Download OPSM 451 Service Operations Management

Koç University
OPSM 301 Operations Management
Class 1:
Introduction: What is operations
management?
Chapter 1
Zeynep Aksin
[email protected]
What is the OPSM301 course about?
 The role of the operations function may be
defined as the design, operation, and
improvement of the production system that
creates the firm’s primary products and
services
 We will study how organisations “actually do
things”
Operations as a Competitive Weapon
 Dell Computers
Innovative Supply Chain Strategy (direct model)
 Southwest Airlines
Leader in lowfare flights, by elimination of all waste
 Zara
Can deliver new styles in 3-6 weeks (compared to 5-12
months for competitors)
 Tansas Markets (now part of Migros)
Inventory Control system cuts stock-outs to 7.2% from 19%
 Vestel Durable Goods
Distribution optimization leads to increased customer
satisfaction as well as lower costs
Supply Chain of a Typical
Original Equipment Manufacturer
Management Decisions
 Strategic (long-term) decisions
 Tactical (intermediate-term) decisions
 Operational planning and control (short-term)
decisions
A Process Management Perspective
 We all manage processes...
Information
structure
Inputs
Process
Management
Network of
Activities and Buffers
Flow units
Outputs
Goods
Services
(customers, data,
material, cash, etc.)
Labor & Capital
Resources
Process Management
 A business process is a network of
activities performed by resources that
transforms inputs into outputs…
 Process Management is a set of
managerial policies specifying how a
process should be operated over time...
Products
 Products are the desired set of process outputs
 Product Types
– Goods versus Services
 Product Attributes
–
–
–
–
Cost
Delivery response time
Variety
Quality
Inputs-Outputs

Tangible Inputs
– People
– Raw material
 Intangible Inputs
– Information
– Time
 Tangible Outputs
– Buildings
– Cars
 Intangible Outputs
– Outgoing patient (hospital)
– Delivered message (advertising company)
Transformations
 Physical--manufacturing
 Locational--transportation
 Exchange--retailing
 Storage--warehousing
 Physiological--health care
 Informational--telecommunications
All Managers are Ops Managers!
 All managers must transform inputs into outputs
 Example: Accounting Manager
– Inputs: data, information, labor
– Transformation: application of accounting principles and
knowledge
– Outputs: accounting reports, knowledge of performance, ...
 Therefore, all managers are in some sense
Operations managers
 All managers have an “operation” to run
Operations Management
Value Proposition
Operations Strategy
Operation Priorities
Cost
Quality
Delivery
Flexibility
Innovation
Service
System Design
Product/Service
 Design
Process Selection
TQM
Facility location
Facility Layout
JIT
Planning & Control
Aggregate Planning
Inventory Systems
Project Management
Scheduling
MRP
 Statistical Process
Control
Characteristics of Goods
 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction
© 1995 Corel Corp.
Characteristics of Service
© 1995 Corel Corp.
 Intangible product
 Produced & consumed
at same time
 Often unique
 High customer
interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
Goods Contain Services / Services Contain
Goods
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling
100
75
50
25
Percent of Product that is a Good
0
25
50
75
100
Percent of Product that is a Service
Development of the Service Economy
U.S. Employment, % Share
80
United States
%70
60
U.S. Exports of Services
In Billions of Dollars
Services as a Percent of GDP
Services
50
40
Industry
Canada
250
France
200
Italy
150
Britain
30
20
Farming
10
0
1850 75 1900 25 50 75 2000
100
Japan
50
W Germany
1970
2000
40 50 60 70
Percent
Year 2000 data is estimated
0
1970 75 80 85 90 95 2000
Productivity
 Measure of process improvement
 Represents output relative to input
Productivity
Units produced
= Input used
 Only through productivity increases can our
standard of living improve
Multi-Product (Total Factor) Productivity
Productivity
=
Output
Labor + material + energy + capital + miscellaneous
Example 1
 Mis Hali cleaned 65 rugs in October,
consuming the following resources:
– Labor: 520 hours at 13 YTL per hour
– Solvent: 100 liters at 5 YTL per liter
– Machine rental: 20 days at 50 YTL per day
 a. What is the labor productivity per dollar?
(0.0096 )
 b. What is the total factor productivity?
(0.00787)
Example 2
 Because of its excellent location and products, a bakery in Sariyer
experienced a 25% increase in demand in the last year. Customers
are unable to find the product of their choice on many occasions.
Space limitations preclude the possibility of adding another oven. A
new process is proposed by an employee which allows several
loaves to be baked simultaneously, however requires additional
manpower. If the bakery made 1500 loaves this time last year with a
labor productivity of 2.344 loaves per labor hour, how many workers
will the bakery need to add, assuming each worker works 160 hours
per month.
(1 worker)
Significant Events in Operations
Management