Course Structure DAO2703 OTM Week 1 Introduction to OTM; Managing the Transformation Process Overview Process Types; Advanced Operations Technologies; Process Analysis Recognizing the Plant Aggregate Production Planning Inventory Management Planning for the Plant; PP&C Cycle Material Requirements Planning Introduction to OTM Operations Scheduling Waiting Line Management Quality Management Lean Operations Operations Strategies © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved. What is Operations? The part of a business organization that is responsible for producing goods and service Production is the creation of goods and services; however, has been used primarily to refer to creation of tangible goods Operations is the term introduced to re-emphasize creation of both goods and services Operations Management is a business function (within an organization) that is responsible for designing, managing, and improving the activities involved in the creation and delivery of products and services through the transformation of inputs into outputs OM refers to both manufacturing and services © Copyright National University of Singapore. All Rights Reserved. Improving the Plant Strategic Considerations © Copyright National University of Singapore. All Rights Reserved. Products or Services? Products are physical items that include raw materials, parts, subassemblies, and final products Automobile Computer Stationery Toiletry Services are activities that provide some combination of time, location, form or psychological value Air travel Education Haircut Legal Consul © Copyright National University of Singapore. All Rights Reserved. Goods vs. Services Goods vs. Services Products are typically neither purely service- or purely goodsbased Goods Services Surgery, Teaching Songwriting, Software Development Computer Repair, Restaurant Meal Home Remodeling, Retail Sales Automobile Assembly, Steelmaking © Copyright National University of Singapore. All Rights Reserved. Characteristics of Goods Characteristics of Services Tangible product Intangible product Can be inventoried Cannot be inventoried Consistent Product Definition Inconsistent Product Definition Limited customer interaction High customer interaction Production (usually) separate from consumption Produced and consumed at the same time Easy to automate Hard to automate Many aspects of quality are easy to evaluate Quality may be hard to evaluate Goods produced at a fixed facility Services dispersed Often has some residual value Reselling is unusual © Copyright National University of Singapore. All Rights Reserved. What is Operations & Technology Management? Industrial Revolutions Integration of Technology with Operations Management “Technology is the sum of techniques, skills, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation.” Wikipedia © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved. The Transformation Process Value-Added Inputs Transformation/ Conversion Process •Land •Labor •Capital •Information Measurement and Feedback Measurement and Feedback Control •Goods •Services Measurement and Feedback © Copyright National University of Singapore. All Rights Reserved. Examples of the transformation process Inputs Processing Output • • • • • • • • • • • Doctors, nurses Facility Medical supplies Equipment Laboratories Examination Surgery Monitoring Medication Therapy Inputs Processing Output Airline • • • • • • Airplanes Pilots Flight attendants Supplies Air cargo Passengers • Air transportation • Passengers/cargo transported to destinations Food processor • • • • • • • Raw vegetables Metal sheets Water Energy Labor Building Equipment • • • • • • Cleaning Making cans Cutting Cooking Packing Labeling • Canned vegetables Outputs Feedback = Measurements taken at various points in the transformation process Control = The comparison of feedback against previously established standards to determine if corrective action is needed Hospital Examples of the transformation process Treated patients © Copyright National University of Singapore. All Rights Reserved. What is a Supply Chain? The network of all entities involved in producing and delivering a finished product to the final customer. This includes sourcing raw materials and parts, manufacturing, producing and assembling the products, storing goods in the warehouses, order entry and tracking, distribution and delivery to the final customer Suppliers’ suppliers © Copyright National University of Singapore. All Rights Reserved. Direct suppliers © Copyright National University of Singapore. All Rights Reserved. Producer Distributor Final customers What is Supply Chain Management? Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems Oscillating inventory levels (bullwhip effect) Inventory stockouts Late deliveries Quality problems © Copyright National University of Singapore. All Rights Reserved. Basic Functions of the Business Organization Organization Marketing Operations • generates demand or at least takes the order for a product or service • creates the product or service Service (Airline) Organization Chart Manufacturing Production Operations Production Control © Copyright National University of Singapore. All Rights Reserved. • tracks how well the organization is doing, pays the bill, collects the money © Copyright National University of Singapore. All Rights Reserved. Manufacturing Organization Chart Marketing Finance/ Accounting Airline Finance/ Accounting Quality Control Purchasing Marketing Flight Operations © Copyright National University of Singapore. All Rights Reserved. Operations Ground Support Finance/ Accounting Facility Maintenance Catering Function Overlap OM and Supply Chain Career Opportunities Finance and Operations Budgeting Economic analysis of investment proposals Provisions of funds Marketing and Operations Demand data Product and service design Competitor analysis Lead time data © Copyright National University of Singapore. All Rights Reserved. Objectives in Operations Management Four major Operations Performance dimensions (aka Operations Capabilities) Cost Quality Speed/Dependability Flexibility/Innovativeness Supports business goals/strategies Can all the four objectives be achieved simultaneously? © Copyright National University of Singapore. All Rights Reserved. Operations manager Supply chain manager Production analyst Schedule coordinator Production manager Purchasing manager Inventory manager Quality manager © Copyright National University of Singapore. All Rights Reserved. Objectives in Operations Management Cost: produced at low cost Labor productivity; inventory turnover Quality: as perceived; Design vs. Conformance Features; mean time between failures (MTBF); scrap; rework Dependability: meet schedules/due dates; speed Percentage on-time deliveries; number of days late Flexibility: Product mix and volume changes Setup times; number of parts per process; time to market © Copyright National University of Singapore. All Rights Reserved. Decisions in Operations Why Study Operations Management? New operations environment Organizing Planning Capacity Layout Location Make or buy Products and services Projects Scheduling Controlling Inventory Quality Degree of centralizing Subcontracting/outsourcing Staffing Fierce competitive arena Low cost/high quality Product variety/rapid introduction Global market/global competition Hiring/laying off Use of overtime labor Directing Issuance of work orders Job assignments Global supply chain Explosion of new product/process technologies Product proliferation through microprocessor-based process technologies New information-intensive process technologies become critical competitive weapons How to use them for competitive advantage? The e-business revolution Urgent need for order fulfilment operations Inventory strategies; packaging; physical distribution © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved. Environmental Concerns Quotes “Our production cycle is about eighty-one hours from the mine to finished machine in the freight car, or three days and nine hours instead of the fourteen days we used to think was record breaking.” Henry Ford on Model T production, 1926 “This is a game of seconds…How can we shave time off this?” Silva Peterson, Starbucks Executive “About 40% of all jobs are in OM.” Heizer, Jay, et al. (2020), p. 40 “… projects 9.4 percent employment growth for business operations managers between 2020 and 2030. In that period, an estimated 226,300 jobs should open up. Business operations managers are the go-to people in a business.” US Bureau of Labor Statistics “Speaking on the third day of the Committee of Supply 2022 in Parliament, Minister for Trade and Industry Gan Kim Yong revealed that Singapore’s Manufacturing 2030 initiative, is “already making good progress”, with the sector growing by 13% since its launch last year.” © Copyright National University of Singapore. All Rights Reserved. https://content.mycareersfuture.gov.sg/manufacturing-industry-jobs-in-singapore-prospects/ Sustainability Use resources in ways that do not harm the ecological systems that support human existence Sustainability measures often goes beyond traditional environmental and economic measures to include measures that incorporate social criteria in decision making All areas of business will be affected Product and service design Customer education program Disaster preparation and response Outsourcing decisions © Copyright National University of Singapore. All Rights Reserved. Ethical Issues in Operations Ethical issues arise in many aspects of operations management Worker safety Product safety Quality The environment The community Hiring and firing of workers Closing facilities Workers’ rights © Copyright National University of Singapore. All Rights Reserved. Productivity Productivity = Output Input Example 1: If it takes 250 hours to produce 1,000 units: © Copyright National University of Singapore. All Rights Reserved. Productivity Thought Question: If inputs increase by 25% and outputs increase by 40%, what is the percentage productivity change? © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved. Productivity Productivity General formula: If inputs increase by X% and outputs increase by Y%, then the percentage productivity change is A broader view of productivity, multifactor productivity, also known as total factor productivity includes all inputs: 1+ Y % % change in productivity = −1 1 + X % Multifactor productivity = Output Labor + Material + Energy + Capital + Miscellaneous It is a measure of production efficiency. © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved. Productivity Productivity Example 2: You were assigned the task of evaluating the improvement in productivity of small business. Data (monthly average of last and this year) for one of the small business you are to evaluate are shown below Last Year Production (dozen) Labor (hours) Capital investment ($) Energy (BTU) © Copyright National University of Singapore. All Rights Reserved. This Year 1,500 1,500 350 325 15,000 18,000 3,000 2,700 Labor: $8 per hour Capital expense: 0.83% per month of investment Energy: $0.60 per BTU Determine the multifactor productivity with dollars as the common denominator for both years and the percentage change in productivity © Copyright National University of Singapore. All Rights Reserved. Multifactor productivity (last year) = 1,500 dozens ( $8 / hr 350 hours ) + ( $15,000 0.0083) + ( $0.60 / BTU 3,000 BTUs ) = 1,500 dozens = 0.317 dozens/$ $4,724.5 Productivity Example 3: Manufacturing labor costs across countries CNY-USD exchange rate = CNY7.17/USD US wage = USD26.35/hour Chinese wage = CNY28/hour Which country’s labor is cheaper? © Copyright National University of Singapore. All Rights Reserved. Productivity What about productivity? Suppose that U.S. workers are 6.3 times more productive than Chinese workers – Chinese workers must work 6.3 times as long to produce the same amount. © Copyright National University of Singapore. All Rights Reserved. Productivity Computing “Relative” Wage Rates W = foreign wage rate X = exchange rate H = home productivity (units/time unit) F = foreign productivity (units/time unit) R = “relative” foreign wage rate accounting for productivity differences (in home currency/time unit) R= © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved. W H X F Productivity Measurement problems: Quality may change External factors Units of measurements © Copyright National University of Singapore. All Rights Reserved. Productivity Variables For over a century (since 1869), the U.S. has been able to increase productivity at an average rate of almost 2.5% per year. The productivity increase is the result of the mix of: Labor (constitutes about 10%) Capital (constitutes about 38%) Management (constitutes about 52%) © Copyright National University of Singapore. All Rights Reserved. Productivity Issues in Service Sector Besides productivity measurement, improvement is difficult in the service sector: Labor intensive Frequently focused on unique individual attributes or desires Often an intellectual task performed by professionals Often difficult to mechanize and automate Often difficult to evaluate for quality © Copyright National University of Singapore. All Rights Reserved. © Copyright National University of Singapore. All Rights Reserved.
