OPERATIONS MANAGEMMENT

300
FALL 2004
WEEK #1 LECTURE
(CONTINUED)

1
 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?

2
 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?
3
 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?

4
 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?
5
 Productivity
• Measure of process improvement
• Represents output relative to input
Units produced
Productivity =
Input used
• Only through productivity increases can our
standard of living improve

6
 Multi-Product Productivity

Productivity =

Output_________________
Labor + material + energy + capital + miscellaneous

7
 Productivity Variables
• Labor - contributes about 10% of the
annual increase
• Capital - contributes about 32% of the
annual increase
• Management - contributes about 52% of
the annual increase

8
 The Economic System
Transforms Inputs to Outputs
Inpu Process Outputs
ts
Land, The economic Goods
Labor, system transforms and
Capital, inputs to outputs at Services
Managem about an annual
ent 2.5% increase in
productivity (capital
38% of 2.5%), labor
(10% of 2.5%),
Feedback (52%
management loop
of 2.5%)

9
 Goods Versus Services
Goods
Service
• Can be resold • Reselling unusual
• Can be • Difficult to
inventoried inventory
• Quality difficult to
• Some aspects of measure
quality • Selling is part of
measurable service
• Selling is distinct
from production 10
 Goods Versus Services -
Continued
Goods
• Service
Product is • Provider, not
transportable product is
• Site of facility transportable
important for cost• Site of facility
important for
• Often easy to customer contact
automate • Often difficult to
• Revenue generated automate
primarily from • Revenue generated
tangible product primarily from
intangible service. 11
 New Challenges in OM
From To
• Local or national • Global focus
focus • Just-in-time
• Batch shipments • Supply chain
• Low bid purchasing partnering
• Rapid product
• Lengthy product development,
development alliances
• Mass
• Standard products customization
• Job specialization • Empowered 12
employees, teams
 The Challenge of Social
Responsibility

Increasing emphasis on business

and social responsibility

13