Operations Management
运营管理
云南大学商旅学院 吴奇志
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Cell Phone：0871-6770167
Email ： victorwqz@
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Announcement
Please notify me in advance if you are absent or
late, taking a French leave is not allowed.
According to the rules made by MBA office, those
who are absent one third or above from the total
classes will be barred from the final exam, no
matter what grade you get in the other 2!
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If you have any comments, please feel
free to let me know, either by email, phone
call or face-to-face talk, I’d prefer the latter
for its high efficiency. Your suggestions are
welcomed so I am open to them all the time.
Besides, I’d like you to treat me not only
like a teacher, but a friend as well. Thanks
for the POM course, for it serves as a bridge
between us.
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Performance Appraisal
Participation & Attendance：25%
Assignment & Case Study in Written Form：25%
Final Exam：50%
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Operations Management for Competitive Advantage
Richard B. Chase, Nicholas J. Aquilano, F. Robert Jacobs
Ninth Edition
McGraw-Hill
Text Book
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Main Reference Books
1 Operations Management
Jay Heizer, Barry Render / Seventh Edition / Pearson Education
2 Operations Management
William J. Stevenson / Seventh Edition / McGraw-Hill
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Guideline in Teaching This Course
¨Focus on bird’s-eye view of POM rather than a certain
specific content,
¨Focus on the managerial matter of POM rather than
methodologies and techniques,
¨Focus on the most useful segments of POM rather than a
comprehensive ones, and
¨Lecture, case study (assignment), discussion, and site
touring (speeches given by celebrities of POM) will comprise
the total activities of this course.
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How to Become A POM Expert?
¨You should have a sound mathematical sense for so many
POM problems need to be calculated,
¨You should have a good knowledge of computer science for
it is a valuable tool to tackle POM problems,
¨You should deal with the real problems by using the book
knowledge,
¨Last, not least, you should be familiar with the English
language because the newly emerged POM techniques are
mostly explained in this language.
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Operations Management
Introduction to Operations
Management
Chapter 1
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Outline
¨ WHAT IS OPERATIONS MANAGEMENT?
¨ THREE ORGANIZATIONAL FUNCTIONS
¨ WHY STUDY OM?
¨ OPERATIONS DESCISIONS
¨ WHAT OPERATIONS MANAGERS DO
¨ WHERE ARE THE OM JOBS?
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Outline - Continued
¨ THE HERITAGE OF OPERATIONS MANAGEMENT
¨ OPERATIONS IN THE SERVICE SECTOR
¨ Differences between Goods and Services
¨ Growth of Services
¨ EXCITING NEW TRENDS IN OPERATIONS MANAGEMENT
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Learning Objectives
When you complete this chapter, you should be
able to :
Identify or Define:
¨ Operations Management (OM)
¨ What operations managers do
¨ Services
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Learning Objectives - Continued
When you complete this chapter, you should be
able to :
Describe or Explain:
¨ A brief history of operations management
¨ Career opportunities in operations management
¨ The future of the discipline
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What Is Operations Management?
Production is the creation of goods and
services
Operations management is the set of
activities that creates value in the form of
goods and services by transforming inputs
into outputs
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Types of Operations
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
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Operations as a System
Transformation
(Conversion)
Process
Energy
Materials
Labor
Capital
Information
Goods or
Services
Feedback information for
control of process inputs
and process technology
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Transformations
¨ Physical--manufacturing
¨ Locational--transportation
¨ Exchange--retailing
¨ Storage--warehousing
¨ Physiological--health care
¨ Informational--telecommunications
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Food Process
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
vegetablesMetal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
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Hospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patientsHospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
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Organizational Functions
¨Essential functions:
¨ Operations –creates the product or service
¨ Marketing – generates demand, Gets customers
¨ Finance/accounting – tracks organizational
performance, pays bills, Obtains funds and Tracks
money
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Functions - Bank
Operations Finance/
Accounting
Marketing
Check
Clearing
Teller
Scheduling
Transactions
Processing
Security
Commercial Bank
© 1984-1994
T/Maker Co.
Example 1
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Organizational Charts
Commercial Bank
Operations
Teller Scheduling
Check Clearing
Transactions
processing
Facilities
design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real Estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust Department
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Functions - Airline
Operations Finance/
Accounting
Marketing
Ground
Support
Flight
Operations
Facility
Maintenance Catering
Airline
© 1984-1994 T/Maker Co.
Example 2
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Organizational Charts
Airline
Operations
Ground support
equipment
Maintenance
Ground Operations
Facility maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance &
Accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International exchange
rates
Marketing
Traffic administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
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Functions - Manufacturer
Operations Finance/
Accounting
Marketing
Production
Control
Manufacturing Quality
Control Purchasing
Manufacturing
Example 3
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Organizational Charts
Manufacturing
Operations
Facilities:
Construction:maintenance
Production & inventory control
Scheduling: materials control
Supply-chain management
Manufacturing
Tooling, fabrication,assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space, and personnel
Process analysis
Development and installation of production tools and
equipment
Finance & Accounting
Disbursements/credits
Receivables
Payables
General ledger
Funds Management
Money market
International exchange
Capital requirements
Stock issue
Bond issues and recall
Marketing
Sales
promotions
Advertising
Sales
Market
research
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Identifying
Critical Success Factors
Decisions Sample Option
Product Customized, or standardized
Quality Define customer expectations and how to achieve them
Process Facility size, technology, capacity
Location Near supplier or customer
Layout Work cells or assembly line
Human resource Specialized or enriched jobs
Supply chain Single or multiple source suppliers
Inventory When to reorder, how much to keep on hand
Schedule Stable or fluctuating productions rate
Maintenance Repair as required or preventive maintenance
Marketing
Service
Distribution
Promotion
Channels of distribution
Product positioning
(image, functions)
Finance/Accounting
Leverage
Cost of capital
Working capital
Receivables
Payables
Financial control
Lines of credit
Production/Operations
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“The manufacturing business of
tomorrow will not be run by
financial executives, marketers,
or lawyers inexperienced in
manufacturing, as so many .
companies are today.”
Peter Drucker
The Importance of OM in Tomorrow
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关注生
产环节
的管理
Quality
Control
Marketing
POM
HRM
World
WarⅡ—
1960s
1970s—
1980s 1990s
21th Century
OM Is Becoming A Critical Success
Factor in the 21th Century
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Why Study OM?
¨OM is one of three major functions
(marketing, finance, and operations) of any
organization.
¨We want (and need) to know how goods and
services are produced.
¨We want to understand what operations
managers do.
¨OM is such a costly part of an organization.
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Fisher Technologies is a small firm that merely
survives in stifling competition in a certain
field. In order to be more competitive, Fisher
Technologies needs to update its obsolete
production equipment by applying a bank loan,
so the company is making three optional plans
in term of marketing, financing and production
respectively aiming to improve profit, but which
one is the most feasible?
Case Study
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Options for Increasing
Contribution
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Ten Critical Decisions
¨ Service, product design
¨ Quality management
¨ Process, capacity design
¨ Location
¨ Layout design
¨ Human resources, job design
¨ Supply-chain management
¨ Inventory management
¨ Scheduling
¨ Maintenance
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The Critical Decisions
¨Quality management
¨ Who is responsible for quality?
¨ How do we define quality?
¨Service and product design
¨ What product or service should we offer?
¨ How should we design these products and
services?
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The Critical Decisions - Continued
¨Process and capacity design
¨ What processes will these products require and in
what order?
¨ What equipment and technology is necessary for
these processes?
¨Location
¨ Where should we put the facility
¨ On what criteria should we base this location
decision?
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The Critical Decisions - Continued
¨Layout design
¨ How should we arrange the facility?
¨ How large a facility is required?
¨Human resources and job design
¨ How do we provide a reasonable work
environment?
¨ How much can we expect our employees to
produce?
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The Critical Decisions - Continued
¨Supply chain management
¨ Should we make or buy this item?
¨ Who are our good suppliers and how many should
we have?
¨ Inventory, material requirements planning,
¨ How much inventory of each item should we have?
¨ When do we re-order?
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The Critical Decisions - Continued
¨ Intermediate, short term, and project
scheduling
¨ Is subcontracting production a good idea?
¨ Are we better off keeping people on the payroll
during slowdowns?
¨Maintenance
¨ Who is responsible for maintenance?
¨ When do we do maintenance?
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Responsibilities of Operations
Management
Products & services
Planning
– Capacity
– Location
–
– Make or buy
– Layout
– Projects
– Scheduling
Controlling
– Inventory
– Quality
Organizing
– Degree of centralization
– Subcontracting
Staffing
– Hiring/laying off
– Use of Overtime
Directing
– Incentive plans
– Issuance of work orders
– Job assignments
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Operations Interfaces with a number
of supporting functions
Public Relations
Accounting
Industrial
Engineering
Operations
Maintenance
PersonnelPurchasing
Distribution
MIS
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Where are the OM Jobs
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Where Are the OM Jobs?
¨Technology/methods
¨Facilities/space utilization
¨Strategic issues
¨Response time
¨People/team development
¨Customer service
¨Quality
¨Cost reduction
¨ Inventory reduction
¨Productivity improvement
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The Historic Evolution of
Operations Management
¨Pre-industrial revolution
Craft production: skilled workers, flexible tools, small quantities
and customized goods
Traits: production was slow and costly, no economies of scale and
thus on stimulant for production expansion.
¨Industrial revolution
A number of innovations changed the face of production:
James Watt’s steam engine (1764), James Hargreaves’ spinning
jenny (1770) and Edmund Cartwright’s power loom (1785).
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The Historic Evolution of Operations
Management - Continued
¨Scientific management
Based on observation, measurement, analysis and improvement
of work methods, and economic incentives. Until then scientific
management turned production from “ the rule of thumb” to the
“science of management”. Frederick W. Taylor and many other
pioneers contributed a lot in this stage.
¨The human relations movement
Scientific management ignored the human element which was
emphasize by a number of psychologists who introduced a series
of theories, among them Theory X, Theory Y, and Theory Z are
best known. 45
The Historic Evolution of Operations
Management - Continued
¨Decision model and management science
With the development of mathematics and due to the World War Two,
many newly invented techniques were applied for the civilian use and
warfare purpose. Especially, with the advent of personal computer this
trend was greatly improved and a new branch of management
emerged: management science which deal with the problem with
mathematical method and computer.
¨The influence of Japanese manufacturers
During 1970s to now, Japanese manufacturers developed or refined
management practices which originated from the West and greatly
increased the productivity of their operations and the quality of their
products and this influence exerts profound impact to their counterparts
in the West.
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The Heritage of Operations
Management
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Significant Events in Operations
Management
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The Heritage of
Operations Management
Division of labor (Adam Smith 1776 and Charles Babbage 1852)
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Coordinated assembly line (Ford/Sorenson/Avery 1913)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian Gilbreth 1922
Quality control (Shewhart 1924; Deming 1950)
Computer (Atanasoff 1938)
CPM/PERT (DuPont 1957)
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The Heritage of Operations
Management - Continued
Material requirements planning (Orlicky 1960)
Computer aided design (CAD 1970)
Flexible manufacturing system (FMS 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization(1992)
Internet (1995)
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Eli Whitney
¨ Born 1765; died 1825
¨ In 1798, received government
contract to make 10,000
muskets
¨ Showed that machine tools
could make standardized parts
to exact specifications
¨ Musket parts could be used in any
musket
© 1995 Corel Corp.
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Frederick W. Taylor
¨ Born 1856; died 1915
¨ Known as ‘father of scientific
management’
¨ In 1881, as chief engineer for Midvale
Steel, studied how tasks were done
¨ Began first motion & time studies
¨ Created efficiency principles
© 1995 Corel Corp.
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Taylor: Management Should Take
More Responsibility for
¨Matching employees to right job
¨Providing the proper training
¨Providing proper work methods and tools
¨Establishing legitimate incentives for work
to be accomplished
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Frank & Lillian Gilbreth
¨ Frank (1868-1924); Lillian
(1878-1972)
¨ Husband-and-wife
engineering team
¨ Further developed work
measurement methods
¨ Applied efficiency methods
to their home & 12 children!
¨ (Book & Movie: “Cheaper
by the Dozen,” book: “Bells
on Their Toes”) © 1995 Corel Corp.
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¨ Born 1863; died 1947
¨ In 1903, created Ford
Motor Company
¨ In 1913, first used
moving assembly line
to make Model T
¨ Unfinished product
moved by conveyor
past work station
¨ Paid workers very well for 1911 ($5/day!)
¨ Model T produced in1908 with 514 min. $850 each by hand
to min. $290 each in 1926 by moving assembly line .
Henry Ford
‘‘Make them
all alike!’
© 1995 Corel
Corp.
‘Any color as long
as it’s black’
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W. Edwards Deming
¨ Born 1900; died 1993
¨ Engineer & physicist
¨ Credited with teaching Japan
quality control methods in
post-WW2
¨ Used statistics to analyze
process
¨ His methods involve workers
in decisions
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Contributions From
¨Human factors
¨ Industrial engineering
¨Management science
¨Biological science
¨Physical sciences
¨ Information science
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Significant Events in OM
¨Division of labor (Smith, 1776)
¨ Standardized parts (Whitney, 1800)
¨ Scientific management (Taylor, 1881)
¨Coordinated assembly line (Ford 1913)
¨Gantt charts (Gantt, 1916)
¨Motion study (the Gilbreths, 1922)
¨Quality control (Shewhart, 1924)
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Significant Events - Continued
¨CPM/PERT (Dupont, 1957)
¨ MRP (Orlicky, 1960)
¨CAD
¨ Flexible manufacturing systems (FMS)
¨Manufacturing automation protocol (MAP)
¨Computer integrated manufacturing (CIM)
Unlike other fields of science, POM witnesses
significant changes in every 10 years.
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Operations in the Service Sector
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Service Economies
Proportion of Employment in the Service SectorProportion of Employment in the Service Sector
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Service Is a Major Job
Provider in The United State
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Jobs in the
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Organizations in Each Sector
Service Sector Example % of all
Jobs
Professional
services, education,
legal, medical
New York City PS108, Notre Dame
University, San Diego Zoo
Trade (retail,
wholesale)
Walgreen’s, Wal-Mart, Nordstroms
Utilities,
transportation
Pacific Gas & Electric, American
Airlines, Santa Fe , Roadway
Express
(Operations Management by Jay Heizer, Barry Render, 7e)
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Organizations in Each Sector
Service Sector Example % of all
Jobs
Business & Repair
Services
Snelling & Snelling, Waste
Management, Pitney-Bowes
Finance, Insurance,
Real Estate
Citicorp, American Express,
Prudential, Aetna, Trammel Crow
Food, Lodging,
Entertainment
McDonald’s, Hard Rock Café,
Motel 6, Hilton Hotels, Walt Disney
Paramount Pictures
Public
Administration
., State of Alabama, Cook
County
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Organizations in Each Sector
Manufacturing
Sector
Example % of
all
Jobs
General General Electric, Ford, . Steel,
Intel
Construction Bechtel, McDermott
Agriculture King Ranch
Mining Homestake Mining
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Organizations in Each Sector
Summary
Sector % of all Jobs
Service %
Manufacturing %
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1850 75 1900 25 50 75 2000 40 50 60 70 1970 75 80 85 90 95 2000
Percent
United States
Canada
France
Italy
Britain
Japan
W Germany
1970
2000
Services
Industry
Farming
250
200
150
100
50
0
80
%70
60
50
40
30
20
10
0
. Employment, % Share Services as a Percent of GDP . Exports of Services
In Billions of Dollars
Year 2000 data is estimated
Development of the Service Economy
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Characteristics of Goods
¨ Tangible product
¨ Consistent product
definition
¨ Production usually
separate from
consumption
¨ Can be inventoried
¨ Low customer
interaction
© 1995 Corel Corp.
69
Characteristics of Service
¨ Intangible product
¨ Produced & consumed at
same time
¨ Often unique
¨ High customer interaction
¨ Inconsistent product
definition
¨ Often knowledge-based
¨ Frequently dispersed© 1995 Corel Corp.
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Goods Versus Services
¨Can be resold
¨Can be inventoried
¨Some aspects of
quality measurable
¨Selling is distinct
from production
¨Reselling unusual
¨Difficult to inventory
¨Quality difficult to
measure
¨Selling is part of service
GoodsGoods ServiceService
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Goods Versus Services -
Continued
¨Product is
transportable
¨Site of facility
important for cost
¨Often easy to
automate
¨Revenue generated
primarily from
tangible product
¨Provider, not product
is transportable
¨Site of facility
important for
customer contact
¨Often difficult to
automate
¨Revenue generated
primarily from
intangible service.
GoodsGoods ServiceService
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Key Differences
• Customer contact
• Uniformity of input
• Labor content
• Uniformity of output
• Measurement of productivity
• Quality assurance
These differences are beginning to fade
in many cases
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Goods Contain Services / Services
Contain Goods
0 25 50 75 100255075100
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling
Percent of Product that is a Good Percent of Product that is a Service
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Steel production
Automobile fabrication
House building
Road construction
Dressmaking
Farming
Auto Repair
Appliance repair
Maid Service
Manual car wash
Teaching
Lawn mowing
Low service content
High goods content
High service content
Low goods content
Increasing
goods content
Increasing
service content
Goods-service continuum
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Changing Challenges for the
Operations Manager
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Changing Challenges for the
Operations Manager
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Situation That Operations
Face Nowadays
¨Globalization
¨Environmental Issues
Green manufacturing
¨Time-based competition
Time and motion study aiming to shorten processing time
Improving flexibility by reducing the setup time
Cutting R&D time by introducing concurrent engineering(CE)
Zero time by Agile Management and SCM
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New trends in Operations Management
¨Emphasis on POM which is a gateway to
corporate strategies
¨Business process reengineering
¨Lean production
¨Supply chain management
¨Agile management
Virtual enterprise, win-win solution
¨Mass customization
¨E-commerce
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The Purchasing Managers Index (PMI)
☆The index is like the Dow Jones Industrials Average, but
instead of rise and fall of a set of stocks, the PMI measures the
rise and fall of manufacturing in the United States.
☆The index is calculated using a set of measures of new
manufacturing orders, production volume, supplier deliveries,
inventory levels, and employment. The data are collected from a
monthly survey conducted by NAPM, the National Association of
Purchasing Management.
☆The PMI is a leading indicator of economic activity,
percent is the threshold, GDP is expanding if above it, and a PMI
below percent shows that the GDP is generally declining.
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Finally, I’d like leave a couple of
minutes for you guys to form into
several 3-to-5-person groups which
are based on individual students’
consent and each group should
contain no more than 5 students.
Let’s get started!
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