CHAPTER
Introduction to
Operations
Management
Before I speak, I have something important to say…
-Groucho Marx
CHAPTER
Tasks ahead:
•
Defining Operations Management
•
Classifying Operations
•
Finding Operations Managers
operations
A set of activities
dedicated to the
transformation of inputs
into outputs of greater
value.
A MODEL OF ANY KIND OF OPERATION
Inputs
Resources
•
•
•
•
•
People
Materials
Equipment
Knowledge
Infrastructure
A MODEL OF ANY KIND OF OPERATION
Inputs
Transformation
Resources
Operations
•
•
•
•
•
•
•
•
•
•
People
Materials
Equipment
Knowledge
Infrastructure
Assembly
Transportation
Extraction
Cultivation
Fabrication
A MODEL OF ANY KIND OF OPERATION
Inputs
Transformation
Outputs
Resources
Operations
Outputs
•
•
•
•
•
•
•
•
•
•
•
•
•
People
Materials
Equipment
Knowledge
Infrastructure
Assembly
Transportation
Extraction
Cultivation
Fabrication
Goods and services
Employment
Pollution
value-added
The difference between
the total value of the
outputs and the total
value of the inputs
associated with an
operation.
THREE ELEMENTS OF VALUE CREATION
VALUE CREATION
THREE ELEMENTS OF VALUE CREATION
VALUE CREATION
Productivity
productivity
A measurement of value
creation, calculated as
a ratio of the values of
output to input.
Productivity
Inputs
Transformation
Inputs
Output
Outputs
THREE ELEMENTS OF VALUE CREATION
VALUE CREATION
Productivity
THREE ELEMENTS OF VALUE CREATION
Sustainability
VALUE CREATION
Productivity
sustainability
The degree to which
activity with immediate
benefit does not incur
greater costs in the long
term.
Recycling
symbol =
Input / Output
Model twisted
into a loop.
green
Assures sustainability.
biomimicry
The imitation of natural
processes and systems.
THREE ELEMENTS OF VALUE CREATION
Sustainability
VALUE CREATION
Productivity
THREE ELEMENTS OF VALUE CREATION
Sustainability
VALUE CREATION
Responsibility
Productivity
responsibility
An obligation to perform.
ethics
Principles governing
conduct, delineating
good from bad.
CLASSIFYING AN OPERATION
Inputs
Transformation
Outputs
CLASSIFYING AN OPERATION
Tangibility
Good or service?
Inputs
Transformation
Outputs
tangibility
The degree of
perceivable, physical
essence of a product.
goods
Tangible products.
goods
Tangible products.
services
Intangible products.
A Bill of Materials for
Manufacture of a
Tangible Good
Finished
good
Top
assembly
Top
casing
Keypad
Bottom
assembly
Screen
assembly
Flat Backlight
screen
frame
CPU
card
Power
supply
Bottom
casing
Physical Therapy as
a pure service.
COMPARING GOODS AND SERVICES
(Generalities…)
Goods operations
Tangible products
Service operations
Intangible products
COMPARING GOODS AND SERVICES
(Generalities…)
Goods operations
Tangible products
Less customer
contact
Service operations
Intangible products
More customer
contact
COMPARING GOODS AND SERVICES
(Generalities…)
Goods operations
Tangible products
Less customer
contact
More reliance on
specialized equipment
Service operations
Intangible products
More customer
contact
Less reliance on
specialized equipment
COMPARING GOODS AND SERVICES
(Generalities…)
Goods operations
Tangible products
Less customer
contact
More reliance on
specialized equipment
Less reliance on
skilled labor
Service operations
Intangible products
More customer
contact
Less reliance on
specialized equipment
More reliance on
skilled labor
CLASSIFYING AN OPERATION
Tangibility
Good or service?
Inputs
Transformation
Outputs
CLASSIFYING AN OPERATION
Supply Chains
Tangibility
One organization or many?
Good or service?
Inputs
Transformation
Outputs
supply chain
A system consisting of
all organizations that
play some role in
supplying a particular
product to a customer.
A SUPPLY CHAIN SYSTEM
CUSTOMER
Supplier’s
Supplier’s supplier
supplier
Casing
supplier
Supplier’s
supplier
Supplier’s
supplier
Keypad
supplier
Retailer
Distributor
Manufacturer
Card and
Flat Screen
memory supplier supplier
Supplier’s Supplier’s Supplier’s
supplier supplier supplier
Goods moving through
global supply chains.
CLASSIFYING AN OPERATION
Supply Chains
Tangibility
One organization or many?
Good or service?
Inputs
Transformation
Outputs
CLASSIFYING AN OPERATION
Supply Chains
Tangibility
One organization or many?
Good or service?
Inputs
Transformation
Uncertainty and Control
Governance
Commercial or nonprofit?
Outputs
VARYING LEVELS OF UNCERTAINTY AND CONTROL
IN OPERATIONS
Production
And Service
Management
Project
Management
More control
Less uncertainty
Event
Management
Incident
Management
Less control
More uncertainty
scientific
management
A methodology
stressing the use of
data collection and
analysis to redesign
processes and improve
efficiency.
VARYING LEVELS OF UNCERTAINTY AND CONTROL
IN OPERATIONS
Production
And Service
Management
Project
Management
More control
Less uncertainty
Event
Management
Incident
Management
Less control
More uncertainty
VARYING LEVELS OF UNCERTAINTY AND CONTROL
IN OPERATIONS
Production
And Service
Management
Project
Management
More control
Less uncertainty
Less control
More uncertainty
project
A unique collection
of activities creating a
particular outcome.
VARYING LEVELS OF UNCERTAINTY AND CONTROL
IN OPERATIONS
Production
And Service
Management
Project
Management
More control
Less uncertainty
Less control
More uncertainty
VARYING LEVELS OF UNCERTAINTY AND CONTROL
IN OPERATIONS
Production
And Service
Management
Project
Management
More control
Less uncertainty
Event
Management
Incident
Management
Less control
More uncertainty
incident
An unscheduled event
requiring immediate
resolution.
Scenario 1a
Classifying Operations
Regional Disaster Relief Services (RDRS) provides assistance to the
victims of natural disasters. RDRS relies on fund-raising to support
its permanent network of 15 warehouses, housing its inventory of
tents, trailers, tools, portable lighting, water-filtration equipment, and
electrical generators. Upon news of a disaster, RDRS activates both
its staff and volunteers to deploy and provide assistance in the field
Inputs
Transformation
Outputs
until permanent services are restored to the citizens of the disaster
area.
What kind of operation is RDRS?
Scenario 1a
Classifying Operations
Regional Disaster Relief Services (RDRS) provides assistance to the
victims of natural disasters. RDRS relies on fund-raising to support
its permanent network of 15 warehouses, housing its inventory of
tents, trailers, tools, portable lighting, water-filtration equipment, and
electrical generators. Upon news of a disaster, RDRS activates both
its staff and volunteers to deploy and provide assistance in the field
Inputs
Transformation
Outputs
until permanent services are restored to the citizens of the disaster
area.
What kind of operation is RDRS?
INCIDENT MANAGEMENT
NON PROFIT
Scenario 1a
Classifying Operations
Inputs
Transformation
Outputs
THE HIERARCHY OF DECISION-MAKING
THE HIERARCHY OF DECISION-MAKING
Long-term
planning
Strategy
Identifying
goals
strategy
A methodology and
resulting plan that
identifies the long-term
goals of an
organization.
THE HIERARCHY OF DECISION-MAKING
Long-term
planning
Strategy
Identifying
goals
THE HIERARCHY OF DECISION-MAKING
Long-term
planning
Medium-term
planning
Strategy
Tactics
Identifying
goals
Developing
solutions
tactics
Means to pursue
strategic goals with
available resources.
THE HIERARCHY OF DECISION-MAKING
Long-term
planning
Medium-term
planning
Strategy
Tactics
Identifying
goals
Developing
solutions
THE HIERARCHY OF DECISION-MAKING
Long-term
planning
Medium-term
planning
Short-term
planning
Strategy
Tactics
Implementation
Identifying
goals
Developing
solutions
Taking
action
Scenario 1b
Classifying Operational Decisions
Regional Disaster Relief Services (RDRS) relies on other agencies
for air transport, but recently proposed the purchase of six
helicopters. RDRS managers were opposed, arguing that ground
operations was the core competency of RDRS and it was more
important to resolve disputes over the proper allocation of all-terrain
Inputs
Transformation
Outputs
vehicles
(ATVs), than to
acquire aviation at great expense.
Several
warehouses located close to wilderness areas have no idle ATVs,
keeping their ATVs deployed throughout the wildfire season.
Managers there want idle ATVs from urban-area RDRS warehouses
to be transferred to their warehouses. Urban managers point out that
the wilderness area managers leave ATVs in remote areas,
speculating that an additional emergency might occur after the initial
rescue or evacuation is completed. The urban warehouse managers
suggest that wilderness area should put more effort into promptly
retrieving the ATVs already assigned to them.
Scenario 1b
Classifying Operational Decisions
How many different decisions have been discussed?
At what level in the hierarchy of decision making are these
decisions?
Inputs
Transformation
Outputs
Scenario 1b
Classifying Operational Decisions
At what level in the hierarchy of decision making are these
decisions?
Inputs
helicopter purchase
Transformation
Outputs
Scenario 1b
Classifying Operational Decisions
At what level in the hierarchy of decision making are these
decisions?
Inputs
helicopter purchase
Transformation
Outputs
ATV Allocation
Scenario 1b
Classifying Operational Decisions
At what level in the hierarchy of decision making are these
decisions?
Inputs
helicopter purchase
Transformation
Outputs
ATV Allocation
ATV Retrieval Policy
RELATIVE MIX OF THE THREE BUSINESS
FUNCTIONS FOR A REGIONAL HOSPITAL
Operations
Finance
Marketing
RELATIVE MIX OF THE THREE BUSINESS
FUNCTIONS FOR A SINGLE JEWELRY STORE
Operations
Finance
Marketing
RELATIVE MIX OF THE THREE BUSINESS
FUNCTIONS FOR A RESORT HOTEL
Operations
Finance
Marketing