Operations Management Operations Management: The design, operation, and control of the transformation process that converts resources into finished Goods and Services. Three Strategic Production Competencies: Time: Reduce delays and cycle times Quality: Improve quality and customer satisfaction Cost: Reduce waste and costs. Note: The distinction between goods and services is not clear-cut, and often organizations turn out a “bundle” of tangible goods and intangible services. Operations Planning Strategic Operations Plans Capacity Planning: Assessing an operating system’s ability to produce a desired output in a given time period. Facilities Location Planning: The design and location of an operations facility. Process Planning: Determining how a product or service will be produced. Facilities Layout Planning: Selecting appropriate layouts for equipment and work stations. Primarily by: Process Product, or Fixed-position Operations Planning Tactical Operations Plans Aggregate planning: The overall production plan for all products Master scheduling: How many units of each product will be produced per unit time. Materials requirements planning: The materials needed to satisfy the master schedule. From the combined strategic operations plans and the tactical operations plans you develop your Comprehensive Operations Plans. Characteristics of Services Customers participate directly in the production process: haircut, fix a broken bone, teeth cleaned They are intangible: can’t be seen, touched or felt Services are produced and consumed simultaneously & immediately and cannot be stored: airline seats Services are often provided where and when the customer desires: life insurance sales Services tend to be labor intensive Benefits of Good Workflow Layouts Minimize investment in equipment Minimize overall production time Use existing space more effectively Provide for employee convenience, safety,comfort Maintain flexible arrangement and operation Minimize material-handling cost Minimize variation in types of equipment Facilitate the manufacturing/service process Facilitate the organizational structure Current Issues in Operations Supply chain management Management of the facilities, functions, and activities involved in producing and delivering a product or service from the suppliers to customers. Just-in-time inventory control (JIT) Information Technology Networked (internet based) economy Electronic commerce Uses information technology to support online commercial transactions Management information systems Use IT to collect, organize, analyze, and process, and distribute data, (and help convert it to information) for use in decision making Designing the MIS Analyze decisions made and the decision system including whether the decisions are being made at the correct level, by the correct persons, etc. Analyze the information requirements of the various functions/managers Aggregate the decisions, and seek to reduce redundancy and increase effectiveness Design information processing system Implement the system Total Quality Management, Six Sigma, and Reengineering Total Quality Management (TQM): A philosophy of management that is driven by customer needs and expectations and focuses on continual improvement in work processes. Six Sigma: A philosophy and measurement process that attempts to design in quality as a product is being made. A document that explains the business founders vision and describes the strategy operations of that business Reengineering: A radical redesign of all or part of an organization’s work processes to improve productivity and financial performance in creating value to the customer. Total Quality Management: The Essence Do it right the first time Be customer-oriented Build teamwork and empowerment Make continuous improvement a way of life via Improved and more consistent product and service quality Faster cycle times as in product development, order processing, etc. Greater flexibility (faster response to changing customer demand,changes in technology, etc. Lower costs and less waste via eliminating needless steps, scrap, rework, and none value-adding activities, etc. Deming’s 14 Points to Quality Create a consistency of purpose to innovate; put resources into research and education, maintaining equipment and new production aids. Learn a new philosophy of quality to improve every system. Require statistical evidence of process control. Require statistical evidence of control in purchasing, and deal with fewer suppliers. Use statistical methods to insolate the sources of trouble Deming’s 14 Points (Con.) Institute modern on-the-job training. Drive out fear and instill learning. Break down barriers between departments. Eliminate numerical goals and slogans. Constantly revamp work methods. Institute massive training for employees in statistical methods. Retrain people in new skills. Create a structure that pushes everyday on the prior points. Six Sigma 12-Process Steps Select the critical-to-quality characteristics Define the required performance standards Validate the measurement system, methods & procedures Establish the current process capability Define upper and lower performance limits Identify sources of variation Screen potential causes of variation to identify the vital few variables needing control Discover variation relationship for the vital variables Establish operating tolerances on each of the vital variables Validate the measurement system’s ability to produce repeatable data Determine the capability of the process to control the vital variables Implement statistical process control on the vital variables Value Chain Management Value: The performance characteristics, features, and attributes, or any other aspects of goods and services for which customers are willing to give up resources. Value Chain: The entire series of organizational work activities that add value at each step beginning with the processing of raw materials and ending with a finished product in the hands of the end users. Value Chain Management “The most cited benefits of value chain management were improved customer service, cost savings, and accelerated delivery times.” Value Chain Management Value chain management is a method of improving the process of creating and transferring documents by automating the flow of information. Supply chain management is the management of the facilities, functions, and activities involved in producing and delivering a product or service from suppliers to customers. Value Chain Management Requirements: Coordination and collaborations Technology investment Organizational processes (The way organizational work is done.) Leadership Employees/human resources • Flexibility Organizational culture and attitudes Supply-Chain Management The strategic management of distribution channels and the processes that support them. Logistics management: Getting goods from their raw material state, through the production, inventory and transportation processes, into the hands of the consumer. Of special focus today is the use of technology, like the internet, to increase personalization and high-quality customer service. Value Chain Management Barriers Organizational barriers • Refusal/reluctance to share information, unwillingness to accept change, security issues Cultural barriers • Especially trust (too much or too little) and control People • Employees must be committed to make it work, and be flexible. Required capabilities • Extreme coordination and collaboration, the ability to configure products to satisfy customers and suppliers, the ability to educated internal and external partners. Scheduling Tools Gantt Chart: A planning tool that shows in bar graph form when tasks are supposed to be done (or cost) and compares that with the actual progress on each. PERT Network Analysis: A flowchart-like diagram that depicts the sequence of activities needed to complete a project and the time or costs associated with each activity. Critical Path:The longest sequence of activities in a PERT network.