OPMAN PART IV-Finals

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Topics:

1. Operations Management An Overview

2. Historical Development
3. Scope of Operations Management
4. Types of Operations
5. Clients view of the business world
6. Trade Off
7. Matching Demad with Supply
6. Total Quality Management

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 Operations
Management is:

The business function responsible

for planning, coordinating, and
controlling the resources needed to
produce products and services for a
company

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Typical Organization Chart

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 •OM Transforms inputs to outputs
What is Role ofINPUTS are resources such as
• People, Material, and
OM? Money
OUTPUTS are goods and services
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OM’s Transformation Process

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 Historical Development of OM

• Industrial revolution Late

1700s
• Scientific management Early 1900s
• Human relations movement 1930s-60s
• Management science 1940s-60s
• Computer age 1960s
• Environmental Issues 1970s
• JIT & TQM*
1980s

*JIT= Just in Time, TQM= Total Quality Management

 • Reengineering 1990s
• Global competition 1980s
• Flexibility 1990s
• Time-Based Competition 1990s
• Supply chain Management 1990s
Historical
• Electronic Commerce 2000s
Development • Outsourcing & flattening of world 2000s

For long-run success, companies must place much

importance on their operations

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 • To add value
– Increase product value at
each stage
– Value added is the net
OM’s increase between output
product value and input
Transformatio material value
n Role • Provide an efficient
transformation
– Efficiency – means performing
activities well for least possible
cost

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Operations Manager in
Practice
• OM has the most diverse organizational
function
• Manages the transformation process
• OM has many faces and names such as;
– V. P. operations, Director of supply
chains, Manufacturing manager
– Plant manger, Quality specialists, etc.
• All business functions need information
from OM in order to perform their tasks

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Scope of Operations
Management
Operations Management includes:
– Forecasting
– Capacity planning
– Scheduling
– Managing inventories
– Assuring quality
– Motivating employees
– Deciding where to locate
facilities
– Supply chain management
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 Types of Operations
Table 1.4
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
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Client’s View of the Business
World
Supply-products or services a business
offers to its customers.
Demand- set of products and services
customer wants
Utility- measure of the strength of
customer preferences for a given
product or service. Customer
buy the product / service that
maximizes their utility
Consumption Utility- measure of how
much you like a product or service,
ignoring the effects of price and of the
inconvenience of obtaining the
product service. (attributes of the
products)
Client’s View of the Business
World
Subcomponents of Consumption
Utility:
(1)Performance- captures how
much an average consumer
desires a product or service
(2)Fit- captures how well the
product or service matches with
unique characteristics of a given
consumer
Client’s View of the Business
World

Heterogenous Preferences– not all consumers

have the same utility function
Inconvenience- reduction in the utility that results
from the efforts of obtaining the product and service.

Transaction Costs- another term used for the

inconvenience of obtaining a product service

Location- the place where a consumer can obtain a

product or service.

Timing- amount of time that passes between the

consumer ordering a product or service and the
consumer obtaining the product or service.
Activity: Products and
Services

A. Food and Hospitality

1. Jollibee
2. Subway
3. Starbucks

B. Bags and Apparels

1. MSE
2. Parisian Bags
3. Gucci

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“companies cannot
be good at
everything”

Strategic Trade-Offs

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Strategic Trade
Offs
Capabilities- dimensions of customers utility
function a firm is able to satisfy.
Trade Offs- the need to sacrifice one
capability in order to increase another one.

Market Segments- a set of customers who

have similar utility functions.

Pareto Dominated- a firm’s product or

service is inferior to one or multiple
competitors on all dimensions of the customer
utility function.

Efficient Frontier- set of firms that are not

Pareto dominated.
Inefficiency- the gap between a firm and
the efficient frontier
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 Three System Inhibitors:
Waste - consumption of inputs and resources
that do not add value to the customer ( costly)
e.g. Triple wraps of sandwich during take out

Overcomi Variability- predictable and unpredictable

changes in the demand or the supply process
ng (Demand variability- customer arrivals,
Inefficien requests, behavior)
(Variability in Supply-time to serve,
cies disruptions, defects)

Inflexibility- the inability to adjust to either

changes in the supply process or changes in
customer demand

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MATCHING SUPPLY WITH DEMAND

1. Design the operations that match the

demand of the market segment with the
supply of products and services appropriate
for the segment- “strategic trade off”

2. Utilize inputs and resources to their

fullest potential -(identify inefficiencies)

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Under Performing Operations

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 Demand Supply Mismatch
FAST FOOD RENTAL FASHION EMERGENCY
CARS RETAILER ROOM
WASTE Leftover Food Cars sitting in items that stay time spent on
the parking lot in the store all patients who
season could have
been seen in
primary care

VARIABILITY Swings in bad weather consumer sudden

customer conditions demand driven increases in
demand delaying the by fashion patient volume
arrival of cars due to the flu
season

INFLEXIBILITY Rgid Staffing Inability to long times to Inability to

levels move vehicles replenish items admit patients
across rental from overseas due to lack of
centers inpatient beds

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 Scenario: Recall the last time you were
standing in line at the grocery. Where did you
Activity 2: see signs of the system inhibitors?
Signs of System Waste:
Inhibitors Variability:
Inflexibility:
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 OM Across the
Organization
 Marketing is not fully able to meet
customer needs if they do not
understand what operations can produce
 Finance cannot judge the need for
capital investments if they do not
understand operations concepts and
needs
 Information systems enables the
information flow throughout the
organization
 Human resources must understand job
requirements and worker skills
 Accounting needs to consider inventory
management, capacity information, and
labor standards
 Manufacturing-
tangible

Conformance/performan
ce
 Reliability
 Feature
 Durability
 Serviceability
 Perceived Quality
Difference Between
Manufacturing &
Service Organization
 Service – intangible
Difference Between  Courtesy/friendliness of staff
Manufacturing and Service  Promptness/Timeliness
Organization
 Atmosphere
 Time
 Consistency
Similarities for
Service/Manufactur
ers

• Both use technology

• Both have quality, productivity,
& response issues
• Both must forecast demand
• Both can have capacity,
layout, and location issues
• Both have customers,
suppliers, scheduling and
staffing issues
 Service jobs are often less structured than
manufacturing jobs

Customer contact is higher

Challenges Worker skill levels are lower

of Services hire many low-skill, entry-level

workers
Managing
Services Employee turnover is higher

Input variability is higher

Service performance can be affected by

worker’s personal factors
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Comparison
Manufacturing
Organization
• Conformance to
Service Organization
Specification
• Tangible Factors
• Performance
• Consistency
• Reliability
• Responsiveness to
• Features
customer’s need
• Durability
• Courtesy/Friendliness
• Serviceability
• Timeliness/promptness
• Atmosphere
• Time
What is Quality?

The definition of quality depends on the

role of the people defining it.
Difficult to define one’s quality
standards in precise terms.
• More common definition of quality:
• Conformance to specification
• Fitness for use
• Value for price paid
• Support services
• Psychological criteria
Quality in Products
Manufactured products have several
quality dimensions that includes:
1. Performance – a product’s primary
operating characteristics.
2. Features – the “ bells and whistles” of a
product.
3. Reliability – the probability of a product’s
surviving over a specified period of time
under stated conditions of use.
Quality in Products cont.
4. Conformance - the degree
to which physical and
performance characteristics of a
product match pre –established
standards.
5. Durability – the amount of
use that one gets from a product
before it physically deteriorates
or until replacement is
preferable.
 Quality in Products cont.
6. Serviceability – the ability to repair a product
quickly and easily.
7. Aesthetics – how a product looks, feels,
sounds, tastes or smells.
8. Perceived Quality – subjective assessment
resulting from image, advertising or brand
names.
 Quality control in manufacturing is usually based on
conformance, specifically, conformance to specifications.

Specifications are targets and tolerances determined by

designers of products and services.
Quality in
Products Targets are the ideal values for which production strives.

Tolerances are acceptable deviations from these ideal values.

Quality in Services
Service can be defined as “ any primary or
complementary activity that does not directly
produce a physical product – that is the non
goods part of the transaction between buyer
( customer ) and seller ( provider ).
Hotel and restaurant, health, legal, engineering and
other professional services; educational institutions;
financial services ; retailers; transportation and public
utilities.
 Quality in Services cont.

The most important dimensions of service

quality include the following:
 Time : how much time must a customer
wait ?
 Timeliness : Will a service be performed
when promised ?
 Completeness : Are all items in the order
included ?
 Quality in
Services cont.

 Courtesy : Do frontline employees

greet each customer cheerfully ?
 Consistency : Are services delivered
in the same passion for every
customer and every time for the
same customer ?
 Accessibility and convenience : Is
the service easy to obtain ?
 Quality in Services cont.
 Accuracy : Is the service performed right
the first time ?
 Responsiveness : Can service personnel
react quickly and resolve
unexpected problems ?
 Service sector growing to 50-
80% of non-farm jobs
Global competitiveness
Demands for higher quality
Huge technology changes
Time based competition
Work force diversity

Growth of the Service

Sector
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 All organizations make decisions and follow a
similar path
– First decisions very broad – Strategic
OM Decisions decisions
• Strategic Decisions – set the direction
for the entire company; they are broad
in scope and long-term in nature
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 OM Decisions

• Following decisions focus on

specifics - Tactical decision
– Tactical decisions: focus
on specific day-to-day issues
like resource needs,
schedules, & quantities to
produce are frequent

Note: Tactical and Strategic

decisions must align

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OM Decisions

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Understand about Process

Three key process Metrics: Inventory,

Flow Rate anf Flow Time

PROCESS METRIC: a scale of measure

of process performance and capability

INVENTORY: The number of flow units

within the process (ex. dollars in process, People
in process)
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Understand about Process

FLOW RATE: The Rate at which flow

units travel through a process
ex. dollars per week, people per month
* always remember the per unit of time

FLOW TIME: The time a flow unit spends

in a processm from strat to finish
ex. hours, minutes, days, months
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Evaluate Average Flow Rate and Flow Time

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Flow Time

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Flow rate

First Patient= 7:35 am

Last Patient= 18:10PM
Interval= 635 minutes or 10.58 hours

= # of patients/ interval
= 10 patients / 10.58 hours
=1.058 patients per hour
*what goes in must come out
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Another Activity

Case # 2
Over the course of an 8 hour day, an admin
personnel wher able to complete 24
transactions. What is the flow rate of customer
in this admin staff per hour?

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Solution

Flow rate= # of clients/hours of work

= 24 clients were served/ 8 hours
=24/8
=3

ANSWER=3 clients /hour transactions were

completed

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Case #3

From 5:00am-6:00 am four callers contact a

help desk. The Callers spend 2,5,3 and 10
minutes on calls. What is the average flow
time of a caller at this help desk?

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Solution

Solution:

= (2 +5+3+10)/4
= (20)/4

ANSWER: 5 MINUTES average flow time

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 Little’s Law- Linking Process Metrics
Together

Little Law = the Law that describes the

relationship beween three key process
metrics: inventory, flow rate and flow time

Inventory= Flow Rate x Flow Time

I= R X T

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Case # 1 on Patients at the LAB

I = 1.058 Patients x 2.126 hours

hour
= 2.12 patients average inventory

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Case #4

During a typical Friday, GOGONOUTS

serves 2,400 customers during the 10 hours
operation. A customer spends on an
average of 5 minutes in the shop. On
average,how many customers are in the
shop simultationeously?

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Solution

I=R x T
=2,400 Customers
10 hours
= 240 c/hr=4 customer per minute
= 4 customers/min
=5 min
= 4 min customer/min x 5 min
=20 customers are in shop simultaneously

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Formula

Inventory = Rate x Time

Flow Rate (R) = I (inventory)

T (Flow Time)

Flow Time (T)= I (inventory)

R (Flow Rate)

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 Models

Quantitative approaches

Operations Analysis of trade-offs

Management
Decision Systems approach
Making
Establishing priorities

Ethics
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 • What
What resources/what amounts
• When
Needed/scheduled/ordered
Keys in • Where
decision Work to be done
making • How
Designed
• Who
To do the work

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 Decision Making
System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment

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Decision Making

System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance
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 • Models
• Quantitative
Decision approaches
Making • Analysis of trade-offs
• Systems approach

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 Models

A model is an abstraction of reality.

– Physical
– Schematic
– Mathematical Tradeoffs

What are the pros and cons of models?

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 • Easy to use, less
expensive
• Require users to
organize
• Increase understanding
Models Are of the problem
Beneficial • Enable “what if”
questions
• Consistent tool for
evaluation and
standardized format
• Power of mathematics
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 Quantitative information
may be emphasized over
qualitative

Models may be incorrectly

applied and results
misinterpreted
Limitations
of Models Nonqualified users may
not comprehend the rules
on how to use the model

Use of models does not

guarantee good decisions
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 Quantitative Approaches

• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models

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 Decision on the amount of
inventory to stock
Analysis of Increased cost of holding
inventory
Trade-Offs
vs
Level of customer service

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 Pareto Phenomenon
• A few factors account for a high
percentage of the occurrence of some
event(s).
• 80/20 Rule - 80% of problems are caused
by 20% of the activities.

How do we identify the vital few?

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 • Financial statements
• Worker safety
• Product safety
• Quality
Ethical • Environment
Issues • Community
• Hiring/firing workers
• Closing facilities
• Worker’s rights

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 Today’s OM
Environment
• Customers demand better quality,
• greater speed, and lower costs
• companies implementing lean system
concepts – a total systems approach to
efficient operations
• recognized need to better manage
information using ERP and CRM systems
• increased cross-functional decision
making
 TQM
It is an integrated organizational effort
designed to improve quality at every
level.
TQM is comprehensive and integrated
way of managing any organization in
order to:
• 1. meet the needs of the
customer consistently
• 2. achieve continuous
improvement in every aspect of the
organization’s activities

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 Customer Focus Continuous Employee/people
Concepts of Improvement Empowerment

TQM
Philosophy

Use of Quality Product Design Process

Tools Management
 The Three (3)
Paradigms of
TQM
• Total - involves the entire organization,
supply chain or
product life cycle.
• Quality - a dynamic state associated
with products, services, people,
processes and environment that meets
or exceeds expectations.
• Management – the system of
managing with steps like planning,
organizing, controlling, leading
and staffing.
Quality Gurus and Their Contributions
85
 Activity 3: Operations Management
RESTAURANT CAR FASHION EMERGENCY
RENTALS RETAILER ROOM
WHAT is the choose attractive
product or service apparel

WHO are the determine sizes and

customers and what color
are the
heterogenous
needs?

HOW MUCH do we pricing: discounts

charge? at season

HOW Efficiently are not too many or too

the products or few items of a
services delivered particiular design

WHERE will the store locations

demand be
fulfilled?
WHEN will be avoid long
the demand be queing and
fullfilled check outs 86
Reminders:
• QUIZ 3 February 4,2024

• Submission of Final Requirements

February 10, 2024
*Send to [email protected]

Final Exam February 10, 2024

11:00am-3:00pm ONLY Philippine Time
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