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INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Decision Making

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Production and Operations Management ­MGT613
VU
Lesson 02
INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT
RECAP OF 1ST Lecture
Course Content, Midterm and Final Exam
Organization Definition
Finance, Marketing and Operations
Productive systems, Production and Service Systems
Operations Management (The management of systems or processes that create goods and/or
provide services)
Operation Function ( Consists of all activities directly related to producing goods or providing
services)
Manufacturing and Service Definitions
Manufacturing is the transformation of raw materials into finished goods for sale, or intermediate
processes involving the production or finishing of semi-manufactures.
It is a large branch of industry and of secondary production. Some industries, like semiconductor
and steel manufacturer's use the term fabrication.
Service is defined as either as
Services are deeds, processes, and performances.
OR
A service is a time-perishable, intangible experience performed for a customer acting in the role of a
co-producer
Definition of Service Firms
Service enterprises are organizations that facilitate the production and distribution of goods, support
other firms in meeting their goals, and add value to our personal lives.
Role of Services in an Economy
Production and Services Growth in Pakistan
Can be attributed to the following sectors
Private
Public
Public Private
Government
Key Areas of Responsibility for an Operations Manager
Operations Managers job responsibility includes but is not limited to:
Forecasting
Capacity planning
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Production and Operations Management ­MGT613
VU
Scheduling
Inventory Management
Quality Assurance and Control
Motivating employees
Deciding where to locate facilities
Key Decision Areas for Operations Managers 5W2H Approach
What : What resources/what amounts
Why: The work is needed to be done
When: Needed/ scheduled/ordered
Where: Work to be done
How much: Quantity to be produced or served,
How: Designed/capacity planning
Who: To do the work
Decision Making
Operations Manager spends most of their routine hours in making decisions under certainty or
uncertainty. The various tools available to an Operations Manager include
1. Models
2. Quantitative approaches
3. Analysis of trade-offs
4. Systems approach
Applications of Models in Operations Management
Models Are Beneficial and effective to an Operations Manager primarily because of the following
reasons
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
Historical Development of OM
JIT and TQC
Manufacturing Strategy Paradigm
Service Quality and Productivity
Total Quality Management and Quality Certification
Historical Development of OM (cont'd)
Business Process Reengineering
Supply Chain Management
Electronic Commerce
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Production and Operations Management ­MGT613
VU
Current Trends in Business
Trends in Business in general and Operations Management which have shaped the industry and the
technological support to the industry include the following:-
1. The Internet, e-commerce, e-business
2. Management technology
3. Globalization
4. Management of supply chains
5. Agility
Production and Operations Management as Nucleus in the Organizations
Operations occupy the central figure in any service or manufacturing organization. A small decision as
it may seem can serious effect the workings and performance output in other units.
Industrial
Engineering
Maintenance
Distribution
Public
Purchasing
Operations
Relations
Legal
Personnel
Accounting
MIS
Current Issues in OM
The recent wave of telecom sector infrastructure consolidation and deregulation has led to a lot of
foreign investors aggressively seeking new Pakistani partners. With the aid of operation management
studies we can foresee the following current issues in Pakistan . These issues have already been
addressed in Pakistan as well as in other countries.
1.
Effectively consolidating the operations resulting from mergers
2.
Developing flexible supply chains to enable mass customization of products and services
3.
Managing global supplier, production and distribution networks
4.
Increased "commoditization" of suppliers
5.
Current Issues in OM (cont'd)
6.
Achieving the "Service Factory"
7.
Enhancing value added services
8.
Making efficient use of Internet technology
9.
Achieving good service from service firms
What is a Production and Productive System?
A productive system is defined as a user of resources to transform inputs into some desired outputs
(products as well as services) where as production system refers specifically to only desired output in
the form of products or manufactured goods.
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Production and Operations Management ­MGT613
VU
It is important to understand that productive system reflects both production as well as services systems.
We also need to understand the important transformations through which a raw material is converted a
value added end product or service.
Physical--manufacturing
Location--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications
Our discussion throughout the semester would focus on what is a Service and what is a Good? In our
course of discussion, we will collect numerous examples to better understand that Workers working for
creation of a product, manufacturing units are simultaneously working to create a service? So the
statement that Services never include goods and goods never include services can never be true.
Production of Goods vs. Delivery of Services
·
Production of goods ­ tangible output
·
Delivery of services ­ an action and reaction between the provider /deliverer of services and the
demander of services, bank teller, hair stylist.
·
Service job categories
­  Government
­  Wholesale/retail
­  Financial services
­  Healthcare
­  Personal services
­  Business services
­  Education
Percent Service Employment for Selected Nations
Percent Service Employment for Selected Nations (Source not Authenticated)
Country
1980
1987
1993
2000
United States
67.1
71.0
74.3
74.2
Canada
67.2
70.8
74.8
74.1
Pakistan
13.3
16.0
18.0
23.9
Japan
54.5
58.8
59.9
72.7
France
56.9
63.6
66.4
70.8
Italy
48.7
57.7
60.2
62.8
Brazil
46.2
50.0
51.9
56.5
China
13.1
17.8
21.2
40.6
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Production and Operations Management ­MGT613
VU
Stages of Economic Development in Pakistan
Pre-
Use of
Standard
Society
dominant
human
Unit of
of living
activity
labor
social life
measure
Structure
Technology
Pre-
Agriculture
Raw
Extended
Survival
Routine
Simple
Industrial
Mining (
muscle
household
Traditional
hand tools
( 1947 to
coal. Salt)
power
( Joint
Authoritative
1960)l
Families)
Industrial
Goods
Machine
Individual
Quantity
Bureaucratic
Machines
( 1960 ­
production
tending
of goods
Hierarchical
todate)
Inter-
Information
Post-
Services
Artistic
Community
Quality of
dependent
industrial
Creative
life in
Global
( Future)
Intellectual
terms of
health,
education,
recreation
Source of Service Sector Growth
Pakistan is slowly but surely facing a change in its demographics, economics and more important social
norms. This shift has often proven to be the source of service sector growth.
Innovation
Push
and
Pull
theory
e.g.
Cash
Management
Services
derived
from
products
e.g.
CD/Automobile/Video
Rental
Information
driven
services
like
finance
brokerage
services.
Social
Trends
Aging of the population
Increase in Life expectancy
Two-income families, both the males and females of the family are working
Growth in number of single people.
Home as sanctuary
Functions with in an Organization
The Operations function consists of all activities that are directly related to production of a good or
service.
Operations function exist in services like healthcare, Police, Traffic, transportation, consultancy,
food handling, restaurants etc.
Operations function forms the core of all businesses.
Operations and Marketing
Value addition refers to conversion of raw materials to finished goods or services.
Value added often refers to the difference between the cost of the raw material and the price of
the finished good.
The revenues from selling goods is used in betterment of existing product or service or R &D,
investment in new facilities and equipments
Weeding out or eliminating non value adding operations. E.g. storage of goods which have been
produced ahead of scheduled production, increases storage and inventory costs. reducing
storage cost would reduce transformation cost and thus increase value addition
Marketing relates to selling of a good or service of the organization through advertising and
pricing decisions.
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Production and Operations Management ­MGT613
VU
Marketing department assesses the customer's needs and communicate it to the operations
people on short term and design people on the long term basis.
Operations people need information about demand over a short range in order to purchase raw
materials or manage inventory or schedule production plan where as the design people need
information to redesign or simply design new products or services.
Marketing provides valuable information about the competitors customers needs and
communicate it to the operations people on short term and design people on the long term basis.
Finance
The finance function focuses on activities that relate to securing resources at favorable prices
and then allocating these resources through out the organization.
Finance and Operation Personnel exchange information and expertise in the following way.
Budgets
Economic analysis of investment proposals
Provision of funds
Historical Evolution of Operations Management
Industrial revolution (1770's)
Scientific management (1911)
o  Mass production
o  Interchangeable parts
o  Division of labor
Human relations movement (1920-60)
Decision models (1915, 1960-70's)
Influence of Japanese manufacturers
Simple Product Supply Chain
Supply Chain: A sequence of activities and organizations involved in producing and delivering a good
or service. Let's apply the same concept to what we have on our breakfast table every morning, a simple
loaf of bread.
Suppliers'
Direct
Final
Distributor
Producer
Suppliers
Suppliers
Consumer
Current Issues in OM
An operations manager needs to prepare himself or herself for the following issues in the years to
come whether its Pakistan or outside Pakistan.
Effectively consolidating the operations resulting from mergers
Developing flexible supply chains to enable mass customization of products and services
Managing global supplier, production and distribution networks
Increased "commoditization" of suppliers
Current Issues in OM (cont'd)
Achieving the "Service Factory"
Enhancing value added services
Making efficient use of Internet technology
Achieving good service from service firms
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Table of Contents:
  1. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT
  2. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Decision Making
  3. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Strategy
  4. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Service Delivery System
  5. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Productivity
  6. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:The Decision Process
  7. INTRODUCTION TO PRODUCTION AND OPERATIONS MANAGEMENT:Demand Management
  8. Roadmap to the Lecture:Fundamental Types of Forecasts, Finer Classification of Forecasts
  9. Time Series Forecasts:Techniques for Averaging, Simple Moving Average Solution
  10. The formula for the moving average is:Exponential Smoothing Model, Common Nonlinear Trends
  11. The formula for the moving average is:Major factors in design strategy
  12. The formula for the moving average is:Standardization, Mass Customization
  13. The formula for the moving average is:DESIGN STRATEGIES
  14. The formula for the moving average is:Measuring Reliability, AVAILABILITY
  15. The formula for the moving average is:Learning Objectives, Capacity Planning
  16. The formula for the moving average is:Efficiency and Utilization, Evaluating Alternatives
  17. The formula for the moving average is:Evaluating Alternatives, Financial Analysis
  18. PROCESS SELECTION:Types of Operation, Intermittent Processing
  19. PROCESS SELECTION:Basic Layout Types, Advantages of Product Layout
  20. PROCESS SELECTION:Cellular Layouts, Facilities Layouts, Importance of Layout Decisions
  21. DESIGN OF WORK SYSTEMS:Job Design, Specialization, Methods Analysis
  22. LOCATION PLANNING AND ANALYSIS:MANAGING GLOBAL OPERATIONS, Regional Factors
  23. MANAGEMENT OF QUALITY:Dimensions of Quality, Examples of Service Quality
  24. SERVICE QUALITY:Moments of Truth, Perceived Service Quality, Service Gap Analysis
  25. TOTAL QUALITY MANAGEMENT:Determinants of Quality, Responsibility for Quality
  26. TQM QUALITY:Six Sigma Team, PROCESS IMPROVEMENT
  27. QUALITY CONTROL & QUALITY ASSURANCE:INSPECTION, Control Chart
  28. ACCEPTANCE SAMPLING:CHOOSING A PLAN, CONSUMER’S AND PRODUCER’S RISK
  29. AGGREGATE PLANNING:Demand and Capacity Options
  30. AGGREGATE PLANNING:Aggregate Planning Relationships, Master Scheduling
  31. INVENTORY MANAGEMENT:Objective of Inventory Control, Inventory Counting Systems
  32. INVENTORY MANAGEMENT:ABC Classification System, Cycle Counting
  33. INVENTORY MANAGEMENT:Economic Production Quantity Assumptions
  34. INVENTORY MANAGEMENT:Independent and Dependent Demand
  35. INVENTORY MANAGEMENT:Capacity Planning, Manufacturing Resource Planning
  36. JUST IN TIME PRODUCTION SYSTEMS:Organizational and Operational Strategies
  37. JUST IN TIME PRODUCTION SYSTEMS:Operational Benefits, Kanban Formula
  38. JUST IN TIME PRODUCTION SYSTEMS:Secondary Goals, Tiered Supplier Network
  39. SUPPLY CHAIN MANAGEMENT:Logistics, Distribution Requirements Planning
  40. SUPPLY CHAIN MANAGEMENT:Supply Chain Benefits and Drawbacks
  41. SCHEDULING:High-Volume Systems, Load Chart, Hungarian Method
  42. SEQUENCING:Assumptions to Priority Rules, Scheduling Service Operations
  43. PROJECT MANAGEMENT:Project Life Cycle, Work Breakdown Structure
  44. PROJECT MANAGEMENT:Computing Algorithm, Project Crashing, Risk Management
  45. Waiting Lines:Queuing Analysis, System Characteristics, Priority Model