CHAPTER ONE
PRODUCTION/OPERATIONS
PRODUCTION AND OPERATIONS MANAGEMENT
MANAGEMENT
SIXTH EDITION
WILLIAM J. STEVENSON
Rochester Institute of Technology
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McGraw-Hill
Companies,
Inc.,
1999
©The
McGraw-Hill
Companies,
Inc.,
1999
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PART ONE
CHAPTER
ONE
INTRODUCTION
PRODUCTION AND OPERATIONS MANAGEMENT
•Chapter One
•Production and Operations Management
•Chapter Two
•Productivity, Competitiveness, and Strategy
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Management

Operations function consists of all activities directly
related to producing goods or providing services.
Organization
Finance
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Production/
Operations
Marketing
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Business Operations Overlap
Production/
Operations
Marketing
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Finance
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Types of Operations
Operations
Examples
Goods Producing
Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange
Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment
Films, radio and television,
concerts, recording
Communication
Newspapers, radio and television
newscasts, telephone, satellites
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Value-Added
• The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Land
Labor
Capital
Outputs
Goods
Services
Transformation/
Conversion
process
Feedback
Control
Feedback
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Feedback
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Food Processor
Inputs
Processing Outputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
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Canned vegetables
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Hospital Process
Inputs
Processing
Outputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Examination
Surgery
Monitoring
Medication
Therapy
Healthy patients
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Operations Interfaces
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Decision Making
• System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Decision Making
• System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Major Characteristics of
Production Systems
• Degree of standardization
• Type of operation
– project
– job shop
– repetitive production
– continuous processing
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Manufacturing or Service?
Tangible
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Act
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Key Differences
•
•
•
•
•
•
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Quality assurance
These differences are beginning to fade
in many cases
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Manufacturing vs Service
Characteristic
Manufacturing Service
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
Intangible
High
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Responsibilities of
Operations Management
• Planning
– Capacity
– Location
– Products and services
– Make or buy
– Layout
– Projects
– Scheduling
• Controlling
– Inventory
– Quality
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• Organizing
– Degree of centralization
– Subcontracting
• Staffing
– Hiring/laying off
– Use of Overtime
• Directing
– Incentive plans
– Issuance of work orders
– Job assignments
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Models
•
A model is an abstraction of reality.
– Physical
– Schematic
– Mathematical
Tradeoffs
What are the pros and cons of models?
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Systems Approach
“The whole is greater than the sum of the parts.”
Suboptimization
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Quantitative Approaches
• Linear programming
•
•
•
•
Queuing Techniques
Inventory models
Project models
Statistical models
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Pareto Phenomenon
• A vital few things are important for reaching
an objective or solving a problem.
• 80/20 Rule - 80% of problems are caused by
20% of the activities.
How do we identify the vital few?
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Recent Trends
• Global competition
• Operations strategy
• Total quality management (TQM)
• Flexibility
• Time reduction Technology
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CHAPTER ONE
PRODUCTION AND OPERATIONS MANAGEMENT
Recent Trends (Continued)
• Worker involvement
• Reengineering
• Environmental issues
• Service
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