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what is operations?

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the part of a business organization that is responsible for producing goods or services

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operations management

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the management of systems or processes that create goods and or provide services

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goods

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physical items that include raw materials, parts, subassembles, and final products

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services

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activities that provide some combination of time, location, form or phsychological value

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supply chain

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a sequence of activities and organizations involved in producing and delivering a good or service

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supply chain:

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suppliers' suppliers -; direct suppliers-; producer-;distributor-; final customers

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basic functions of the business organization

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marketing, operations, finance

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Manufactoring vs Service

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1.degree of 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 9. evaluation of work 10. ability to patent design

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challenges in managing services

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1. jobs are less structured 2. contact with customers is higher 3. worker skills are typically low 4. many new workers 5. employee turnover is high, in low skilled jobs 6. input variability tends to be higher in many service environments 7. outside factors can affect the service performance

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role of the operations manager

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the operations function consists of all activities directly related to producing goods or providing services a primary function of the operations manager is to guide the system by decision making -system design decision -system operation decisions

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system design

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-capacity -facility location -facility layout -product and service planning -acquisition and placement of equipment strategic decisions: usually require long-term commitment of resources determine parameters of system operation

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system operation decisions

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these are generally tactical and operational decisions -management of personnel -inventory management and control -scheduling -project management -quality assurance operations managers spend more time on system operation decisions than any other decision area -they still have a vital stake in system design

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why study om?

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every aspect of business affects or is affected by operations many service jobs are closely related to operations -financial services -marketing services -accounting services -info services there is a significant amount of interaction and collaboration amongst the functional areas it provides an excellent vehicle for understanding the world in which we live

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decision making

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what: what resources are needed? when: when will each resource be needed where: where will the work be done how: how will the product or service be designed who: who will do the work

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model

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an abstraction of reality; a simplification of something features: they are simplification of real life phenomena they omit unimportant details of the real-life systems they mimic so that attention can be focused on the most important aspects of the real-life system

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types of models

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physical model schematic model mathematical models

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quantitative methods

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a decision making approach that frequently seeks to obtain a mathematically optimal solution

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system

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a set of interrelated parts that must work together -marketing subsystem -operations subsystem -finance subsystem

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the systems approach

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interrelationships among subsystems main theme is that the whole is greater than the sum of its parts the output and objectives of the organization take precendence over those of any other subsystem

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industrial revolution

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pre industrial: craft production- system in which highly skilled workers use simple flexible tools to produce small quantities of customized goods key elements: began in england in 1770s division of labor application of the "rotative" steam engine cotton gin and interchangeble parts

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scientific management

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frederick winslow taylor based on observation, measurement, analysis and improvement of work methods and economic incentives emphasis on max outputt

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contributors of scientific management

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frank gilbreth- father of motion henry gantt harrington emerson- applied taylors ideas to organization structure henry ford- employed scientific management techniques to his factories moving assembly line

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human relations movement

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importance of the human element in job design lillian gilbreth elton mayo- hawthorn studies on worker motivation abraham maslow- motivation theory 1940s; hierarchy of needs frederick hertzberg- two factor theory douglas mcgregor- theory x and theory Y william ouchi- theory Z 1981

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Decision models and management science

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f.w. harris- mathematical model for inventory management 1915 dodge romig and shewart- stat procedures for sampling and quality control tippett- statistical sampling theory 1935 OR groups george dantzig- linear programming

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key issues for operations managers today

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economic conditions innovating quality problems risk management competing in a global economy

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sustainability

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using resources in ways that do not harm ecological systems that support human existence areas of business affected: product and service design, consumer education programs, disaster preparation and response, supply chain waste management, outsourcing decisions

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ethical issues in operations

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financial statements worker safety product safety quality the environment the community hiring and firing closing facilities workers rights

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supply chain issues

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-the need to improve -increasing levels of outsourcing -increasing transportation costs -competitive pressures -increasing globalization -increasing importance of e-business -the complexity of supply chains -the need to manage inventories

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elements of supply chain management

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Customers - what products/services do customers want Forecasting - predicting timing and volume of customer demand Design - incorporating customer wants, manufacturability, and time to market Capacity planning - matching supply and demand Processing - controlling quality, scheduling work Inventory - meeting demand requirements while managing costs Purchasing - evaluating potential suppliers, supporting the needs of operations on purchased goods and services Suppliers - monitoring supplier quality, on-time delivery, and flexibility; maintaining supplier relations Location - determining the location of facilities logistics- deciding how to best move info

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competitiveness

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how effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services

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business compete using operations

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Product and service design Cost Location Quality Quick response Flexibility Inventory management Supply chain management Service Managers and workers

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mission

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the reason for an organizations existence -states purpose "what business are we in?"

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goals

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provide detail and the scope of the mission -goals can be viewed as organizational destinations

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strategy

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a plan for achieving organizational goals -serves as a roadmap for reaching the organizational destinations

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tactics

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the methods and actions taken to accomplish strategies the "how to" part of the process

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operations

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the actual "doing" part of the process

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core competencies

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the special attributes or abilities that give an organization a competitive edge

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strategy formulation

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takes into account: core competencies, environmental scanning, SWOT successful strategy fomulation takes into account: order qualifiers, order winners

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order qualifiers

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characteristics that customer perceive as minimum standards of acceptability for a product or service to be considered as potential for purchase

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order winners

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characteristics of an organization's goods or services that cause it to be perceived as better than the competition

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environmental scanning

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identifies: internal factors -strengths and weaknesses external factors: opportunities and threats

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key external factors

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1. economic conditions 2. political conditions 3. legal environment 4. technology 5. competition 6. markets

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key internal factors

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Human Resources Facilities and equipment Financial resources Customers Products and services Technology Suppliers Other

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operations strategy

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the approach consistent with organization strategy, that is used to guide the operations function

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quality based strategy

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strategy that focuses on quality in all phases of an organization -pursuit of such a strategy is rooted in number of factors: *trying to overcome a poor quality reputation *desire to maintain a quality image *a desire to catch up with the competition *a part of a cost reduction strategy

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time based strategies

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strategies that focus on the reduction of time needed to accomplish tasks

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agile operations

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a strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of change

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productivity

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a measure of the effective use of resources, usually expressed as the ratio of output to input useful when: tracking an operating units performance over time judging the performance of an entire industry or country

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why productivity matters

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High productivity is linked to higher standards of living Higher productivity relative to the competition leads to competitive advantage in the marketplace For an industry, high relative productivity makes it less likely it will be supplanted by foreign industry

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measures

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productivity= output/input partial meausures: output/single input output/labor output/capital multifactor measures: output/multiple inputs output/labor+machines output/labor+capital+energy total measure: goods or services produced / all inputs used to produce them

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productivity growth

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current productivity-previous productivity/ previous productivity x100%

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forecast

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forecast a statement about the future value of a variable of interest

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improving productivity

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Develop productivity measures for all operations Determine critical (bottleneck) operations Develop methods for productivity improvements Establish reasonable goals Make it clear that management supports and encourages productivity improvement Measure and publicize improvements Don't confuse productivity with efficiency

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two important aspects of forecasts

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expected level of demand accuracy

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common features of all forecasts

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Techniques assume some underlying causal system that existed in the past will persist into the future Forecasts are not perfect Forecasts for groups of items are more accurate than those for individual items Forecast accuracy decreases as the forecasting horizon increases

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elements of a good forecast

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should be timely accurate reliable expressed in meaningful units should be in writing should be simple to undrstand and use should be const effective

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steps in forecasting process

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determine the purpose of the forecast establish a time horizon obtain clean and analyze appropriate data select a forecasting technique make the forecast monitor the forecast

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forecast accuracy

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error= actual-forecast if errors fall beyond acceptaale bounds, corrective action may be necessary

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MAD

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sigma |actual-forecast|/n

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MSE

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sigma(actual-forecast)squared / n-1

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qualitative forecasting

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soft information: human factors personal opinions hunches

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quantitative forecasting

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projection of historical data or the development of associative methods that attempt to use causal variables to make a forecast

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time series:

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a time ordered sequence of observations taken at regular time intervals

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judgemental

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uses subjective inputs

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time series

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uses historical data assuming the future will be like the past

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associative models

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uses explanatory variable to predict the future

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regression

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a technique for fitting a line to a set of data points

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simple linear regression

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the simplest form of regression that involves a linear relationship between two variables

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SLR assumptions

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variations around the line are random deviations around the average value should be normally distributed predictions are made only within the range of observed values

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standard error of estimate

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a measure of the scatter of points around a regression line small error, the prediction is more accurate

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correlation

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a measure of the strength and direction of relationship between two variables ranges between -1.00 and +1.00

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square of correlation coefficient

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a measure of the percentage of variability in the values of the y that is "explained" by the independent variable ranges between 0 and 1

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naive forecast

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uses a single previous value of a time series as the basis for a forecast can be used with a stable time, seasonal variations, trend

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averaging forecasting

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moving average weighted moving average exponential smoothing

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moving average:

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fewer data poins-more responsive

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weighted moving average

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the most recent are given more weight

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exponential smoothing

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a weighted averaging method based on previous forecast plus a percentage of the forecast error

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reactive approach

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view forecasts as a probable future demand react to meet that demand

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proactive approach

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seeks to actively influence demand

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strategic alliance- an agreement among firms that take up 3 forms

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-collaborative effort -joint venture -technology licensing

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