MBA 570
Summer 2011
Accounting
?
Finance
Information
Systems
Economics
Marketing
Management
Business Environment
Accounting
Bookkeeping
Pensions
Audits
Tax
Accounting
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Finance
Investments
Capital
Stock Market
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Economics
Nceufhkurreffg
(the study of how
the forces of
supply and
demand allocate
scarce resources*)
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Operations
Finance
Information
Systems
Economics
Marketing
Management
Management
Organization
Behavior
Policy
Strategy
Accounting
Operations
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Operations
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Marketing
Sales,
Promotion
Market Research
Consumer
Behavior
Operations
Finance
Information
Systems
Economics
Marketing
Management
Accounting
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Information Systems
The application of
?
people,
technologies, and
procedures to
solve business
problems**
Information
Finance
Economics
Systems
Marketing
Management
Accounting
?
Finance
Information
Systems
Economics
Marketing
Management
Accounting
Operations
The efficient and
effective ,
Design, control,
Maintenance, and
improvement of
processes to
produce and
distribute products
and services***
Operations
Finance
Information
Systems
Economics
Marketing
Management

Designing Products and Services

Designing Products and Services

Designing Products and Services

Facility Location and Layout

Scheduling Operations

Scheduling Operations

Inventory Control

Quality Management
What Is Operations
Management?
Production is the creation of goods and
services
Operations management is the set of activities
that creates value in the form of goods and
services by transforming inputs into outputs
Operations management affects:
- Companies’ ability to compete
- Nation’s ability to compete internationally
◦ Consists of all activities directly
related to producing goods or
providing services
Value-Added
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Feedback
Control
Feedback
Feedback

Physical
Manufacturing

Locational
Transportation

Exchange

Storage
Warehousing

Physiological
Health Care

Informational
Telecommunications
Retailing
Food Processor
Inputs
Processing Outputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Canned
Making cans vegetables
Cutting
Cooking
Packing
Labeling
Hospital Process
Inputs
Processing
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Outputs
Examination Healthy
Surgery
patients
Monitoring
Medication
Therapy
OM Decisions
Where to locate your business?
OM Decisions
What type of process to use?
OM Decisions
Number of workers to employ?
Number of workers scheduled at each station?
More than just McDonalds…
Forecasting park demands
Reducing wait times
Managing projects

More Efficiently
◦ More Abundantly
 With Higher Customer Satisfaction
Loyalty
Loyalty
Customer
Satisfaction
Quality
The Goal of Operations
and business
apostle
zone of affection
Loyalty (Retention)
100%
80%
zone of indifference
60%
40%
zone of defection
20%
terrorist
1
2
3
Dissatisfied Neutral
Very
dissatisfied
Satisfaction
4
Satisfied
5
Very
satisfied
Productivity



Measure of process improvement
Represents output relative to input
Productivity = Units produced
Input used
Only through productivity increases can
our standard of living improve
Multi-Product Productivity
Productivity
=
Output
Labor + material + energy + capital + miscellaneous
Options for Increasing
Contribution
Marketing
Option
Current
Sales
Cost of
Goods Sold
Gross
Margin
Finance
Costs
Net
Margin
Taxes @
25%
Contribution
$100,000
Sales
Revenue :
+50%
$150,000
-80,000
Finance &
OM Option
Accounting
Option
Finance
Operations
Costs: -50% Costs: -20%
$100,000
$100,000
-120,000
-80,000
-64,000
20,000
30,000
20,000
36,000
-6,000
-6,000
-3,000
-6,000
14,000
24,000
17,000
30,000
-3,500
-6,000
-4,250
-7,500
10,500
18,000
12,750
22,500
Measurement Problems



Quality may change while the quantity
of inputs and outputs remains constant
External elements may cause an
increase or decrease in productivity
Precise units of measure may be
lacking
Goods-service Continuum
Steel production
Home remodeling
Auto Repair
Maid Service
Teaching
Automobile fabrication
Retail sales
Appliance repair Manual car wash Lawn mowing
High percentage goods
Low percentage service
Low percentage goods
High percentage service
Goods Contain Services / Services
Contain Goods
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling
100
75
50
25
Percent of Product that is a Good
0
25
50
75
100
Percent of Product that is a Service
Manufacturing or Service?
Tangible
Act







Inseparability
Intangibility
Perishability
Heterogeneity
Site Location
Labor Intensity
Difficulty In Measuring Quality of Output
Manufacturing vs Service
Characteristic
ManufacturingService
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
High
Intangible
Scope of Operations Management

Operations Management includes:
◦
◦
◦
◦
◦
◦
◦
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
◦ And more .
..

What
What resources/what amounts

When
Needed/scheduled/ordered

Where
Work to be done

How
Designed

Who
To do the work
Decision Making
System Design
–
–
–
–
–
capacity
location
arrangement of departments
product and service planning
acquisition and placement of
equipment
Decision Making
System operation
personnel
inventory
scheduling
project
management
– quality assurance
–
–
–
–







Ethical behavior
Operations strategy
Working with fewer resources
Cost control and productivity
Quality and process improvement
Increased regulation and product liability
Lean production

Local or national focus
•Global focus

Batch shipments
•Just-in-time

Low bid purchasing
•Supply chain partnering
Lengthy product
development

•Rapid product development,
alliances

Standard products
•Mass customization

Job specialization
•Empowered employees,
teams
Profits are the result of attention to quality
and customer satisfaction, while the reverse
is rarely true.
Edwards Deming