1 -1 Mc Graw-Hill Irwin Operations Management Seventh Edition

1 -1 Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -2 Chapter One Introduction to Operations Management Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -3 Introduction to Operations Management The management of systems or processes that create goods and/or provide services Organization Finance Mc. Graw-Hill/Irwin Operations Marketing Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -4 Introduction to Operations Management • Operations Management includes: – Forecasting – Capacity planning – Scheduling – Managing inventories – Assuring quality – Motivating employees – And more. . . Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -5 Introduction to Operations Management Business Operations Overlap Operations Marketing Mc. Graw-Hill/Irwin Finance Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -6 Introduction to Operations Management Goods-service continuum Steel production Automobile fabrication House building Low service content construction Road High goods content Dressmaking Farming Auto Repair Appliance repair Increasing goods content Maid Service Manual car wash Increasing service content Teaching Lawn mowing High service content Low goods content Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -7 Introduction to Operations Management Value Added Value of Product Farmer produces and harvests wheat $0. 15 Wheat transported to mill $0. 08 $0. 23 Mill produces flour $0. 15 $0. 38 Flour transported to baker $0. 08 $0. 46 Baker produces bread $0. 54 $1. 00 Bread transported to grocery store $0. 08 $1. 08 Grocery store displays and sells bread $0. 21 $1. 29 Total Value-Added $1. 29 Stage of Production Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -8 Introduction to Operations Management Types of 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 Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -9 Introduction to Operations Management Value-Added The difference between the cost of inputs and the value or price of outputs. Value added Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Feedback Control Feedback Mc. Graw-Hill/Irwin Feedback Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -10 Introduction to Operations Management Food Processor Inputs Raw Vegetables Metal Sheets Water Energy Labor Building Equipment Mc. Graw-Hill/Irwin Processing Outputs Cleaning Making cans Cutting Cooking Packing Labeling Canned vegetables Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -11 Introduction to Operations Management Hospital Process Inputs Doctors, nurses Hospital Medical Supplies Equipment Laboratories Mc. Graw-Hill/Irwin Processing Outputs Examination Surgery Monitoring Medication Therapy Healthy patients Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -12 Introduction to Operations Management Operations Interfaces Industrial Engineering Distribution Maintenance MIS Operations Purchasing Accounting Mc. Graw-Hill/Irwin Public Relations Personnel Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -13 Introduction to Operations Management Decision Making System Design – – – capacity location arrangement of departments product and service planning acquisition and placement of equipment Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -14 Introduction to Operations Management Decision Making System operation personnel inventory scheduling project management – quality assurance – – Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -15 Introduction to Operations Management Manufacturing or Service? Tangible Mc. Graw-Hill/Irwin Act Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -16 Introduction to 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 Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -17 Introduction to 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 Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -18 Introduction to Operations Management Responsibilities of Operations Management Planning – Capacity – Location – Products & services – Make or buy – Layout – Projects – Scheduling Controlling – Inventory – Quality Mc. Graw-Hill/Irwin Organizing – Degree of centralization – Subcontracting Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -19 Introduction to Operations Management Models A model is an abstraction of reality. – Physical – Schematic – Mathematical Tradeoffs What are the pros and cons of models? Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -20 Introduction to Operations Management Systems Approach “The whole is greater than the sum of the parts. ” Suboptimization Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

1 -21 Introduction to Operations Management Quantitative Approaches • Linear programming • Queuing Techniques • Inventory models • Project models • Statistical models Mc. Graw-Hill/Irwin Operations Management, Seventh Edition, by William J. Stevenson Copyright © 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.