OPERATIONS MANAGEMENT Introduction to OM 1 Learning Objectives

OPERATIONS MANAGEMENT Introduction to OM 1

Learning Objectives • LO 1 -1 a: Differentiate operations from other functions • LO 1 -1 b: Identify the elements and major concepts of operations and supply chain management. • LO 1 -2: Know the differences between goods and services • LO 1 -3: Know the potential career opportunities in operations and supply chain management • LO 1 -4: Evaluate the efficiency of a firm. 1 -2

OM WARM-UP EXERCISE • John, Matt, and Jill are new business graduates. They can’t wait to start their own business: their long-time dream of a sports (bar) restaurant. But they soon figure out that they need to make many decisions to start and run their business. Help them out. 1 -3

The Hard Rock Cafe u First opened in 1971 u Now – 129 restaurants in over 40 countries u Rock music memorabilia u Creates value in the form of good food and entertainment u 3, 500+ custom meals per day in Orlando u How does an item get on the menu? u Role of the Operations Manager

WHAT IS OM? - from previous classes - making a business run smoothly, effectively and cost efficiently. Making sure everything in a business coincides. - scheduling, organizing and managing everything that goes into the production process - management of processes, employees, budgets - system - best way to allocate business resources for productivity and efficiency - overall process of delivering the final product/ service 5

Why Study OM? 1. OM is one of three major functions of any organization 2. How goods and services are produced? 3. We want to understand what operations managers do 4. OM is such a costly part of an organization

Goods versus Services Pure Goods Services Core Goods Core Services Pure Services Tangible Less interaction with customers Intangible Interaction with customer required Often homogeneous can be inventoried Cannot be inventoried/time dependent Defined and evaluated as a package of features Inherently heterogeneous 1 -7

A CONTINUUM FROM GOODS TO SERVICES 1 -8

Careers in Operations and Supply Chain Management Plant manager Hospital administrator Branch manager Department store manager Call center manager Supply chain manager Purchasing manager Quality control manager Business process improvement analyst Lean improvement manager Project manager Production control analyst Facilities manager Chief operating officer 1 -9

Certifications • • • APICS, the American Production and Inventory Control Society American Society of Quality (ASQ) Institute for Supply Management (ISM) Project Management Institute (PMI) Council of Supply Chain Management Professionals Charter Institute of Purchasing and Supply (CIPS)

Options for Increasing Contribution Finance/ Marketing Accounting Option OM Increase Reduce Sales Finance Production/Operation Current Revenue 50% Costs 20% Sales $100, 000 $150, 000 $100, 000 Cost of Goods – 80, 000 – 120, 000 – 80, 000 – 64, 000 Gross Margin 20, 000 30, 000 20, 000 36, 000 Finance Costs – 6, 000 – 3, 000 – 6, 000 Subtotal 14, 000 24, 000 17, 000 30, 000 Taxes at 25% – 3, 500 – 6, 000 – 4, 250 – 7, 500 Contribution $ 10, 500 $ 18, 000 $ 12, 750 $ 22, 500

Each Section of OSCM: What Is Accomplished? 1 -12

What Is Operations and Supply Chain Management? • The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services • Operations and supply chain management (OSCM) is • A functional field of business • Concerned with the management of the entire production/delivery system 1 -13

Operations and Supply Chain Processes Operations Manufacturing and service processes used to transform resources into products Supply Chain Processes that move information and material to and from the firm 1 -14

Process Steps for Men’s Nylon Supplex Parkas 1 -15

Strategy, Processes, and Analytics Operations and supply chain management involves �Product design �Purchasing �Manufacturing �Service operations �Logistics �Distribution Success depends upon �Strategy �Processes to deliver products and services �Analytics to support the decisions needed to manage the firm 1 -16

Process Activities §Planning – processes needed to operate an existing supply chain §Sourcing – selection of suppliers that will deliver the goods and services needed to create the firm’s product §Making – producing the major product or service §Delivering – logistics processes such as selecting carriers, coordinating the movement of goods and information, and collecting payments from customers §Returning – receiving worn-out, excess, and/or defective products back from customers 1 -17

Operations and Supply Chain Processes 1 -18

Historical Development of Operations and Supply Chain Management Manufacturing strategy developed Just-in-time (JIT) production Early pioneered by the Japanese 1980 s Mid 1980 s Service quality and productivity Late 1970 s Total quality management Early Six-sigma quality (TQM) and Quality 1990 s certification programs Mid 1990 s Supply chain Business process Late 1990 s management (SCM) reengineering (BPR) Electronic commerce Business analytics Early 2000 s Service science Mid 2010 s 1 -19

NEW CHALLENGES / TRENDS IN OM From • Local or national focus • In-house • Traditional trade/market • Batch shipments • Mass production • Low bid purchasing • Lengthy product development • Standard products • Job specialization • Environmental concerns To • Global focus/global network • Outsourcing / off-shoring/Insourcing • E-business • Just-in-time • Lean production • Supply chain partnering • Rapid product development • Mass customization • Empowered employees/team building • Environmental Sustainability/Triple Bottom 20 1 -20

Current Issues in OSCM • Coordinating relationships between members of SC • Optimizing global network of suppliers, producers, and distributors • Managing customer touch points • Raising awareness of OSCM as a competitive weapon • Sustainability and triple bottom line 1 -21

Efficiency, Effectiveness, and Value Efficiency • Doing something at the lowest possible cost Effectiveness • Doing the right things to create the most value for your customer Value • The attractiveness of a product relative to its cost 1 -22

Efficiency and Wall Street 1 -23