PRODUCTION/OPERATIONS MANAGEMENT CHAPTER ONE PRODUCTION AND OPERATIONS

PRODUCTION/OPERATIONS MANAGEMENT CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT SIXTH EDITION WILLIAM J. STEVENSON Rochester Institute of Technology Irwin/McGraw-Hill Irwin/McGraw-Hill The McGraw-Hill Companies, The McGraw-Hill Companie s, Inc., 1999 Inc., 1999 1-1

PART ONE CHAPTER ONE INTRODUCTION PRODUCTION AND OPERATIONS MANAGEMENT Chapter One Production and Operations Management Chapter Two Productivity, Competitiveness, and Strategy Irwin/McGraw-Hill Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-2 The McGraw-Hill Companies,

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Operations Management Operations function consists of all activities directly related to producing goods or providing services. Organization Finance Irwin/McGraw-Hill Production/ Operations Marketing TheMcGraw-Hill Companies, Inc., 1999 1-3

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Business Operations Overlap Production/ Operations Marketing Irwin/McGraw-Hill Finance TheMcGraw-Hill Companies, Inc., 1999 1-4

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Types of Operations Operations Examples Goods Producing Farming, mining, construction, manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-5

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Value-Added The difference between the cost of inputs and the value or price of outputs. Value added Inputs Land Labor Capital Outputs Goods Services Transformation/ Conversion process Feedback Feedback Irwin/McGraw-Hill Control Feedback TheMcGraw-Hill Companies, Inc., 1999 1-6

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Food Processor Inputs Raw Vegetables Metal Sheets Water Energy Labor Building Equipment Irwin/McGraw-Hill Processing Outputs Cleaning Making cans Cutting Cooking Packing Labeling Canned vegetables TheMcGraw-Hill Companies, Inc., 1999 1-7

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Hospital Process Inputs Doctors, nurses Hospital Medical Supplies Equipment Laboratories Irwin/McGraw-Hill Processing Examination Surgery Monitoring Medication Therapy Outputs Healthy patients TheMcGraw-Hill Companies, Inc., 1999 1-8

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Operations Interfaces Industrial Engineering Distribution Maintenance Operations Purchasing Accounting Irwin/McGraw-Hill Public Relations Personnel TheMcGraw-Hill Companies, Inc., 1999 1-9

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Decision Making System Design – capacity – location – arrangement of departments – product and service planning – acquisition and placement of equipment Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-10

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Decision Making System operation – personnel – inventory – scheduling – project management – quality assurance Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-11

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Major Characteristics of Production Systems Degree of standardization Type of operation – project – job shop – repetitive production – continuous processing Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-12

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Manufacturing or Service? Tangible Irwin/McGraw-Hill Act TheMcGraw-Hill Companies, Inc., 1999 1-13

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Key Differences Customer contact Uniformity of input Labor content Uniformity of output Measurement of productivity Quality assurance These differences are beginning to fade in many cases Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-14

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Manufacturing vs Service Characteristic Manufacturing Service Output Tangible Customer contact Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Measurement of productivity Easy Difficult Opportunity to correct quality problems High Low Intangible High Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-15

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Responsibilities of Operations Management Planning – Capacity – Location – Products and services – Make or buy – Layout – Projects – Scheduling Controlling – Inventory – Quality Irwin/McGraw-Hill Organizing – Degree of centralization – Subcontracting Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments TheMcGraw-Hill Companies, Inc., 1999 1-16

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Models A model is an abstraction of reality. – Physical – Schematic – Mathematical Tradeoffs What are the pros and cons of models? Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-17

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Systems Approach “The whole is greater than the sum of the parts.” Suboptimization Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-18

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Quantitative Approaches Linear programming Queuing Techniques Inventory models Project models Statistical models Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-19

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Pareto Phenomenon A vital few things are important for reaching an objective or solving a problem. 80/20 Rule - 80% of problems are caused by 20% of the activities. How do we identify the vital few? Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-20

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Recent Trends Global competition Operations strategy Total quality management (TQM) Flexibility Time reduction Technology Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-21

CHAPTER ONE PRODUCTION AND OPERATIONS MANAGEMENT Recent Trends (Continued) Worker involvement Reengineering Environmental issues Service Irwin/McGraw-Hill TheMcGraw-Hill Companies, Inc., 1999 1-22