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Operations Mangement
Heizer and Render
Operations Management, 10e
Principles of Operations Management, 8e
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Outline
 Global Company Profile: Hard Rock
Cafe
 What Is Operations Management?
 Organizing to Produce Goods and
Services
 Why Study OM?
 What Operations Managers Do
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Outline - Continued
 The Heritage of Operations
Management
 Operations in the Service Sector
 Differences between Goods and
Services
 Growth of Services
 Service Pay
 Exciting New Trends in Operations
Management
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The Hard Rock Cafe
 First opened in 1971
 Now – 129 restaurants in over 40 countries
 Rock music memorabilia
 Creates value in the form of good food
and entertainment
 3,500+ custom meals per day in Orlando
 How does an item get on the menu?
 Role of the Operations Manager
© 2011 Pearson Education, Inc. publishing as Prentice Hall
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What Is Operations
Management?
Production is the creation of
goods and services
Operations management (OM) is
the set of activities that create
value in the form of goods and
services by transforming inputs
into outputs
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Organizing to Produce
Goods and Services
 Essential functions:
1. Marketing – generates demand
2. Production/operations – creates
the product
3. Finance/accounting – tracks how
well the organization is doing,
pays bills, collects the money
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Organizational Charts
Airline
Operations
Ground support
equipment
Maintenance
Ground Operations
Facility
maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange
Marketing
Traffic
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
Figure 1.1(B)
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Why Study OM?
1. OM is one of three major functions of
any organization, we want to study
how people organize themselves for
productive enterprise
2. We want (and need) to know how
goods and services are produced
3. We want to understand what
operations managers do
4. OM is such a costly part of an
organization
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What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing
 Directing
 Controlling
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Ten Critical Decision Areas
in OM
1. Design of goods and services
2. Managing quality
3. Process and capacity
design
4. Location strategy
5. Layout strategy
6. Human resources and
job design
7. Supply-chain
management
8. Inventory, MRP, JIT
9. Scheduling
10. Maintenance
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The Critical Decisions
1. Design of goods and services
 What good or service should we
offer?
 How should we design these
products and services?
2. Managing quality
 How do we define quality?
 Who is responsible for quality?
Table 1.2 (cont.)
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The Critical Decisions
3. Process and capacity design
 What process and what capacity will
these products require?
 What equipment and technology is
necessary for these processes?
4. Location strategy
 Where should we put the facility?
 On what criteria should we base the
location decision?
Table 1.2 (cont.)
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The Critical Decisions
5. Layout strategy
 How should we arrange the facility?
 How large must the facility be to meet
our plan?
6. Human resources and job design
 How do we provide a reasonable
work environment?
 How much can we expect our
employees to produce?
Table 1.2 (cont.)
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The Critical Decisions
7. Supply-chain management
 Should we make or buy this
component?
 Who should be our suppliers and how
can we integrate them into our strategy?
8. Inventory, material requirements
planning, and JIT
 How much inventory of each item
should we have?
 When do we re-order?
Table 1.2 (cont.)
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The Critical Decisions
9. Intermediate and short–term
scheduling
 Are we better off keeping people on
the payroll during slowdowns?
 Which jobs do we perform next?
10. Maintenance
 How do we build reliability into our
processes?
 Who is responsible for maintenance?
Table 1.2 (cont.)
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Where are the OM Jobs?
 Technology/methods
 Facilities/space utilization
 Strategic issues
 Response time
 People/team development
 Customer service
 Quality
 Cost reduction
 Inventory reduction
 Productivity improvement
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Opportunities
Figure 1.2
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Significant Events in OM
Figure 1.3
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The Heritage of OM
 Division of labor (Adam Smith 1776;
Charles Babbage 1852)
 Standardized parts (Whitney 1800)
 Scientific Management (Taylor 1881)
 Coordinated assembly line (Ford/
Sorenson 1913)
 Gantt charts (Gantt 1916)
 Motion study (Frank and Lillian Gilbreth
1922)
 Quality control (Shewhart 1924; Deming
1950)
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The Heritage of OM
 Computer (Atanasoff 1938)
 CPM/PERT (DuPont 1957, Navy 1958)
 Material requirements planning (Orlicky 1960)
 Computer aided design (CAD 1970)
 Flexible manufacturing system (FMS 1975)
 Baldrige Quality Awards (1980)
 Computer integrated manufacturing (1990)
 Globalization (1992)
 Internet (1995)
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New Challenges in OM
From
To
 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
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Industry and Services as
Percentage of GDP
90 −
Services
80 −
Manufacturing
70 −
60 −
50 −
40 −
30 −
20 −
US
UK
Spain
South Africa
Russian Fed
Mexico
Japan
Hong Kong
Germany
France
Czech Rep
China
Canada
0−
Australia
10 −
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Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100%
75
50
25
0
25
50
75
100%
|
|
|
|
|
|
|
|
|
Percent of Product that is a Good Percent of Product that is a Service
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Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Ethics and
regulations
not at the
forefront
Public concern over
pollution, corruption,
child labor, etc.
Local or
national
focus
Growth of reliable, low
cost communication
and transportation
High ethical and
social
responsibility;
increased legal
and professional
standards
Global focus,
international
collaboration
Lengthy
product
development
Shorter life cycles;
growth of global
communication; CAD,
Internet
Rapid product
development;
design
collaboration
Figure 1.5
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Changing Challenges
Traditional
Approach
Low cost
production,
with little
concern for
environment;
free
resources
(air, water)
ignored
Low-cost
standardized
products
Reasons for
Change
Current
Challenge
Public sensitivity to
environment; ISO 14000
standard; increasing
disposal costs
Environmentally
sensitive
production; green
manufacturing;
sustainability
Rise of consumerism;
increased affluence;
individualism
Mass
customization
Figure 1.5
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Changing Challenges
Traditional
Approach
Reasons for
Change
Current
Challenge
Emphasis on
specialized,
often manual
tasks
Recognition of the
employee's total
contribution; knowledge
society
Empowered
employees;
enriched jobs
“In-house”
production;
low-bid
purchasing
Rapid technological
change; increasing
competitive forces
Supply-chain
partnering; joint
ventures,
alliances
Large lot
production
Shorter product life
cycles; increasing need
to reduce inventory
Just-In-Time
performance;
lean; continuous
improvement
Figure 1.5
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New Trends in OM
 Ethics
 Global focus
 Environmentally sensitive production
 Rapid product development
 Environmentally sensitive production
 Mass customization
 Empowered employees
 Supply-chain partnering
 Just-in-time performance
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