CHAPTER 01 INTRO TO OPERATIONS MANAGEMENT

Many organizations offer a combination of goods and services to their customers. As you learned in this chapter, there are some key differences between production of goods and delivery of services. What are the implications of these differences relative to managing operations?

1. There are many implications due to the differences between service and manufacturing operations. For example, in a service firm, because the degree of customer contact is high, we have to make sure that employees are better trained in customer service than employees in a manufacturing industry are. In a pure-service industry firm, we will build a lot of slack in scheduling because of the uncertainty of input.

List 5 important differences between goods production and service operations

Among the important differences between manufacturing and service operations are: a. The nature and consumption of output. b. Uniformity of input. c. Labor content of jobs. d. Uniformity of output. e. Measurement of productivity.

Describe each of these systems: Craft production Mass production Lean production

Craft production: involves producing high variety of customized goods, low volume output with skilled workers, and utilizing general-purpose equipment. The main advantage is the flexibility to produce a wide variety of outputs providing many choices for the need of customers. The main disadvantage is its inability to produce at low cost. Examples: tailoring, machine shop, print shop, and landscaping. Mass production: involves producing a few standardized goods at high volume of output with low skilled workers utilizing specialized equipment. The main advantage is low cost, efficient production. The main disadvantage is that it does not allow easy changes in volume of output, product, or process design. Examples: automobiles, computers, mail sorting, appliances, paper, soft drink bottling, etc. Lean Production: involves producing more variety of goods than most production at moderate to high volume of output. It requires high skilled workers, quality, employee involvement, teamwork, and flatter organizational structure with fewer levels of management. It combines the advantages of both mass production (high volume, low cost) and craft production (variety, flexibility). Examples: similar to mass production

Why is the degree of customization an important consideration in process planning?

Degree of customization has important implications throughout a business organization. Generally, higher degrees of customization involve more complexity in terms of production or service, involve different forms of layout (arrangement of the workplace), require higher worker skills, and have lower productivity.

One way that organizations compete is through technological innovation. However, there can be downsides for both the organization and the consumer. Explain.

Innovations might be product or service related, or process related. These typically involve added cost and time for training and possibly new equipment or equipment changes, and potential changes for the supply chain (e.g., new suppliers, new delivery requirements, etc.). Process innovations can be disruptive to the workforce due to lower labor or machine time requirements, which may result in job loss, retraining, and/or lower worker morale. New products or services also probably will involve new advertising campaigns or other promotions, and the need for consumer education. Consumers will have to adjust to new products or services, and may have some difficulty if innovations entail increased complexity.

Why is it important for the various functional areas of a business organization to collaborate?

It is important for the various functional areas to collaborate because collaboration will lead to improved communication among the departments (functions) that in turn will improve the performance of the firm. Collaboration will reduce the chance of sub-optimization by a functional area due to the possibility that a particular functional area does not have enough information about the other areas and their constraints or decisions.

In what general ways does technology have an impact on operations management decision making ?

Product and service technology allows a company to develop new products faster. Process technology enables a company to improve methods, procedures, and equipment used to produce goods and to provide services. Information technology enables companies to process large quantities of data quickly, to identify and track goods, to obtain point-of-sale data, and to communicate documents electronically to suppliers and customers.

Why is it important to match supply and demand? If a manager believes that supply and demand will not be equal, what actions could the manager take to increase the probability of achieving a match?

That would depend on whether supply was too large or too small. If there is over capacity, try to increase demand through advertising and/or price reductions. If output (goods) can be stored, and future demand is expected to be higher, store excess output for future demand. If supply is too small, options might be to outsource, work overtime, or hire temporary workers. If there are few or no competitors, increase prices.

Describe the operations function and the nature of the operations manager's job

The operations function consists of all activities that are related directly to producing goods or providing services. It is the core of most business organizations because it is responsible for the creation of an organization's goods or services. Its essence is to add value during the transformation process (the difference between the cost of inputs and value and price of outputs).

Why do people do things that are unethical?

The reasons for doing unethical things vary from person to person and from one situation to another. Some of the possible reasons are listed below: a. The decision-maker cannot recognize his or her action as unethical because of a lack of morals or understanding or lack of sensitivity towards a given issue. b. Even though the decision-maker recognizes his or her behavior or action as unethical, he or she justifies it based on self-rationalization that involves justice theory. For example, the decision-maker may think that the consequences of his or her decision is not going to hurt other people or organizations in the short run but the potential long term effects may be devastating. c. The decision-maker knows that his or her action is unquestionably unethical. However, the type of ethical behavior required is not in the personal portfolio of the decision-maker and ethics in general is not important to him or her. d. The decision-maker does not think he or she will be caught. e. The self-interest of the decision-maker outweighs the ethical considerations.

Why are services important? Why is manufacturing important? What are non-manufactured goods

The service sector now accounts for more than 70 percent of jobs in the U.S. and that figure continues to increase. Manufacturing is important in that it supplies a large proportion of exports and many service jobs are dependent on manufacturing because they support manufacturing. Farm products are an example of non-manufacturing goods because there is no production and the products naturally grow without human intervention.

Briefly describe the terms operations management and supply chain

The term operations management relates to the management of systems or processes that create goods and/or provide services. These processes involve the planning, coordination, and execution of all activities within an organization that create goods and services. A supply chain is the sequence of organizations, including their facilities, functions, and activities, that are involved in producing and delivering a product or service. This sequence begins with basic suppliers of raw materials and ends with the final customer. A supply chain includes activities and facilities external to the internal operations function, e.g., sourcing and transportation of inbound materials.

Identify the 3 major functional areas of a business organizations and briefly describe how they interrelate

The three primary functions are operations, finance, and marketing. Operations is concerned with the creation of goods and services Finance is concerned with provision of funds necessary for operation Marketing is concerned with promoting and/or selling goods or services

List and briefly explain the four basic sources of variation, and explain why it is important for managers to be able to effectively deal with variation.

There are four basic sources of variation: 1. The variety of goods or services being offered: The greater the variety of goods and services, the greater the variation in production or service requirements. 2. Structural variation in demand, such as trends and seasonal variations. These are generally predictable. They are particularly important for capacity planning. 3. Random variation. This natural variability is present to some extent in all processes, is present in demand for services and products, and generally cannot be influenced by managers. 4. Assignable causes of variation: Variation caused by defective inputs, incorrect work methods, out of adjustment equipment, and so on. This type of variation can be reduced or eliminated by analysis and corrective action. Variations can be disruptive to operations and supply chain processes, interfering with optimal functioning. Variations result in additional cost, delays and shortages, poor quality, and inefficient work systems. Poor quality and product shortages or service delays can lead to dissatisfied customers and damage an organization's reputation and image.

Explain the term "Value - Added"

Value added is defined as the difference between the cost of inputs before the transformation process and the value or the price of output after the transformation process. In a manufacturing process as the inputs are transformed to outputs, value is added to products in a number of different ways. The value adding can take many different forms. For example, value can be added by changing the product structurally (physical change) or transporting a product (a product may have more value if it is located somewhere other than where it currently is).

What are trade-offs? Why is it careful consideration of trade-offs important in decision making?

When we decide to take an action there are usually consequences of that action and advantages and disadvantages of taking that action. In other words, before we make a decision, we must weigh the pros and cons of that decision. Trade-offs involve weighing of pros and cons regarding a particular decision. For example, if a decision-maker decides to increase the level of inventory, he or she has to consider the trade-off between increased level of customer service and the additional inventory carrying cost.

Why might some workers prefer not to work in a lean production environment

Workers may not like to work in a lean production environment because there are fewer opportunities for employee advancement, more worker stress due to higher levels of responsibility and greater variability and expansion of job requirements.

Discuss the importance of each of the following a. Matching supply and demand b. Managing a supply chain

a. Matching supply and demand is an important objective for every business organization. Undersupply can result in dissatisfied customers, potential loss of business, and opportunity costs. Oversupply can potentially result in additional cost to store the excess, the need to sell the excess for a reduced cost, or the cost to dispose of the excess. b. Managing a supply chain is important for several reasons, including matching supply and demand, reducing transportation costs, achieving a competitive advantage, managing inventories, and achieving supply chain visibility.

Briefly discuss each of these terms related to the historical evolution of operations management a. Industrial Revolution b. Scientific Management c. Interchangeable parts d. Division of Labor

a. The Industrial Revolution began in the 1770s in England, and spread to the rest of Europe and to the U.S. in the late eighteenth century and the early nineteenth century. A number of inventions such as the steam engine, the spinning Jenny, and the power loom helped to bring about this change. There were also ample supplies of coal and iron ore to provide the necessary materials for generating the power to operate and build the machines that were much stronger and more durable than the simple wooden ones they replaced. b. Frederick W. Taylor, who is often referred to as the father of scientific management, spearheaded the scientific management movement. The science of management was based on observation, measurement, analysis, improvement of work methods, and economic incentives. Management should be responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperation between management and workers, and separating management activities from work activities. c. Parts of a product made to such precision that each part would fit any of the identical items bring produced. It meant that individual parts would not have to be custom made because they were standardized. d. Breaking up a production process into a series of tasks, each performed by a different worker. It enabled workers to learn jobs and become proficient at them more quickly, avoiding the delays of workers shifting from one activity to another.