1-1 Introduction to Operations Management

Operations
Operations Management
Analytics
William J. Stevenson

8th edition
1-2 Introduction to Operations Management

What is Operations Analytics?

Operations Management
Operations analytics deals with data mining, data
aggregation, and analytical models geared towards
improving existing operations and company profitability.
In manufacturing companies, these could mean demand
and supply matching, demand forecasting and planning,
inventory optimization, William J. Stevenson
procurement forecasting and
planning, etc

8th edition
1-3 Introduction to Operations Management

Operations Management

William J. Stevenson

8th edition
1-4 Introduction to Operations Management

What is Operations Management?

Operations Management
Operations management involves overseeing and
coordinating the processes that transform inputs (such as
materials, labor, and technology) into outputs (products or
services) efficiently and effectively. It focuses on
optimizing resources, improving productivity, and
William
ensuring quality in the production of J. Stevenson
goods or services.

8th edition
1-5 Introduction to Operations Management

Key Aspects of Operations

Management

Operations Management
• supply chain management
• process design
• capacity planning
William J. Stevenson
• quality control
• logistics.
8th edition
 1-6 Introduction to Operations Management

CHAPTER
1

Introduction to
Operations Management

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights
1-7 Introduction to Operations Management

Operations Management
Figure 1.1

The management of systems or processes

that create goods and/or provide services

Organization

Finance Operations Marketing

1-8 Introduction to Operations Management

Value-Added
Figure 1.2
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
1-9 Introduction to Operations Management

Goods-service Continuum
Figure 1.3

Steel production Home remodeling Auto Repair Maid Service Teaching

Automobile fabrication Retail sales Appliance repair Manual car wash Lawn mowing

High percentage goods Low percentage goods

Low percentage service High percentage service
1-10 Introduction to Operations Management

Food Processor
Table 1.2

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
1-11 Introduction to Operations Management

Hospital Process
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
1-12 Introduction to Operations Management

Production of Goods vs. Delivery of Services

 Production of goods – tangible output

 Delivery of services – an act
 Service job categories
 Government
 Wholesale/retail
 Financial services
 Healthcare
 Personal services
 Business services
 Education
1-13 Introduction to Operations Management

Key Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
1-14 Introduction to Operations Management

Scope of Operations Management

 Operations Management includes:
 Forecasting
 Capacity planning

 Scheduling

 Managing inventories

 Assuring quality

 Motivating employees

 Deciding where to locate facilities

 And more . . .
1-15 Introduction to Operations Management

 The operations function

 Consists of all activities directly related to
producing goods or providing services
1-16 Introduction to Operations Management

Figure 1.4
U.S. Manufacturing vs. Service Employment
Year Mfg. Service
45 79 21
100
50 72 28
55 72 28 80
60 68 32
65 64 36
Percent 60
70 64 36 40
75 58 42
80 44 46 20
85 43 57
0
90 35 65
95 32 68 45 50 55 60 65 70 75 80 85 90 95 00
00 30 70 Year
1-17 Introduction to Operations Management

Responsibilities of Operations Management

Table 1.6

Planning Organizing
– Capacity – Degree of centralization
– Location – Process selection
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling/Improving – Issuance of work orders
– Inventory – Job assignments
– Quality
– Costs
– Productivity
1-18 Introduction to Operations Management

Key Decisions of Operations Managers

 What
What resources/what amounts
 When
Needed/scheduled/ordered
 Where
Work to be done
 How
Designed
 Who
To do the work
1-19 Introduction to Operations Management

Business Operations Overlap

Figure 1.5

Operations

Marketing Finance
1-20 Introduction to Operations Management

Operations Interfaces
Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS
1-21 Introduction to Operations Management

Trends in Business
 Major trends
 The Internet, e-commerce, e-business
 Management technology

 Globalization

 Management of supply chains

 Agility
1-22 Introduction to Operations Management

Understanding Supply Chain Analytics

The basic Supply Chain Management process

1.Plan

2.Develop (Source)

3.Make

4.Deliver

5.Return
1-23 Introduction to Operations Management

Plan

The initial stage of the supply chain process is the

planning stage. We need to develop a plan or
strategy in order to address how the products and
services will satisfy the demands and necessities of
the customers. In this stage, the planning should
mainly focus on designing a strategy that yields
maximum profit.
1-24 Introduction to Operations Management

Develop

After planning, the next step involves developing or

sourcing. In this stage, we mainly concentrate on
building a strong relationship with suppliers of the
raw materials required for production. This involves
not only identifying dependable suppliers but also
determining different planning methods for
shipping, delivery, and payment of the product.
1-25 Introduction to Operations Management

Make

The third step in the supply chain

management process is the manufacturing or
making of products that were demanded by
the customer. In this stage, the products are
designed, produced, tested, packaged, and
synchronized for delivery.
1-26 Introduction to Operations Management

Deliver

The fourth stage is the delivery stage. Here the products are
delivered to the customer at the destined location by the
supplier. This stage is basically the logistics phase, where
customer orders are accepted and delivery of the goods is
planned. The delivery stage is often referred as logistics,
where firms collaborate for the receipt of orders from
customers, establish a network of warehouses, pick carriers
to deliver products to customers and set up an invoicing
system to receive payments.
1-27 Introduction to Operations Management

Return

The last and final stage of supply chain

management is referred as the return. In the stage,
defective or damaged goods are returned to the
supplier by the customer. Here, the companies need
to deal with customer queries and respond to their
complaints etc.