Operation management 10e heizer render chapter 01

Operations
Management
Chapter 1 –
Operations and
Productivity
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc.

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Outline
 Global Company Profile: Hard Rock
Cafe
 What Is Operations Management?
 Organizing to Produce Goods and
Services
 Why Study OM?
 What Operations Managers Do
 How This Book Is Organized
© 2008 Prentice Hall, Inc.

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Outline - Continued
 The Heritage of Operations
Management

 Operations in the Service Sector
 Differences between Goods and
Services
 Growth of Services
 Service Pay

 Exciting New Trends in Operations
Management
© 2008 Prentice Hall, Inc.

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Outline - Continued
 The Productivity Challenge
 Productivity Measurement
 Productivity Variables
 Productivity and the Service Sector

 Ethics and Social Responsibility

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Learning Objectives
When you complete this chapter
you should be able to:
1. Define operations management

2. Explain the distinction between
goods and services
3. Explain the difference between
production and productivity

© 2008 Prentice Hall, Inc.

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Learning Objectives
When you complete this chapter
you should be able to:
4. Compute single-factor
productivity
5. Compute multifactor productivity
6. Identify the critical variables in
enhancing productivity

© 2008 Prentice Hall, Inc.

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The Hard Rock Cafe
 First opened in 1971
 Now – 121 restaurants in over 40 countries

 Rock music memorabilia
 Creates value in the form of good food

and entertainment
 3,500+ custom meals per day in Orlando
 How does an item get on the menu?
 Role of the Operations Manager
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What Is Operations
Management?
Production is the creation of
goods and services
Operations management (OM)
is the set of activities that
creates value in the form of
goods and services by
transforming inputs into
outputs
© 2008 Prentice Hall, Inc.

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Organizing to Produce
Goods and Services
 Essential functions:
 Marketing – generates demand
 Production/operations – creates
the product

 Finance/accounting – tracks how
well the organization is doing, pays
bills, collects the money

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Organizational Charts
Commercial Bank
Operations

Finance

Marketing

Teller
Scheduling
Check Clearing
Collection
Transaction
processing
Facilities
design/layout
Vault operations
Maintenance
Security

Investments

Security
Real estate

Loans
Commercial
Industrial
Financial
Personal
Mortgage

Accounting
Auditing

Trust Department
Figure 1.1(A)

© 2008 Prentice Hall, Inc.

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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
© 2008 Prentice Hall, Inc.

Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange

Marketing
Traffic
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising

Figure 1.1(B)

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Organizational
Charts
Manufacturing
Operations
Facilities

Construction; maintenance

Production and inventory control
Scheduling; materials control

Quality assurance and 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

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Finance/
accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall

Marketing
Sales
promotion
Advertising
Sales
Market
research

Figure 1.1(C)
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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
© 2008 Prentice Hall, Inc.

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Options for Increasing
Contribution
Marketing
Option

Current
Sales
Cost of Goods
Gross Margin
Finance Costs
Subtotal

Taxes at 25%
Contribution

© 2008 Prentice Hall, Inc.

$100,000
– 80,000
20,000
– 6,000
14,000
– 3,500
$ 10,500

Finance/
Accounting
Option

Increase
Reduce
Sales
Finance
Revenue 50% Costs 50%
$150,000
– 120,000
30,000
– 6,000
24,000
– 6,000
$ 18,000

$100,000
– 80,000
20,000
– 3,000
17,000
– 4,250
$ 12,750

OM
Option
Reduce
Production
Costs 20%
$100,000
– 64,000
36,000
– 6,000
30,000
– 7,500
$ 22,500

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What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing

 Leading
 Controlling
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Ten Critical Decisions











Ten Decision Areas
Design of goods and services
Managing quality
Process and capacity
design
Location strategy
Layout strategy
Human resources and
job design
Supply chain
management

Inventory management
Scheduling
Maintenance

Chapter(s)
5
6, Supplement 6
7, Supplement 7
8
9
10, Supplement 10
11, Supplement 11
12, 14, 16
13, 15
17
Table 1.2

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The Critical Decisions
 Design of goods and services
 What good or service should we
offer?
 How should we design these products
and services?

 Managing quality

 How do we define quality?
 Who is responsible for quality?
Table 1.2 (cont.)
© 2008 Prentice Hall, Inc.

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The Critical Decisions
 Process and capacity design
 What process and what capacity will
these products require?
 What equipment and technology is
necessary for these processes?

 Location strategy
 Where should we put the facility?
 On what criteria should we base the
location decision?
Table 1.2 (cont.)
© 2008 Prentice Hall, Inc.

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The Critical Decisions
 Layout strategy
 How should we arrange the facility?
 How large must the facility be to meet
our plan?

 Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our
employees to produce?
Table 1.2 (cont.)
© 2008 Prentice Hall, Inc.

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The Critical Decisions
 Supply chain management
 Should we make or buy this component?
 Who are our suppliers and who can
integrate into our e-commerce program?

 Inventory, material requirements
planning, and JIT
 How much inventory of each item should
we have?
 When do we re-order?
Table 1.2 (cont.)
© 2008 Prentice Hall, Inc.

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The Critical Decisions

 Intermediate and short–term
scheduling
 Are we better off keeping people on
the payroll during slowdowns?
 Which jobs do we perform next?

 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?
Table 1.2 (cont.)
© 2008 Prentice Hall, Inc.

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Where are the OM Jobs?

© 2008 Prentice Hall, Inc.

Figure 1.2

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Where are the OM Jobs?











© 2008 Prentice Hall, Inc.

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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Significant Events in OM

Figure 1.3
© 2008 Prentice Hall, Inc.

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The Heritage of OM
 Division of labor (Adam Smith 1776;

Charles Babbage 1852)
 Standardized parts (Whitney 1800)
 Scientific Management (Taylor 1881)
 Coordinated assembly line (Ford/
Sorenson 1913)
 Gantt charts (Gantt 1916)
 Motion study (Frank and Lillian Gilbreth
1922)
 Quality control (Shewhart 1924; Deming
1950)
© 2008 Prentice Hall, Inc.

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