2. Contents
Contents
1- What is Operations Management (OM)?
1- What is Operations Management (OM)?
2- Importance of OM .
2- Importance of OM .
3- OM decisions.
3- OM decisions.
4- OM's contributions to society.
4- OM's contributions to society.
5- OM of service & manufacturing organizations
5- OM of service & manufacturing organizations
6- The ever-changing world of OM
6- The ever-changing world of OM
7- Make or buy decision
7- Make or buy decision
8- Historical development of OM.
8- Historical development of OM.
3. 1- What is operations management (OM)?
1- What is operations management (OM)?
OM definition
OM definition
Responsibilities of operations managers
Responsibilities of operations managers
Difference between OM and PM
Difference between OM and PM
4. What is operations management ?
What is operations management ?
1-The collection of people, technology, and systems
within a company that has primary responsibility for
responsibility for
providing the organization’s products or services.
providing the organization’s products or services.
2-The management of the direct recourses that are
required to produce and deliver an organization's goods
and services .
3- A discipline and profession that studies and
practices the process of planning, designing, and
operating production systems and subsystems to
achieve the goals of the organization.
4- The business function responsible for planning,
planning,
coordinating, and controlling
coordinating, and controlling the resources needed
to produce a company’s products and services.
5- The management of the
5- The management of the conversion process
conversion process that
that
transforms inputs into outputs in the form of finished
transforms inputs into outputs in the form of finished
goods and services.
goods and services.
6. Inputs and Outputs of a production system
Inputs and Outputs of a production system
Inputs
Inputs
External:
External:
Legal, Economic, Social, Technological
Market:
Market:
Competition, Customer Desires, Product Info.
Primary Resources:
Primary Resources:
Materials, Personnel, Capital, Utilities
Outputs
Outputs
Direct
Direct
Products
Services
Indirect
Indirect
Waste
Pollution
Technological Advances
9. What is operations management ?
What is operations management ?
Operations management is the set of activities that create
create
value
value in the form of goods and services by transforming inputs
into outputs
Value added
Value added is the
is the net increase between output product value and
net increase between output product value and
input material value
input material value (
(The value of the outputs is greater than the
outputs is greater than the
value of the inputs
value of the inputs, resulting in the profit
profit or the benefit
benefit for
government or non-profit organizations)
All types of organizations
All types of organizations, manufacturing or service, large or
small, transform inputs into outputs
transform inputs into outputs.
Every organization has OM function
Every organization has OM function, since all organizations
provide products or services
provide products or services, but the function may be formal or
formal or
informal
informal (In many
In many smaller
smaller organizations operations management
organizations operations management
may be done by people who perform many other types of task
may be done by people who perform many other types of task
such as
such as marketing and accounting
marketing and accounting)
)
10. What's the difference between PM and
What's the difference between PM and
OM?
OM?
Some thinks that they are really one and the
same by different names.
others think that production management is
just a subset of operations
subset of operations
management because operations
management because operations
involve more than just production.
involve more than just production.
if
if services
services concept
concept added
added to the
to the
production management it can be
production management it can be called
called
operations management.
operations management.
11. What responsibilities do operations managers
What responsibilities do operations managers
have?
have?
Direct responsibilities
Direct responsibilities :
the activities which are directly related to
producing and delivering products and services.
producing and delivering products and services.
Indirect responsibilities
Indirect responsibilities :
the activities involved in interfacing with other
interfacing with other
parts of the organisation
parts of the organisation.
Broad responsibilities
Broad responsibilities :
a wider set of tasks that involve scanning the
scanning the
business, social and political environment
business, social and political environment in
which the organisation exists in order to understand
its context.
12. Responsibilities of OM
Products & services
Products & services
Planning
Planning
– Capacity
Capacity
– Location
Location
–
– Make or buy
Make or buy
– Layout
Layout
– Projects
Projects
– Scheduling
Scheduling
Controlling/Improving
Controlling/Improving
– Inventory
Inventory
– Quality
Quality
Organizing
Organizing
– Degree of centralization
Degree of centralization
– Process
Process selection
selection
Staffing
Staffing
– Hiring/laying off
Hiring/laying off
– Use of Overtime
Use of Overtime
Directing
Directing
– Incentive plans
Incentive plans
– Issuance of work orders
Issuance of work orders
– Job assignments
Job assignments
– Costs
Costs
– Productivity
Productivity
14. Importance of OM
Importance of OM
1-
1- Operations is an important
Operations is an important part of
part of every organization
every organization
2- We should
2- We should know how
know how goods and services are produced (
goods and services are produced (All managers
All managers
should have an understanding the main principles and tools of OM)
should have an understanding the main principles and tools of OM)
3-
3- It is responsible for the customer fulfillment aspects of an organization.
It is responsible for the customer fulfillment aspects of an organization.
Thus,
Thus, it manages customer satisfaction
it manages customer satisfaction .
.
4- OM is such a
4- OM is such a costly part of an organization
costly part of an organization .
. (For most organizations it
(For most organizations it
absorbs a huge percentage of required capital )
absorbs a huge percentage of required capital )
Companies need to have
Companies need to have efficient operations to survive
efficient operations to survive .
. To
To
succeed, a firm must have
succeed, a firm must have a strong operations function
a strong operations function
teaming with the other organization functions
teaming with the other organization functions.
.
5-
5- OM
OM responsible to increase productivity and profitability
responsible to increase productivity and profitability .
.
Increasing overall productivity leads to economic growth and a higher
Increasing overall productivity leads to economic growth and a higher
standard of living.
standard of living.
6- Operational decision-making
6- Operational decision-making requires a long-term perspective
requires a long-term perspective and
and
requires
requires inputs from all business functions
inputs from all business functions .
.
OM Decisions tend to be costly and difficult to reverse
OM Decisions tend to be costly and difficult to reverse
15. Strategic options managers use to gain competitive advantage
Strategic options managers use to gain competitive advantage
28% -
28% - Operations Management (+quality?)
Operations Management (+quality?)
18% - Marketing/distribution
18% - Marketing/distribution
17% - Momentum/name recognition
17% - Momentum/name recognition
16% - Quality/service
16% - Quality/service
14% - Good management
14% - Good management
4% - Financial resources
4% - Financial resources
3% - Other
3% - Other
16. In brief
In brief…..
…..
OM plays an important, although not always
obvious, role in societies in which we live.
It is responsible for
It is responsible for the food we eat
food we eat and even
the table
table on eat it; it provides us with the
clothin
clothing we wear, with vehicles
vehicles we use for
transportation, and with the "toys"
"toys" we use
for recreation, from baseballs and bats to
computer games.
In other words, operations management affects
In other words, operations management affects
nearly all aspects of our day-to-day activities.
nearly all aspects of our day-to-day activities.
17. Some definitions
Some definitions
Productivity:
Productivity:
The ration of what is produced by an operation or process to what
is required to produced it, that is ,the output from the operations
divided by the input to the input operation (ratio of output to input)
Efficiency:
Efficiency:
producing something at the
producing something at the lowest possible cost
lowest possible cost
Effectiveness:
Effectiveness:
doing the right things to create the most value for the firm
Value
Value
quality divided by price
Competitive advantage:
Competitive advantage:
competitive advantage is an advantage over competitors gained by
offering consumers greater value, either by means of lower prices
or by providing greater benefits and service that justifies higher
prices
18. 3- OM decisions
3- OM decisions
Strategic
Strategic
Tactical
Tactical
operational
operational
19. Where should we locate our facility
locate our facility
How much capacity
capacity do we need
What should we make,
make, what should we buy
buy
What technology
echnology should we use
How do we insure appropriate quality
quality
Who should we use as vendors
vendors
How much inventory
inventory do we need
How should we schedule
schedule our resources
Main operational decisions
Main operational decisions
20. Critical decisions of OM
Critical decisions of OM
Product & service design.
Product & service design.
Quality management.
Quality management.
Process design.
Process design.
Capacity & location of facilities.
Capacity & location of facilities.
Layout of facilities.
Layout of facilities.
Human resource & Job design.
Human resource & Job design.
Supply-chain management.
Supply-chain management.
Inventory management.
Inventory management.
Scheduling.
Scheduling.
Maintenance.
Maintenance.
22. Strategic decisions
Strategic decisions
senior management responsibility
senior management responsibility
More
More broad
broad in nature
in nature
Determine the success of an organization's strategy
Determine the success of an organization's strategy,
,
Very risky and hard to
Very risky and hard to reverse
reverse
Have significant
Have significant long - term
long - term impact, ,and
impact, ,and
less frequent.
less frequent.
Examples:
Examples:
How will we make the product?
Where do we locate the facility?
How much capacity do we need?
When should we add more capacity?
23. Tactical decisions
Tactical decisions
Medium-
Medium- range decisions focus on resource needs,
range decisions focus on resource needs,
schedules, & quantities to produce
schedules, & quantities to produce
Tactical decisions are
Tactical decisions are frequent
frequent, must align with
, must align with
strategic decisions.
strategic decisions.
Involves resource allocation and utilization.
Involves resource allocation and utilization.
Involves a
Involves a moderate degree of uncertainty and risk
moderate degree of uncertainty and risk..
..
They are the link between lower and high level
They are the link between lower and high level
management
management
Examples:
Examples:
How many workers do we need?
How many workers do we need?
When do we need them?
When do we need them?
Should we work overtime or put on a second sift?
Should we work overtime or put on a second sift?
When should we have material delivered?
When should we have material delivered?
Should we have a finished goods inventory?
Should we have a finished goods inventory?
24. Operational decisions
Operational decisions
Involves a short time horizon
short time horizon.
Involves very little uncertainty and risk.
Examples :
Examples :
What jobs do we work on today or this week?
To whom do we assign what task?
What jobs have priority?
25. OM decisions
OM decisions
Strategic Tactical Operating
Characteristics
Longer term
decisions
Medium term
decisions
Shorter term
decisions
Responsibility of
the senior
management
Responsibility of
middle and
senior managers
Responsibility of
middle and lower
management levels
High capital
investment
Broad in nature Narrow in scope These decisions
concern the day-to-
day activities of
workers
26. 4- OM's contributions to society
4- OM's contributions to society
Higher Standard of Living
Higher Standard of Living
Better Quality Goods and Services
Better Quality Goods and Services
Concern for the Environment
Concern for the Environment
Improved Working Conditions
Improved Working Conditions
27. Operations management's contributions to society
Operations management's contributions to society
OM's contributions to society:-
OM's contributions to society:-
(
(A)- Higher Standard of Living
A)- Higher Standard of Living
(B) - Better Quality Goods and Services
(B) - Better Quality Goods and Services
(C)- Concern for the Environment
(C)- Concern for the Environment
(D)- Improved Working Conditions
(D)- Improved Working Conditions
28. (A)- Higher standard of living
A major factor in raising the standard of living in a society is the
ability to increase its productivity
ability to increase its productivity.
Higher productivity is the result of increased efficiency in
Higher productivity is the result of increased efficiency in
operations
operations, which in turn translates into lower cost goods
which in turn translates into lower cost goods
and services
and services.
Thus, higher productivity provides
Thus, higher productivity provides
consumers with more discretionary
consumers with more discretionary
income, which contributes to their
income, which contributes to their
higher standard of living.
higher standard of living.
29. 1-Improve productivity
1-Improve productivity
3- Lower cost of goods & services
3- Lower cost of goods & services
5-Higher standard of living
5-Higher standard of living
Higher standard of living
Higher standard of living
2- Result of increased
2- Result of increased
efficiency in operations
efficiency in operations
4- More income
4- More income
30. (B) - Better quality of goods and services
(B) - Better quality of goods and services
One of the many
One of the many consumer benefits
consumer benefits of increased
of increased
competition is the higher-quality products that are
competition is the higher-quality products that are
available today.
available today.
Quality standards are continually increasing
Quality standards are continually increasing.
.
Many companies today have established
Many companies today have established Six-Sigma
Six-Sigma
quality standards
quality standards (pioneered by Motorola in the late
(pioneered by Motorola in the late
1980s), resulting in no more than
1980s), resulting in no more than 3.4 defects per
3.4 defects per
million
million opportunities.
opportunities.
Such high quality standards were
Such high quality standards were once
once considered not
considered not
only prohibitively expensive but also virtually
only prohibitively expensive but also virtually
impossible to achieve even if cost wasn't a
impossible to achieve even if cost wasn't a
consideration.
consideration.
Today we know that such high quality is not only very
Today we know that such high quality is not only very
possible, but also results in lower costs, because
possible, but also results in lower costs, because
firms can reduce their waste and rework.
firms can reduce their waste and rework.
31. (C)- Concern for the environment
(C)- Concern for the environment
Many companies today are taking up the
Many companies today are taking up the
challenge to
challenge to produce environmentally
produce environmentally
friendly products with environmentally
friendly products with environmentally
friendly processes
friendly processes, all of which falls
, all of which falls
under the purview of operations
under the purview of operations
management.
management.
Recycling and concern for air and water
Recycling and concern for air and water
quality
quality
32. (D)-Improved working conditions
Managers recognize the benefits of providing workers with
benefits of providing workers with
better working conditions.
better working conditions.
This includes not only the work environment
work environment but also the
design of the jobs themselves
design of the jobs themselves.
Workers are now encouraged to participate in improving
participate in improving
operations through suggestions
operations through suggestions.
After all, who would know better
who would know better how to do a particular
operation than that person who does it every day
than that person who does it every day.
Managers also have learned that there is a very clear
very clear
relationship between satisfied workers and satisfied
relationship between satisfied workers and satisfied
customers, especially in service operations.
customers, especially in service operations.
(
(Empowerment
Empowerment :The concept of encouraging and
authorizing workers to take the initiative to improve
operations, reduce costs, and improve product quality
and customer service.)
33. 5- OM of service and manufacturing organizations
5- OM of service and manufacturing organizations
Importance of service now
Importance of service now
Service nature
Service nature
The affect of service nature on OM activities
The affect of service nature on OM activities
34. OM of service and manufacturing organizations
OM of service and manufacturing organizations
Initially, operations management concepts
focused almost entirely on manufacturing
focused almost entirely on manufacturing.
As countries become more developed
more developed,
services continue to represent a larger
larger
percentage of their economies.
percentage of their economies.
Now Less than 20%
Now Less than 20% of all jobs are in
manufacturing (and they are declining)
and they are declining)
Almost 80% of jobs are in the service sector
(and they are increasing)
Nearly half of all jobs are in POM
35. Services as a percent of Gross Domestic Product (GDP) for different countries
Services as a percent of Gross Domestic Product (GDP) for different countries
37. U.S. manufacturing vs service
U.S. manufacturing vs service employment
employment
Year Mfg. Service
45 79 21
50 72 28
55 72 28
60 68 32
65 64 36
70 64 36
75 58 42
80 44 46
85 43 57
90 35 65
95 32 68
00 30 70
38. Growth in services in the United States
Growth in services in the United States
39. Service and manufacturing similarities
Service and manufacturing similarities
All use technology
Both have quality, productivity, &
response issues
All must forecast demand
Each will have capacity, layout, and
location issues
All have customers and suppliers
All have scheduling and staffing issues
40. Manufacturing vs. service
Manufacturing vs. service
Characteristic Manufacturing Service
Output
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct
Tangible
Low
High
Low
High
Easy
High
Intangible
High
Low
High
Low
Difficult
Low
quality problems
High
41. Manufacturing vs. service
Manufacturing vs. service
1- Customer contact:
1- Customer contact:
Service, by nature
Service, by nature, involves a much high degree of customer contact
involves a much high degree of customer contact than
than
manufacturing.
manufacturing.
The performance of service often occurs at the
The performance of service often occurs at the point of consumption
point of consumption.
.
Manufacturing allows a
Manufacturing allows a separation between production and consumption
separation between production and consumption, so
, so
that manufacturing can occur away from the consumer.
that manufacturing can occur away from the consumer.
Customer are sometimes apart of the system (self-service operations-shopping
Customer are sometimes apart of the system (self-service operations-shopping
+gas stations)
+gas stations) so tight control on process is impossible
so tight control on process is impossible
2- Uniformity of input:
2- Uniformity of input:
Service operations are subject to
Service operations are subject to greater variability of input
greater variability of input than typical
than typical
manufacturing operations.
manufacturing operations.
Each patient, each client and each auto repair
Each patient, each client and each auto repair presents a specific
presents a specific
problem
problem that often must be diagnosed before it can be remedied
that often must be diagnosed before it can be remedied
Manufacturing operations often
Manufacturing operations often have the ability to carefully control the
have the ability to carefully control the
amount of variability of input
amount of variability of input and thus achieve low variability in outputs.
and thus achieve low variability in outputs.
Job requirements for manufacturing are generally more uniform than those for
Job requirements for manufacturing are generally more uniform than those for
service
service
42. Manufacturing vs. service
Manufacturing vs. service
3-
3- Labor content of jobs:
Labor content of jobs:
Many services involve a higher labor content than manufacturing
operations
4-
4- Uniformity of output
Uniformity of output
Because high mechanization generates products with low
Because high mechanization generates products with low
variability , manufacturing tends to be smooth and efficient ,
variability , manufacturing tends to be smooth and efficient ,
service activities sometimes appear to be slow and awkward
slow and awkward and
output is more variable. Automated services are exception to this
Automated services are exception to this
5-
5- Measurement of productivity
Measurement of productivity
Measurement of productivity is more straightforward
straightforward in
manufacturing due to the high degree of uniformity of most
uniformity of most
manufacturing items.
manufacturing items.
In service operations , variations in demand intensity and in
variations in demand intensity and in
requirements from job to job make productivity measurement
requirements from job to job make productivity measurement
more difficult
more difficult
43. Colegio de San Juan de Letran
Management
/
Human
Resource
Area
•Attributes of
Attributes of
GOODS
GOODS
Tangible product
Tangible product
- Product can be inventoried.
inventoried.
- Some aspect of quality
quality are
measurable.
- Selling is distinct from
production.
- Site
Site of facility is important for
cost.
cost.
- Often easy to automate
automate.
- Revenue is generated
primarily from the tangible
tangible
product.
product.
Capital
Capital intensive
Goods vs. services
Goods vs. services
•Attributes of SERVICES
Attributes of SERVICES
• Intangible Products
Intangible Products
- Many services cannot be inventoried.
- Many aspects of quality are difficult to
measure.
- Selling is often a part of the service
part of the service.
Provider, not product, is often
transportable.
Site
Site of facility is important for customer
customer
contact.
contact.
Service is often difficult to automate
automate.
Revenue is generated primarily from the
intangible service
intangible service.
Labor
Labor intensive
intensive
44. 6- The ever - changing world of OM
6- The ever - changing world of OM
Increased global competition
Increased global competition
Advances in technology
Advances in technology
Linking OM to customers and suppliers
Linking OM to customers and suppliers
45. The ever-changing world of OM
The ever-changing world of OM
Operations management is continuously
Operations management is continuously
changing to meet the new and exciting
changing to meet the new and exciting
challenges of today's business world.
challenges of today's business world.
This ever-changing world is
This ever-changing world is characterized by
characterized by
increasing global competition and advances in
increasing global competition and advances in
technology. Emphasis is also shifting within the
technology. Emphasis is also shifting within the
operations function to link it more closely with both
operations function to link it more closely with both
customers and suppliers.
customers and suppliers.
Here we will consider these issues
Here we will consider these issues:
46. (A)- Increased global competition
(A)- Increased global competition
Global (economy, village, and landscape): are terms used to describe
how the world is becoming smaller, and countries
how the world is becoming smaller, and countries
are becoming more dependent on each other.
are becoming more dependent on each other.
The world is rapidly transforming itself into a single global economy,
The world is rapidly transforming itself into a single global economy,
which referred to as a global village or global landscape.
which referred to as a global village or global landscape.
Markets once dominated by local or national companies are now
Markets once dominated by local or national companies are now
vulnerable to
vulnerable to competition
competition from literally all corners of the world.
from literally all corners of the world.
For example, in the
For example, in the 1960s,
1960s, only 7
only 7 percent
percent of the firms in the United
of the firms in the United
States exposed to foreign competition; by the late
States exposed to foreign competition; by the late 1980s,
1980s,
This figure exceeded
This figure exceeded 70 percent
70 percent, and that percentage has
, and that percentage has
continued to grow.
continued to grow.
Consequently, as companies
Consequently, as companies expand their business to include
expand their business to include
foreign markets, so too must the operations management
foreign markets, so too must the operations management function
function
take a more global perspective in order for companies
take a more global perspective in order for companies
to remain competitive.
to remain competitive.
To s prosper in such a global marketplace companies
To s prosper in such a global marketplace companies must excel
must excel
in more than one dimension
in more than one dimension, which previously was the norm.
, which previously was the norm.
47. Ford’s Global Network to Support the Manufacturing of the Escort
Ford’s Global Network to Support the Manufacturing of the Escort
48. (
(B)- Advances in technology
B)- Advances in technology
Advance in technology in recent years have had a
significant effect on the OM function:
IT+ automation + Internet
Competition
Product life cycle
New jobs
Robots
E-???
49. (C )- Linking OM to customers and suppliers
(C )- Linking OM to customers and suppliers
In the past
In the past, most manufacturing organizations viewed
operations strictly as an internal function that had
internal function that had to be
buffered from the external environment by other
buffered from the external environment by other
organizational functions.
organizational functions.
Orders were generated by the marketing function
marketing function; supplies and
raw materials were obtained through the purchasing function
purchasing function;
capital for equipment purchases came from the finance
function; the labor force was obtained through the human
human
resources function
resources function; and the product was delivered by the
distribution function
distribution function
Now more and more firms are recognizing the competitive
advantage achieved when the transformation process is not
is not
isolated
isolated, as when customers are invited to view their
as when customers are invited to view their
operating facilities firsthand
operating facilities firsthand
50. (C )- Linking OM to customers and suppliers
(C )- Linking OM to customers and suppliers
companies are working
companies are working more closely with suppliers
more closely with suppliers.
.
Firms like Toyota, have suppliers
Firms like Toyota, have suppliers deliver product directly to
deliver product directly to
the factory floor, eliminating need for a stockroom.
the factory floor, eliminating need for a stockroom.
The relationship between the transformation processes of suppliers
The relationship between the transformation processes of suppliers
and customer often referred to as a
and customer often referred to as a product's value chain.
product's value chain.
( steps an organization requires to produce a good or service, regardless of
( steps an organization requires to produce a good or service, regardless of
where the are performed)
where the are performed)
A value chain consists of all the steps
A value chain consists of all the steps actually add value to
actually add value to
the product
the product. This concept helps managers to eliminate all non
. This concept helps managers to eliminate all non
added steps (such
added steps (such as inspections and inventory
as inspections and inventory ) and
) and
consequently results in a higher of dependence among the value-
consequently results in a higher of dependence among the value-
added functions within the chain.
added functions within the chain.
This integration of both suppliers and customers into the
This integration of both suppliers and customers into the
transformation process to blur the boundaries between what were
transformation process to blur the boundaries between what were
previously totally independent organizations (
previously totally independent organizations (Virtual enterprises)
Virtual enterprises)
(company whose boundaries are not clearly defined due to the integration of
(company whose boundaries are not clearly defined due to the integration of
customers and suppliers)
customers and suppliers)
51. 7- Make or buy?
7- Make or buy?
Capacity
Capacity
Expertise
Expertise
Quality
Quality
Demand
Demand
Cost
Cost
Risk
Risk
52. Make or buy?
Make or buy?
Many organizations buy parts or contract out services,
Many organizations buy parts or contract out services,
for a variety of reasons. Among those factors are:
for a variety of reasons. Among those factors are:
1- Available capacity:
1- Available capacity:
If an organization has available the equipment,
equipment,
necessary skills, and time
necessary skills, and time, it often make sense to
produce an item or perform a service in-house.
The additional costs would be relatively small compared
with required to buy items or subcontract services.
2- Expertise:
2- Expertise:
If a firm lacks the expertise
lacks the expertise to do a job satisfactorily,
buying
buying might be a reasonable alternative.
53. Make or buy?
Make or buy?
3- Quality consideration:
3- Quality consideration:
Firms that specialize can usually offer high quality
specialize can usually offer high quality than an
organization can attain itself.
Conversely, unique quality requirements or the desire to closely
closely
monitor
monitor quality may cause an organization to perform a job itself.
4- The nature of demand:
4- The nature of demand:
When demand for an item is high and steady
high and steady, the organization is
often better off doing the work itself
doing the work itself.
However, wide fluctuations in demand or small orders
fluctuations in demand or small orders are
usually better handled by specializations who are able to combine
combine
orders from multiple sources, which results in a higher
orders from multiple sources, which results in a higher
volume
volume and tends to offset individual buyer fluctuations.
54. Make or buy?
Make or buy?
5- Cost:
5- Cost:
any cost savings achieved from buying or making must be weighted
any cost savings achieved from buying or making must be weighted
against the preceding factors
against the preceding factors.
Cost saving might come from the item itself or from transportation cost savings.
If there are fixed costs associated with making an item that cannot be reallocated if the
cannot be reallocated if the
service or product is outsourced
service or product is outsourced , that has to be recognized in the analysis.
Conversely, outsourcing may help a firm avoid incurring fixed costs.
6- Risk:
6- Risk:
Outsourcing may involve certain risks. one is
Outsourcing may involve certain risks. one is loss of control operations.
loss of control operations.
Another is the need to disclose propriety information.
Another is the need to disclose propriety information.
In some cases , a firm might choose to perform
In some cases , a firm might choose to perform part of the job
part of the job
itself
itself and let others handle the rest in order to maintain flexibility
and let others handle the rest in order to maintain flexibility
and to hedge against
and to hedge against loss of a subcontractor
loss of a subcontractor .
.
If part or all the work will be done “ in-house”, capacity alternatives
If part or all the work will be done “ in-house”, capacity alternatives
will need to developed
will need to developed
55. 8- Historical development of OM
8- Historical development of OM
Prior to 1900
Prior to 1900
Scientific Management
Scientific Management
Other Management Pioneers (Gilbreth + Gantt)
Other Management Pioneers (Gilbreth + Gantt)
Moving Assembly Line
Moving Assembly Line
Hawthorne Studies
Hawthorne Studies
Operations Research
Operations Research
OM Emerges as a Field
OM Emerges as a Field
The Marriage of OM and IT
The Marriage of OM and IT
OM in Services
OM in Services
Integration of Manufacturing and Services
Integration of Manufacturing and Services
56. Historical development of OM
Historical development of OM
Prior to 1900:
Prior to 1900:
Cottage industry produced custom-made goods.
Watt’s steam engine in 1785.
Whitney’s standardized gun parts in 1801.
Industrial Revolution began at mid-century.
Scientific Management (Frederick W. Taylor):
Scientific Management (Frederick W. Taylor):
Systematic approach to increasing worker productivity through time study,
standardization of work, and incentives.
Viewed workers as an interchangeable asset.
Other Management Pioneers:
Other Management Pioneers:
Frank and Lillian Gilbreth
Motion study and industrial psychology
Henry L. Gantt
Scheduling and the Gantt chart
57. Historical development of OM
Historical development of OM
Moving Assembly Line (1913):
Moving Assembly Line (1913):
Labor specialization reduced assembly time.
Hawthorne Studies:
Hawthorne Studies:
Yielded unexpected results in the productivity of Western Electric plant
workers after changes in their production environment.
Led to recognition of the importance of work design and employee
motivation.
Operations Research (Management Science):
Operations Research (Management Science):
Outgrowth of WWII needs for logistics control and weapons-systems design.
Seeks to obtain mathematically optimal (quantitative) solutions to complex
problems.
OM Emerges as a Field:
OM Emerges as a Field:
1950–1960, OM moved beyond industrial engineering and operations
research to the view of the production operation as a system.
1950–1960, OM moved beyond industrial engineering and operations
research to the view of the production operation as a system
58. Historical development of OM
Historical development of OM
The Marriage of OM and IT:
The Marriage of OM and IT:
Integrated solutions approaches
Business process reengineering
Supply chain management
Systems integration (SAP)
Operations Management in Services:
Operations Management in Services:
OM concepts can apply to both manufacturing and service
operations.
Integration of Manufacturing and Services:
Integration of Manufacturing and Services:
Conducting world class operations requires compatible
manufacturing and service operations
59. Last word
Last word
Shifts from cost and efficiency
cost and efficiency to value
value, from mass production to lean
lean
production
production, from manufacturing technology to information
information
technology
technology, and from national economy to world economy
world economy have made
OM critically important in modern business
OM critically important in modern business.
Workers are different
Workers are different; they demand increasing levels of
empowerment and more meaningful work.
Customers are different
Customers are different, their demands and expectations are much
higher.
Technology is different
Technology is different; computers & automation have dramatically
changed the nature of work, requiring constant learning and more
abstract thinking.
Finally the environment is different
environment is different, we live in a global business
environment without boundaries .
Such changes in business are occurring at an increasingly rapid pace,
and we can expect them to continue in the future. Operations
Operations
managers clearly face important challenges in preparing for this
managers clearly face important challenges in preparing for this
century.
century.
60. Last word?
Last word?
“Paying attention to customers and knowing what they
want is a fundamental and important beginning.
fundamental and important beginning.
However, given that several competing companies pay
attention to what customers want, the key to
the key to
competitiveness then becomes
competitiveness then becomes production
production
capability
capability. What differentiates winners from
losers is that winners are better able to consistently
provide products and services that are
provide products and services that are
competitive with regard to quality,
competitive with regard to quality,
price, time and agility
price, time and agility
