?
17
Introduction
18. 1. Operation manager
2. Industrial engineer
3. Operation research
4. Production controller
5. Production manager
6. Production planner
7. Scheduler
8. Layout designer
9. Project manager
10. ERP consultant
11. Data scientist
What will be the job title for managing operations within firms ?
About 40% of all jobs are in OM.
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Introduction
20. History of Operation Management
➢ Division of labor (Adam Smith 1776; Charles Babbage 1852)
➢ Standardized parts (Whitney 1800)
➢ Scientific Management (Taylor 1881)
➢ The concept of assembly line (Ford/ Sorenson 1913)
➢ Gantt charts (Gantt 1916)
➢ Motion study (Frank and Lillian Gilbreth 1922)
➢ Quality control (Shewhart 1924; Deming 1950)
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21. History of Operation Management
➢ Computer (Atanasoff 1938)
➢ CPM/PERT (DuPont 1957, Navy 1958)
➢ Material requirements planning (Orlicky 1960)
➢ Computer aided design (CAD 1970)
➢ Flexible manufacturing system (FMS 1975)
➢ Baldrige Quality Awards (1980)
➢ Computer integrated manufacturing (1990)
➢ Globalization (1992)
➢ Internet (1995)
➢ Industry 4.0 (2016)
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22. Industry 4.0
Autonomous
Robots
Simulation
Horizontal and
vertical system
integration
Industrial
Internet of
Things
Cyber Security
Additive Mfg
Augmented
reality
Big data
analytics
Amazon: https://www.youtube.com/watch?v=Y-lBvI6u_hw
Hyndai: https://www.youtube.com/watch?v=mbGukMPPvl0
VR/AR: https://www.youtube.com/watch?v=Vg0JBqU-8co
Indusrt 4.0: https://www.youtube.com/watch?v=HPRURtORnis
Add mfg: https://www.youtube.com/watch?v=kKQ5KwFwW_s
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23. New Challenges in OM
➢ Global focus
➢ Just-in-time
➢ Supply-chain
partnering
➢ Rapid product
development,
alliances
➢ Mass customization
➢ Empowered
employees, teams
To
From
➢ Local or national focus
➢ Batch shipments
➢ Low bid purchasing
➢ Lengthy product
development
➢ Standard products
➢ Job specialization
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24. Characteristics of Goods
➢ Tangible product
➢ Consistent product
definition
➢ Can be inventoried
➢ Low customer
interaction
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25. Characteristics of Service
➢ Intangible product
➢ Produced and consumed at same
time
➢ Often unique
➢ High customer interaction
➢ Inconsistent product definition
➢ Often knowledge-based
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26. Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
Percent of Product that is a Good Percent of Product that is a Service
100% 75 50 25 0 25 50 75 100%
| | | | | | | | |
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28. Industry and Services as Percentage of GDP
Australia
Canada
China
Czech
Rep
France
Germany
Hong
Kong
Japan
Mexico
Russian
Fed
South
Africa
Spain
UK
US
Turkey
90 −
80 −
70 −
60 −
50 −
40 −
30 −
20 −
10 −
0 −
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29. Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Ethics and
regulations
not at the
forefront
Public concern over
pollution, corruption, child
labour, etc.
High ethical and
social responsibility;
increased legal and
professional
standards
Local or
national focus
Growth of reliable, low
cost communication and
transportation
Global focus,
international
collaboration
Lengthy
product
development
Shorter life cycles; growth
of global communication;
CAD, Internet
Rapid product
development;
design collaboration
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30. Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Low cost
production,
with little
concern for
environment;
free
resources (air,
water)
ignored
Public sensitivity to
environment; ISO 14000
standard; increasing
disposal costs
Environmentally
sensitive
production; green
manufacturing;
sustainability
Low-cost
standardized
products
Rise of consumerism;
increased affluence;
individualism
Mass
customization
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31. New Trends in OM
➢ Ethics
➢ Global focus
➢ Environmentally sensitive production
➢ Rapid product development
➢ Mass customization
➢ Empowered employees
➢ Supply-chain partnering
➢ Just-in-time performance
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32. Productivity Measurement
Productivity is the ratio of outputs (goods and
services) divided by the inputs (resources such
as labour and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output
only and not a measure of efficiency
The U.S. has been able to increase productivity at an average rate of
almost 2.5% per year. Such growth has doubled U.S. wealth every 30
years.
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33. ➢ Measure of process improvement
➢ Represents output relative to input
➢ Only through productivity increases, our standard of living
could be improved.
Productivity
Productivity =
Units produced
Input used
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35. Multi-Factor Productivity
Output
Labor + Material + Energy + Capital
+ Miscellaneous
Productivity =
➢ Also known as total factor productivity
➢ Output and inputs are often expressed in
dollars
Multiple resource inputs multi-factor productivity
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38. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
=
Old labour
productivity
8 titles/day
32 labor-hrs
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39. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
32 labor-hrs
=
Old labor
productivity
=
New labor
productivity
= 0.25 titles/labor-hr
14 titles/day
32 labour-hrs
= 0.4375 titles/labor-hr
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40. Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
$640 + 400
14 titles/day
$640 + 800
=
Old multifactor
productivity
=
New multifactor
productivity
= .0077 titles/dollar
= .0097 titles/dollar
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41. Measurement Problems
1. Quality may change while the quantity of inputs and outputs
remains constant. Quality may require more labor hours and
resources.
2. External elements may cause an increase or decrease in
productivity. More reliable electric power service.
3. Precise units of measure may be lacking. Not all cars
require the same input.
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42. Productivity Variables (US Economic System)
1. Labor - contributes
about 10% of the
annual increase
2. Capital - contributes
about 38% of the
annual increase
3. Management -
contributes about 52%
of the annual increase
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43. Productivity Variables
• Illiteracy and poor diets are a major impediment to productivity, costing
countries up to 20% of their productivity.
• When the capital invested per employee drops, we can expect a drop in
productivity. Using labour rather than capital may reduce unemployment
in the short run, but it also makes economies less productive and
therefore lowers wages in the long run.
• Increasing Management productivity includes improvements made
through the use of knowledge and the application of technology.
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