Operations Management Chapter One

Capacity

*Capacity-related decisions are aimed at providing the right resources at the right place at the right time. *Long-range capacity is determined by the size of the physical facilities or by outsourcing to a reliable supplier. In the shor run, capacity sometimes can be augmented by subcontracting, extra shifts, or rental of space. Capacity planning also determines the proper number of people in operations, staffing levels are set to meet the needs of market demand and the desire to maintain a stable workforce. In the short run, capacity must be allocated to specific tasks and jobs in operations by scheduling people, equipment, and facilities.

Inventory

*Inventory-related decisions determine the type and level of inventory to be held. *Inventory control systems are used to manage materials from purchasing through raw materials, work in process, and finished goods inventories. Inventory managers decide how much inventory is needed, where to locate the inventory, and a host of related decisions.

Process

*Process-related decisions determine the physical process used to produce the product or service and the associated workforce policies and practices. Many of these decisions are long-range in nature and cannot be reversed easily, particularly when significant capital investment is needed. It is therefore important that the transformation process be designed in relation to the long-term strategic posture of the organization and the capabilities of the workforce. *Since many process decisions require large capital investments, financial managers are concerned with the investments in assets required by the operations function. Human Resource managers are concerned with recruiting, hiring, staffing, and evaluation decisions concerning the workers in operations. *The operations function typically manages more employees and physical assets than does any other function in the firm.

Quality

*Quality-related decisions affect the value and functionality of the goods or services produced and delivered to customers. These decisions determine whether and to what extent customer specifications are satisfied. *The operations function is responsible for the quality of goods and services produced. Decisions must ensure that quality is designed and built into all stages of producin and delivering goods and services to customers. *Quality requires total organizational support. Mangers from all functions should be concerned with quality and should participate in setting the specifications for all new products and in defining the levels of customer service required.

3 Key Points of Operation Mangement

1. Decisions. Four major decision responsibilities of operations management are: Process, Quality, Capacity, and Inventory. 2. Function. Operations is a major function in any organization. 3. Process. Operations managers plan and control the transformation process and its interfaces in organizations as well as across the supply chain.

ASQ

American Society for Quality - The world's leading organization devoted to advancing learning, quality improvement, and knowledge exchange to improve business results and create better workplaces and communities worldwide. www.asq.org

APICS

Association for Operations Management - The global leader and premier source of the body of knowledge in operations management, including production, inventory, the supply chain, materials management, purchasing, and logistics. www.apics.org

CSCMP

Council of Supply chain Management Professionals - the preeminent worldwide professional association for supply chain management professionals, whose vision is to lead the evloving supply chain management profession by developing, advancing, and disseminating supply chain knowledge and research. http:cscmp.org

Operations Management

Deals with the production of goods and services. The operations function of an organization is responsible for producing and delivering goods or services of value to customers of the organizations. Operations managers make decisions ot manage the transformation process that converts inputs into desired finished goods or services.

e-business

Electronic information exchanges between between suppliers and customers.

Inputs

Include energy, materials, labor, capital, and information.

Supply Chain Management

Includes the integration of the work and the requirements of suppliers, producers, and customers. Managing the supply chain requires managers to consider the entire flow of materials, information, and money throughout the supply chain, from raw materials through production and distribution to the final customers. Can be improved by using lean operations to speed up the flow of materials and reduce waste along the supply chain.

Bank

Inputs: Tellers, staff, computer equipment, facilites, and energy. Outputs: Financial Services (Loans, deposits, safekeeping, etc.)

ISM

Institute for Supply Management - The largest and one of the most respected supply management associations in the world, whose mission is to lead the supply management and purchasing profession through its standards of excellence, research, promotional activities, and education www.ism.ws

Operations, purchasing, logistics functions

Mange the production of the goods or services that are moved through the production process and delivered to customers.

Transformation System

Operations can be defined as this that converts inputs into outputs.

Key Point 5

Operations decisions are often cross-functional in nature. Decisions may impact or be impacted by activities in other functions such as marketing and finance. Often, cross-functional teams are formed to undertake complex systematic decisions.

Key Point 2

Operations management focuses on decisions to manage the transformation process that converts inputs into desired finished goods or services. These decisions are inteded to maximize the value inherent in goods or services delivered to customers throughout the entire supply chain.

Key Point 1

Operations produces and delivers goods or services deemed to be of value to customers in a global economy. The operations function is essential for both for-profit and nonprofit organizations.

Outputs

Process techonology is used to convert inputs into outputs.

Process View

Provides common ground for defining service and manufacturing operations as transformation processes and is a powerful basis for the design and analysis of operations in an organization and across the supply chain.

Purchasing Function

Responsible for finding other organizations to serve as sources and then buying the material and service inputs for the transformation process of the organization.

Globalization of Operations

Strategies for operations should be formulated with global effects in mind and not consider only narrow national interests. All aspects of operations and the supply chains are affected by the global nature of business.

Sustainability

The focus of sustainability of the natural environment has been heightened in recent years with concerns over global warming, water contamination, air pollution, etc.

Process Technology

The methods, procedures, and equipment used to tranform materials or inputs into products or services.

Supply Chain

The network of manufacturing and service operations (often multiple organizations) that supply one another from raw materials through production to the ultimate customer. The supply chain consists of the physical flow of materials, money, and information along the entire chain of purchasing, production, and distribution.

Lean Systems

The predominant operations systems in most modern industries. Lean is concerned with eliminating waste (non-value-adding activities) in every part of the business and improving the flow of goods and services. Lean employs the concepts of Just-in-Time production and extends those ideas to identifying value provided to the customer.

Key Point 3

The supply chain is the network of manufacturing and service operations that supply each other from raw materials through manufacturing to the ultimate customer. The supply chain consists of the physical flow of materials, money, and information along the entire chain of purchasing, production, and distribution. The supply chain connects many different organizations.

Value

The tangible and intangible benefits that customers derive from consuming a good or service at a price they are willing to pay.

Key Point 4

There are four key groupings of decisions in operations: process, quality, capacity, and inventory. These decisions are useful for diagnosing and improving existing operations or identifying the requirements for new operations. These decisions need to account for contingencies, or special situations, because a best practice may not be best in all circumstances.

Key Point 6

We identify several contemporary themes in operations that are emerging and will be important in the future. these themes are services and manufacturing, customer-directed operations, lean, integration of operations with other functions, environmental concerns and sustainability, supply chain management, globalization of operations, and a contingency approach to operations.

Logistics Function

typically responsible for the actual movement of goods andor services across organizations.