Operation Management: Planning, Coordinating, and Controlling Resources for Business Success
Operation Management: The Business Function
Operation Management is the business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company. It is a core function of every organization and transforms inputs into outputs.
Inputs and Outputs
Inputs are resources such as:
- People
- Facilities
- Processes
- Material
- Technology
- Information
Outputs are finished goods and services.
OM’s Transformation Role
OM’s transformation role is to:
- Add value: Increase product value at each stage. Value added is the net increase between output product value and input material value.
- Provide an efficient transformation: Perform activities well and at the lowest possible cost.
Services vs. Manufacturers
Services
- Intangible product
- Cannot be inventoried
- High customer contact
- Short response time
- Labor intensive
Manufacturers
- Physical product
- Can be inventoried
- Low customer contact
- Longer response time
- Capital intensive
Strategic and Tactical Decisions
Strategic Decisions
- Set the direction for the entire company
- Broad in scope and long-term in nature
- Less frequent
Tactical Decisions
- Focus on specific day-to-day issues
- Resource needs, schedules, and quantities to produce
- More frequent
History of Operation Management
Late 1700’s Industrial Revolution: Machine to Human.
Early 1900’s Scientific Management: Analysis and Measurement; assembly lines and mass production.
1930 to 1960’s Human Relations Movement: Humans Elements.
1940 to 1960’s Management science: Quantitative Techniques.
1960’s Computer Age: Quantitative Models and data processing Improvements.
1970’s Environmental Issues: Waste reduction, recycle, reuse.
1980’s Just In Time: High volume production with minimal inventories.
1980’s Total Quality Management: Eliminate causes of production defect.
1980’s Reengineering: Redesign processes for greater efficiency and cost reduction.
1980’s Global Competition: Complete in the global market.
1990’s Flexibility: Customization on a mass scale.
1990’s Time-based competition: Speed of delivery.
1990’s Supply Chain Management: Reduce cost of entire system.
2000’s Electronic Commerce: Use the internet for business.
2000’s Outsourcing and flattering of the world: Technology enabling outsourcing jobs virtually anywhere.
2010’s Big data Analytics: Math and statistics applied large volumes of data to gain business insights.
Key Concepts
Scientific management: Focused on improving output by redesigning jobs and determining acceptable levels of worker output.
Hawthorne studies: Created the human relations movement, which focused on giving more consideration to workers’ needs.
Human relations movement: Recognized that factors other than money can contribute to worker productivity.
Job enlargement: Workers are given a larger portion of the total task to do.
Job enrichment: Workers are given a greater role in planning.
Management science: Develops quantitative techniques to solve operations problems.
Just-in-time (JIT): Eliminates waste and continuous improvement.
Total quality management (TQM): Eliminates causes of product defects and makes quality everyone’s responsibility.
Reengineering: Redesigns processes to make them more efficient.
Flexibility: Offers a greater variety of product choices to customers.
Mass customization: Highly customize goods and services at high volumes.
Time-based competition: Develops new products and delivers them faster than competitors.
Supply chain management (SCM): Manages the flow of materials from suppliers to customers to reduce cost and increase responsiveness.
Global marketplace: Focuses on customers, suppliers, and competitors from a global perspective.
Sustainability: Reduces waste, recycles, and reuses products and parts.
Electronic commerce: Business transactions conducted over the internet.
Outsourcing: Obtaining goods or services from an outside provider.
Big data analytics: Applies mathematics and statistics to large volumes of data to gain business insights.
OM’s Diverse Organizational Function
- Manages the transformation process
- Has many faces and names, such as:
- V. P. Operations
- Director of Supply Chains
- Manufacturing Manager
- Plant Manager
- Quality Specialists
- Provides information to all business functions