BA 357 Operations Management
John Sloan
Day 1 Agenda
 Who am I?
 Syllabus highlights
 Who are you?
 Introduction to Operations Management
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Who am I?
 Third year on the OSU Faculty, teaching BA 357,
BA 462, and BA 550
 28 years of operations / project management
experience with Hewlett-Packard:
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Different geographical locations
Different product lines
Different functional responsibilities
International experience
Experience teaching in business setting
 BA Mathematics, 4 years USAF, MBA
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Syllabus Highlights
 Get the book
 Come to class. I will not formally take attendance –
but if you don’t come, don’t expect to do well.
 Be prepared for class & participate in class
 Eight quizzes – You can drop one (1/3 of grade)
 Midterm exam (1/3 of grade)
 Final exam (1/3 of grade)
 All subject to change
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Policy on Cheating
All students are expected to abide by the
university rules on academic honesty,
which forbid cheating or plagiarism.
Failure to do so will result in failing the
class.
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Schedule – BA 357 Section 4
Date
Chapter / Topic
Quiz / Assignment due
1/4/05
Introductions
Syllabus review
Ch 1: Introduction to Operations Management
1/6/05
Ch 2: Operations Strategy
Regal Marine Video
1/11/05
Ch 3: Business Processes
King Sooper Video
1/13/05
Supplement 7: Capacity Planning
1/18/05
Quantitative Module A: Decision-Making Tools
Quiz 2
Homework 2
1/20/05
Ch 6: Quality Management
Quiz 3
Homework 3
1/25/05
Ch 12: Inventory Management
1/27/05
Ch 16: JIT / Lean Systems
Quiz 4
Homework 4
2/1/05
JIT Exercise
2/3/05
Midterm course review / Catch-up
2/8/05
Midterm exam
Homework 1
Quiz 1
Two Canneries Video
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Schedule – p2
2/10/05
Quantitative Module D: Waiting Line Models
2/15/05
Quantitative Module F: Simulation
2/17/05
Supplement 11: SCM & E-Commerce
2/22/05
Ch 4: Forecasting
2/24/05
Ch 13: Aggregate Planning
3/1/05
Quiz 5
Homework 5
Quiz 6
Homework 6
Ch 14: MRP & ERP
Quiz 7
Homework 7
3/3/05
Ch 14: MRP & ERP (continued)
Ch 15: Short-Term Scheduling
Quiz 8
Homework 8
3/8/05
Ch 3 (Heizer): Project Management
3/10/05
Sustainability
Final course review
3/14/05
Final exam
RM Video
Air NZ Video
Homework 9
7:30 AM
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Who Are You?
 Name and major
 Work experience
 I know it is early for some of you, but…
What do you want to be doing once you graduate?
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Operations
Management
Introduction
Chapter 1
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Operations & Operations Management
 Operations: the collection of people, technology,
and systems within an organization that has primary
responsibility for providing the organization’s
products or services
 Operations management: the planning,
scheduling, and control of the activities that
transform inputs into finished goods and services
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Supply Chain & SCM
 Supply chain: the network of manufacturers and service
providers that work together to move goods from the raw
materials stage through to the end user. These
manufacturers and service providers are linked together
through physical flows, information flows, and monetary flows.
 Supply chain management: the active management
of supply chain activities and relationships to maximize
customer value and achieve a sustainable competitive
advantage. It represents a conscious effort by a firm or group
of firms to develop and run supply chains in the most effective
and efficient ways possible.
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Processes and Operations
Internal and
external customers
Inputs
•Workers
•Managers
•Equipment
•Facilities
•Materials
•Services
•Land
•Energy
Processes and
operations
1
Outputs
3
5
2
4
•Services
•Goods
Information on
performance
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Goods vs. Services
Goods
Services
Product
Tangible
Intangible
Resale
Yes
No
Inventory
Raw materials, WIP,
finished goods
No – produced and consumed
at same time
Quality
Relatively easy - consistent
product definition
Very hard – each customer
different
Customer
Interaction
Can be low
Generally high
Transportability
Yes
No
Location
Where convenient to produce
Frequently centralized
Convenient to customer
Frequently dispersed
Automation
Yes
Yes –
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standardized
services
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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
0
25
Percent of Product that is a Good
25
50
75
100
Percent of Product that is a Service
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Organization Chart
General manager
Marketing
Manufacturing
Finance/
Accounting
Operations
Production
Control
Quality
Control
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Purchasing
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Some Cross-functional Linkages
 Engineering: what products and processes are needed
 Marketing: can we make what we wish to sell / what
products cost the most to make / customer expectations
 Accounting: inventory management / JIT / work standards
/ cost verses price
 Finance: make verses buy / quantifying quality / cash flow
and capital requirements / cost verses price
 Human resources: what skills do our employees need /
who to hire / type of compensation to match strategy
 Information Systems: what information is needed and by
whom / flow of goods / linkages to rest of supply chain
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Trends in Operations & SCM
 E-commerce
improves speed, quality and cost of business communication
 Increased competition and globalization in markets
increasing rate of change in markets, products and technology
 Relationship management
of all operations activities, the most susceptible to break down
The freethinking of one age is
the common sense of the next
Matthew Arnold (1822 – 1888)
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Why Study Operations Management?
 Every organization must make a product or provide a service
that someone values
Operations has primary responsibility for providing
the organization’s products or services
 Most organizations function as part of larger supply chains
Supply chains are networks of manufacturers and
service providers that work together to move goods
from the raw materials stage through to the end user
 Organizations must carefully manage their operations and
supply chains in order to prosper, and indeed, survive
Decisions and actions in operations directly affect
company growth, market share, and profitability
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Why Study Operations Management?
 This is where the good or service comes into being
– if you do not understand this part of the
company, you are not being the best accountant,
marketer, or whatever, that you could be.
 Strategies in all functional areas must be
linked/aligned to support the business strategy.
 This is where companies focus a great deal of
energy – because this is where most companies
incur the majority of their costs. Therefore this is
an area where you can have a major impact on a
firm’s competitiveness.
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Options for Increasing Contribution
Marketing
Option
Finance/Acct
Option
OM Option
Current
Sales
+ 50%
Finance
Costs – 50%
Production
Costs – 20%
$100,000
$150,000
$100,000
$100,000
Cost of Goods
-80,000
-120,000
-80,000
-64,000
Gross Margin
20,000
30,000
20,000
36,000
Finance Costs
-6,000
-6,000
-3,000
-6,000
Net Margin
14,000
24,000
17,000
30,000
Taxes @ 25%
-3,500
-6,000
-4,250
-7,500
Contribution
10,500
18,000
12,750
22,500
Sales
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Productivity
Productivity = output / input
(bigger is better)
Single-factor productivity
output / labor hours
output / labor $
sales / sales rep
sales / retail outlet, etc
Multi-factor productivity
output / (labor + material + overhead)
Productivity Worksheet
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Conclusions for Day 1
 OM is the management of the processes that add
value directly to our goods and services.
 Functional area strategies must be linked to
support the business strategy
 There is lots of money in improving operations
 Goods and services are part of the same continuum
 Productivity is the ratio of output to input, either
single-factor or multi-factor.
 Homework assignment 1 in public folder
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