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1. Introduction to
Production & Operations
Management
Prof. Szuder Andrei Ph.D
szuder@ait.asia
School of Engineering and Technology
Asian Institute of Technology
1
Textbook
Lecture notes
References
Lee.J. Krajewski ; Larry P. Ritzman Operations
management Strategy and Analysis-Prentice
Hal. 2002
S Anil Kumar;N Suresh-Operations ManagementNew Age International Publisher.2009
W. Hopp, and M. Spearman: Factory Physics:
Foundations of Manufacturing Management,
Second Edition, McGraw-Hill, 2001
S. Nahmias: Production and Operations Analysis,
2nd edition, Irwin, 1993.
3
Grading System:
The final grade will be computed according to the
following weight distribution:
Midsem Exam 30%
Final Exam 40%
Assignments/Projects (30%)
The examinations are open book.
4
Lecture Outline
What is OM?
Production
Creating goods and services
Operations Management
TIME
COST
QUALITY
Operations:
Value-added Process,
Transformation Process
Value Added
INPUTS
Materials
Energy
Technology
Labor skills
Informations
Organization
Measurement
Transformation /
Conversion process
OUTPUTS
Goods
Services
Feedback
Feedback
Feedback
Control
10
Milestones of OM Development
Industrial Revolution
Scientific Management
Human Relations Movement
Management Science
Computer Age
Just-In-Time Systems
Total Quality Management (TQM)
Reengineering
Flexibility
Time-based Competition
Supply Chain Management
Global Competition
Environmental Issues
Electronic Commerce
Century
Late 1700s
Early 1900s
1930s to 1960s
Mid-1900s
1970s
1980s
1980s
1980s
1990s
1990s
1990s
1990s
1990s
Late 1990s Early 21st
Significant Events in OM
Figure 1.3
Industrial Revolution
(late 1700s)
Pre-Industrial Revolution
Craft production - System in which highly skilled workers use simple,
flexible tools to produce small quantities of customized goods
Some key elements of the industrial revolution
Operations management did not begin until the Industrial Revolution
in the 1700s
Prior to that time only craft production
Began in England in the 1770s. The revolution first took hold in
textile mills, grain mills, metalworking, and machine-making facilities
Division of labor - Adam Smith, 1776
Substituted machine power for labor (James Watts steam engine,
), 1780s
Interchangeable Parts - Eli Whitney, 1792
Management theory and practice did not advance appreciably
during this period
14
Eli Whitney
Born 1765; died 1825
In 1798, received government
contract to make 10,000
muskets
Showed that machine tools
could make standardized part
to exact specifications
Musket parts could be used in
any musket
15
Eli Whitney
Whitney's defenders have
claimed that he invented the
American system of
manufacturing-- the
combination of power
machinery, interchangeable
parts, and division of labor
that would underlie the
nation's subsequent industrial
revolution.
Division of Labor
Industrial Revolution
(1800s)
18
19
Industrial Revolution
(1800s)
Scientific Management
In the early 1900s F.W. Taylor approached the management of work
as a science.
Based on observation, measurement, and analysis, he identified the
best method for performing each job.
Separated planning from doing
Managements job was to discover workers physical limits through
measurement, analysis & observation
The methods were standardized for all workers, and economic
incentives were established to encourage workers to follow the
standards.
Emphasis was on maximizing output
Major contributors:
Fredrick Taylor: stopwatch time studies
Henry Ford: moving assembly line
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
22
Frederick W. Taylor
Management Should Take More Responsibility
for
23
24
25
Motion Studies:
Frank & Lillian Gilbreth
Time Study
Motion Study
Breaking each task into its separate
motions and then eliminating those that ar
e unnecessary or repetitive.
26
Therbligs
Therbligs: The Keys to
Simplifying Work
Therbligs comprise a
system for analyzing the
motions involved in
performing a task. The
identification of individual
motions, as well as
moments of delay in the
process, was designed to
find unnecessary or
inefficient motions and to
utilize or eliminate even
split-seconds of wasted time.
Frank and Lillian Gilbreth
invented and refined this
system, roughly between
1908 - 1924.
27
Ergonomics
28
Henry Ford
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
Refer to
http://www.lii.net/deming.ht
ml
30
31
Development in 1980s
Just-In-Time (JIT):
Techniques designed to achieve high-volume
production using coordinated material flows,
continuous improvement, & elimination of waste.
Lean system
Total Quality Management (TQM):
Techniques designed to achieve high levels of
product quality through shared responsibility & by
eliminating the root causes of product defects
Business Process Reengineering:
Clean sheet redesign of work processes to increase
efficiency, improve quality & reduce costs
Time-based competition:
Developing new product designs & delivering
customer orders more quickly than competitors
Environmental issues:
Pressure from consumers & regulators to reduce,
reuse & recycle solid wastes & discharges to air &
water
Electronic Commerce
(since late 1990s)
Internet & related technologies enable new methods of
business transactions:
E-retailing creates a new outlet for selling goods &
services with global access and 24-7 availability.
B2C.
Internet provides a cheap network for coordinating
supply chain management information. B2B
Developing influence of broadband & wireless
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Figure 1.1
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Processes and
operations
1
3
5
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Processes and
operations
1
3
5
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Processes and
operations
1
Outputs
Services
5
Goods
Internal and
external customers
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Fedback
Processes and
operations
1
3
4
Fedback
Outputs
Services
5
Value Added
Goods
Fedback
Control
Input-Transformation-Output Relationships
for Typical Systems
Primary
Transformation
Functions
Typical Desired
Output
System
Primary
Inputs
Hospital
Patients
Health care
Healthy individuals
Restaurant
Hungry
Customer
Satisfied customers
Automobile
factory
Sheet steel,
engine parts
Tools, equipment,
workers
High-quality cars
Collage or
university
High school
graduates
Teachers, books,
Classrooms
Educated individuals
Department
store
Shoppers
Displays, stocks of
goods, sales clerks
Attract shoppers,
promote products, fill
orders
Sales to satisfied
customers
Distribution
Center
Stock keeping
units (SKUs)
Storage and
redistribution
Fast delivery,
availability of SKUs
Resources
46
Nested Processes
Processes can be broken down into sub processes, which can in
turn be broken down into still more sub processes. We refer to this
concept of a process nested process
One person or one department may be unable to do all within a
process. parts of the process, or different segments in the process
may require different skills.
Some parts of the process may be standardized for all customers,
making high-volume operations possible.
Other parts of the process may be customized, requiring processes
best suited to flexible, low-volume operations.
Operations
Retail
Products
Wholesale
Cash Management
Loan operations
Trading operations
Others
Distribution
Compliance
Finance
Human resources
Auto Finance
Cards
Mortgages
Others
Trading
Loan administration
Leasing
Others
ATM support
Customer transactions
Service quality
Others
Credit applications
Manage retail products
Originate lease portfolio
Others
Fund management
Market making spot
Dealer support
Others
Maintain cards
Research problems
Site analysis
Others
Process deposits
Cash checks
Safe deposit boxes
Others
Loan documentation
Review credit standing
Obtain manager approval
Others
Prepare reports
Attend meetings
Input funds deals
Others
Figure 1.2
50
Figure 1.3
Figure 1.3
Skill Areas
Quantitative methods
Organizational behavior
General management
Information systems
Economics
International business
Business ethics
and law
Organizational Charts
Commercial Bank
Operations
Finance
Marketing
Teller Scheduling
Check Clearing
Collection
Transaction proce
ssing
Facilities design/la
yout
Vault operations
Maintenance
Security
Investments
Security
Real estate
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Accounting
Auditing
Trust Department
Organizational Charts
Airline
Operations
Ground support equipm
ent
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
Marketing
Traffic administrati
on
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
Organizational Charts
Manufacturing
Operations
Finance/ accounting
Marketing
Facilities
Disbursements/ credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Sales promotion
Advertising
Sales
Market research
Construction; maintenance
Design
Industrial engineering
Process analysis
Figure 1.1(C)
Sales
Cost of Goods
Gross Margin
Finance Costs
Subtotal
Taxes at 25%
Contribution
Marketing
Option
Finance/
Accounting
Option
OM
Option
Current
Increase
Sales
Revenue 50%
Reduce
Finance
Costs 50%
Reduce
Production
Costs 20%
$100,000
80,000
20,000
6,000
14,000
3,500
$ 10,500
$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
$100,000
64,000
36,000
6,000
30,000
7,500
$ 22,500