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Operations Management
What is operations? The part of a business organization that is
responsible for producing goods or delivering services
How can we define operations management? The management of
systems and associated processes that produce goods and/or
deliver services
Process Variation
Supply Chain
Supply Chain a sequence of organizations and activities involved
in producing and delivering a good or service
Quantitative Methods
A decision making approach that frequently seeks to obtain
optimal or good solutions to a decision problem using
mathematical models of the problem
o Linear programming models
o Queuing models
o Inventory models
o Project management models
o Forecasting models
o Statistical models
o Others
Order Winners
Core Competencies, and
o Is aligned with Corporate Strategy
Agility
Agile operations
o The use of flexibility to adapt and prosper in an environment
of change
Involves the blending of
Flexibility Design, Volume, Process
Productivity
What is Productivity?
o A measure of the Output relative to the Input (recall I-P-O
chart from Chapter 1).
o Expressed as the ratio of Output to Input (i.e., Output / Input)
o Is not the same as Efficiency or Effectiveness.
Effectiveness measures whether or not you are
producing desired Output, regardless of how much Input
is consumed.
Efficiency measures how well given Input is being
utilized to generate (effective) Output the more you
Output with the given Input, the more Efficient you are.
Productivity is a measure of the rate of (effective)
Output relative to Input; how much Output did you
produce per unit of Input? The higher this rate, the more
productive you are.
You may be more Efficient than before but less
Productive than you could be.
You may be more Productive than before but less
Efficient than you could be
See Efficiency vs. Productivity Illustration handout.
Operations Management is a
Productivity/Efficiency/Effectiveness
Improvement/Maintenance tool.
Conclusion: You could Increase Efficiency but yet not be as Productive as you can
be. You could increase Productivity, but not be as Efficient as you could be. Point
C is the only point where you optimize on both Output produced and Input
consumed.
How is it used?
Tracking an operating units (DMUs) performance over
time
Judging the performance of a firm, an industry, a state, or a
country over time
Judging performance of a firm or an industry over
geographic regions (counties, cities, states, countries,
continents)
Why is it used?
Higher productivity is linked to higher standards of living
As an economy replaces manufacturing jobs with lower
productivity service jobs, it is generally more difficult to
maintain higher standards of living
Higher productivity leads to competitive advantage in the
marketplace
Pricing and profit effects
For an industry, higher relative productivity makes it less likely
that it will be supplanted by foreign industry
Forecasting Approaches
-Qualitative Forecasting
Qualitative techniques use soft forecast estimates such as:
Consumer Surveys
Sales Force Estimates
Executive Opinion
Expert Judgment (e.g., Delphi Method)
-Quantitative Forecasting (our focus hereafter)
Quantitative techniques rely on hard historical demand
data. Two families of techniques:
project behavior of historical data to the future to
make a forecast (Time Series Forecasting)