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Chemical Engineering Operation, Management and Production

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					1-1   Introduction to Operations Management




           Operations Management


                                              William J. Stevenson




                                                          8th edition
 1-2     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 reserved.
1-3   Introduction to Operations Management
1-4   Introduction to Operations Management
 1-5   Introduction to Operations Management




This strategy is based on the corporate mission, and in essence reflects how the firm
plans to use all its resources and functions (marketing, finance, and operations) to
gain competitive advantage. The operations strategy specifies how the firm will
employ its production capabilities to support its corporate strategy. (We will discuss
the extent to which operations influences corporate strategy in subsequent chapters.)
Operations management deals with the direct production resources of the firm. These
resources may be thought of as the five P’s of operations management – People,
Plants, Parts, Processes, and Planning and control systems. The people are the direct
and indirect work force, the plants include the factories or service branches where
production is carried out; the parts include the materials (or in the case of services,
the supplies) that go through the system: the process include the equipment and the
steps by which production is accomplished; and the planning and control systems are
the procedures and information used by management to operate the system.
1-6   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 . . .
 1-7   Introduction to Operations Management

  Why Study Operations Management?
You may be wounding why you need to study operation
Management. There are number of very good reasons.
1.  Operations Management activities are at the core of all
   business organizations, regardless of what business they are
   in.
2. 50% or more of all jobs are in operations management related
   areas such as customer services, quality assurance,
   production planning, and control scheduling, job design,
   inventory management, and many more.
3. Activities in all of the other areas of business organizations,
   such as finance, accounting, human resources, logistics,
   marketing, purchasing as well as other all interrelated with
   operation management activities.
4. So it is essential for these people to have basic understanding
   of operations management
5. Also you will learn how to use a range of quantitative tools that
   enhance managerial decision making
1-8   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
1-9   Introduction to Operations Management

            Business Operations Overlap
Figure 1.5



                                  Operations



           Marketing                          Finance
1-10 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
1-11 Introduction to Operations Management

                    Operations Interfaces
                           Industrial
                           Engineering
                                                   Maintenance
           Distribution




      Purchasing                                          Public
                                 Operations               Relations


            Legal
                                                    Personnel

                Accounting                   MIS
1-12 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
1-13 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
1-14 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
1-15 Introduction to Operations Management

              Manufacturing or Service?




            Tangible                         Act
1-16 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
1-17 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
1-18 Introduction to Operations Management

               Manufacturing vs Service

    Characteristic                           Manufacturing Service
     Output                                      Tangible   Intangible
     Customer contact                            Low         High
     Uniformity of input                         High        Low
     Labor content                               Low         High
     Uniformity of output                        High        Low
     Measurement of productivity                 Easy        Difficult
     Opportunity to correct                      High        Low
     quality problems
       High
1-19 Introduction to Operations Management




     The operations function
         Consists of all activities directly related to
          producing goods or providing services
1-20 Introduction to Operations Management

                     Types of Operations
Table 1.4
         Operations                          Examples
     Goods Producing        Farming, mining, construction,
                            manufacturing, power generation
     Storage/Transportation Warehousing, trucking, mail
                            service, moving, taxis, buses,
                            hotels, airlines
     Exchange               Retailing, wholesaling, banking,
                            renting, leasing, library, loans
     Entertainment          Films, radio and television,
                            concerts, recording
     Communication          Newspapers, radio and television
                            newscasts, telephone, satellites
1-21 Introduction to Operations Management



Figure 1.4
                                                 U.S. Manufacturing vs. Service Employment
     Year Mfg. Service                                            Mfg.
       45   79      21                                            Service
       50   72      28                 90
                                       80
       55   72      28
                                       70
       60   68      32       Percent   60
       65   64      36                 50
       70   64      36                 40
       75   58      42                 30
       80   44      46                 20
       85   43      57                 10
       90   35      65                  0
       95   32      68                      45     50   55   60   65   70   75   80   85   90   95   00
       00   30      70                                                  Year
1-22 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
1-23 Introduction to Operations Management

                                   Models

    A model is an abstraction of reality.

     – Physical
     – Schematic
     – Mathematical
                                             Tradeoffs



          What are the pros and cons of models?
1-24 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
1-25 Introduction to Operations Management

                         Decision Making

        System Design
         –   capacity
         –   location
         –   arrangement of departments
         –   product and service planning
         –   acquisition and placement of
             equipment
1-26 Introduction to Operations Management

                         Decision Making

        System operation
         – personnel
         – inventory
         – scheduling
         – project
           management
         – quality assurance
1-27 Introduction to Operations Management

                           Decision Making

    Models
    Quantitative approaches

    Analysis of trade-offs

    Systems approach
1-28 Introduction to Operations Management

                   Models Are Beneficial

     Easy to use, less expensive
     Require users to organize
     Systematic approach to problem solving
     Increase understanding of the problem
     Enable “what if” questions
     Specific objectives
     Consistent tool
     Power of mathematics
     Standardized format
1-29 Introduction to Operations Management

              Quantitative Approaches
    • Linear programming
    • Queuing Techniques
    • Inventory models
    • Project models
    • Statistical models
1-30 Introduction to Operations Management

                       Systems Approach

                      “The whole is greater than
                        the sum of the parts.”




                  Suboptimization
1-31 Introduction to Operations Management

                    Pareto Phenomenon

   • A few factors account for a high
     percentage of the occurrence of some
     event(s).
   • 80/20 Rule - 80% of problems are caused
     by 20% of the activities.


               How do we identify the vital few?
1-32 Introduction to Operations Management

Historical Evolution of Operations Management
Table 1.7
     Industrial revolution (1770’s)
     Scientific management (1911)
         Mass production
         Interchangeable parts

         Division of labor

     Human relations movement (1920-60)
     Decision models (1915, 1960-70’s)

     Influence of Japanese manufacturers
1-33 Introduction to Operations Management

                        Trends in Business

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

         Globalization

         Management of supply chains

         Agility
1-34 Introduction to Operations Management

           Simple Product Supply Chain
Figure 1.7


  Suppliers’         Direct                                      Final
                                      Producer   Distributor
  Suppliers         Suppliers                                  Consumer




         Supply Chain: A sequence of activities
         And organizations involved in producing
         And delivering a good or service
1-35 Introduction to Operations Management

               A Supply Chain for Bread


    Stage of Production                      Value    Value of
                                             Added    Product
    Farmer produces and harvests wheat        $0.15     $0.15
    Wheat transported to mill                 $0.08     $0.23
    Mill produces flour                       $0.15     $0.38
    Flour transported to baker                $0.08     $0.46
    Baker produces bread                      $0.54     $1.00
    Bread transported to grocery store        $0.08     $1.08
    Grocery store displays and sells bread    $0.21     $1.29
    Total Value-Added                         $1.29
1-36 Introduction to Operations Management

                  Other Important Trends
      Global Marketplace
       Markets and companies are becoming increasingly global in
       nature. The North American Free Trade Agreement
       (NAFTA) has opened borders for trade between the United
       States, Canada, and Mexico. Even more far-reaching is the
       General Agreement on Tariffs and Trade (GATT). 124
       Countries have agreed to open their economies, reduce
       tariffs and subsidies, and expand protection of intellectual
       property.
      Operations strategy
       At present various companies are recognizing the
       importance of operations strategy on the overall success of
       their business, and the necessity for relating it to their
       overall business strategy.
1-37 Introduction to Operations Management

                  Other Important Trends
     Total Quality Management
      Many firms are now adopting a total quality management
      approach to their business. In this approach organization
      involved in a never ending quest to improve the quality of
      goods and services. Key features are; a team approach,
      finding and eliminating problems, emphasis on serving the
      customer, and continuously working to improve the system.
     Flexibility
     The ability to adopt quickly to changes in volume of demand, in the
     mix of products demanded, and in product design, has become a
     major competitive strategy. In manufacturing, the term agile
     manufacturing is sometimes used to connote flexibility.
1-38 Introduction to Operations Management

                  Other Important Trends
     Technology
      Technological advances have led to a vast array of new
      products and processes. Undoubtedly the computer has had
      and will continue to have the greatest impact on business
      organizations. It has truly revolutionized the way companies
      operate. Technological advances in new materials, new
      methods, and new equipment have also made their mark on
      operations.
     Worker involvement
     Various companies are pushing the responsibility for decision
     making and problem solving to lower levels in the
     organizations. The reasons for this include recognition of the
     knowledge workers possess about the production process and
     system. A key to worker involvement is the use of teams of
     workers who solve problems and make decisions on a
     consensus basis.
1-39 Introduction to Operations Management




       Reengineering
        Some companies are taking drastic measures to improve
        their performance. The are conceptually starting from
        scratch inn redesigning their processes. Engineering focuses
        on significantly improving business processes, such as the
        steps required to fill a customer’s request or the steps
        required to bring a new product to market
       Environmental Issues.
        Pollution control and waste disposal are key issues managers must
        contend with. There is increasing emphasis on reducing waste, using less
        toxic chemicals (e.g, lawncare services shifting to environmentally
        friendly approaches) recycling, making it easier for consumers to recycle
        products (e.g., including s shipping container for returning used laser
        printer cartridges) and designing products and parts that can be reused
        (remanufacturing products such as copying machines.)
1-40 Introduction to Operations Management




       Supply Chain Management organization are
        increasing their attention to managing the supply
        chain, from suppliers and buyers of raw materials
        all the way to final customers
       Lean Production
        This new approach to production emerged in the
        1990s. It in corporates a number of the recent trends
        listed here, with an emphasis on quality flexiblity,
        time reduction, and teamwork. This has led to a
        flattening of the organizational structure, with fewer
        levels of management.

				
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