Operations Management

Philosophy You are not just learning Operations

Management - but you should be- in the sense that without a product or service a company is not going to exist.

What is an organization?
A group of people working together in a structured and coordinated fashion to achieve a set of goals which they could not achieve working on their own.

Successful organizations do not achieve their goals by chance but by following a deliberate process called MANAGEMENT.

Management: Science or Art?

Science of Management


Assumes

that

problems

can

be
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approached using rational, logical, objective, and systematic ways.

Art of Management


Decisions are made and problems solved using a blend of intuition, experience, instinct, and personal insights.

What is Management?
A set of activities


planning and decision making, organizing, leading, and controlling

directed at an organizations resources



human, financial, physical, and information

with the aim of achieving organizational goals in an efficient and effective manner.

Management Process?????

Feedback and Control

Physical Flow

Information Flow

Measurements taken at various points in the transformation process for control purposes are called feedback. The process of comparing outputs to previously established standards to determine if corrective action is needed is called controlling

Basic Purpose of Management

EFFICIENTLY
Using resources wisely and in a cost-effective way
And

EFFECTIVELY
Making the right decisions and successfully implementing them

Why Study Operations Management???

Why study OM: follow the CASH

Current Marketing Operations Increase Sales Decrease 50% Production Costs 20% 150,000 100,000 -120,000 -64,000 30,000 36,000 -6000 -6000 24,000 30,000 -6000 -7550 18,000 22,500

Sales C.O.G.S. Gross Margin Finance Costs Taxes (25%) Contribution

100,000 -80,000 20,000 -6000 14,000 -3500 10,500

Organizational Model
Finance inance Sal POM Mar ti QA HRM

ri

MI

Accounting

Typical Organization Chart

Cross-Functional Linkages
Finance
Budgeting. Analysis. Funds.

MIS
What IT solutions to make it all work together?

Human Resources
Skills? Training? # of Employees?

Design
Sustainability. Quality. Manufacturability.

Operations Marketing
What products? What volumes? Costs? Quality? Delivery?

Accounting
Performance measurement systems. Planning and control.

Definition: Operations
Conversion of Inputs into Outputs

Transformation of Changing

Resources into

Products

Labor, capital, material, etc. into

SJSU Bus 140 - David Bentley

Goods and services

Rev. 01/22/02

13

What is Operations???
What is Operations?


a function or system that transforms inputs into outputs of greater value a series of activities along a value chain extending from supplier to customer activities that do not add value are superfluous(more than needed) and should be eliminated.

What is a Transformation Process?



The Operations System

The operations system transforms inputs into desired goods and services.
EXTERNAL FACTORS

INPUTS

PROCESS

OUTPUTS

FEEDBACK
Material flow Information Flow

ValueValue-Added Process
The operations function involves the conversion of inputs into outputs
Value added
Inputs (Land, Labor, Capital) Transformation /Conversion process
Feedback

Outputs (Goods, Services)

Control
Feedback Feedback

Types of Transformation
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 Storage, as in warehousing

What is Operations Mgt?

Operations Management is the systematic design, direction and control of the processes that transform inputs into products and services. It is a set of decisions
What Is a Process? Process is any activity or group of activities that takes one or more inputs, transforms and adds value to them and provides one or more outputs for its customers, internal or external Internal Customer one or more employees of the same organization External Customer end users or intermediaries

What is Operations Management?

Create operational systems. Manage (plan, organize, staff, direct and control) the activities relating to the production of goods and/or services with maximum efficiency (at the lowest cost) and effectiveness (in the eyes of the customer). Improve those processes continuously to create competitive advantage.

The business function responsible for planning, coordinating, and controlling the resources needed to produce a companys products and services.
R. Dan Reid & Nada R. Sanders

Operations Management = Management of

Operations Management / operations Planning production, Organizing resources, Directing operations and personnel , and Monitoring system performance

Impact of E-Business on Operations Management

Benefits of E-Business
Comparison customers shopping by

Impact on Operations
Customer expectations escalate; quality must be maintained and costs lowered No more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possible Transaction costs are lower; customer support costs decrease; eprocurement saves big bucks

Direct contact customers

with

Business processes conducted online

Impact of E-Business on Operations Management (cont.)

Benefits of E-Business
Access to customers worldwide Middlemen are eliminated Access to suppliers worldwide

Impact on Operations
Demand increases; order fulfillment and logistics become major issues; production moves overseas Logistics change from delivering to a store or distribution center to delivering to individual homes; Outsourcing increases; more alliances and partnerships among firms are formed; global supply chain issues arise

Impact of E-Business on Operations Management (cont.)

Benefits of E-Business
Online auctions and emarketplaces

Impact on Operations
Competitive bidding lowers cost of materials; supply needs can be found in one location

Better and faster decision making

More timely information is available with immediate access by all stakeholders in decision-making process; customer orders and product designs can be clarified electronically; electronic meetings can be held;