Management And Operations Chapter 1

Front 1

Finance and operations exchange info in what aspect

Back 1

Budgeting
Economic analysis of Investment Proposals
Provisions of funds

Front 2

Marketing departments and operations communicate in what aspects

Back 2

Consumer demand

Consumer expectations( design departments)

Provide insight on what competitors are doing

Let operations know when new skills and equipment are needed

Front 3

Lead Time

Back 3

The time between ordering a good or service and receiving it.

Front 4

Legal department

Back 4

must be contacted on contracts with employees and customers, suppliers and transporters.

Front 5

Accounting

Back 5

Accounting supplies information to management on costs of labor, materials, and overhead, and may provide reports on items such as scrap, downtime, and inventories.

Front 6

Management information systems (MIS)

Back 6

Concerned with providing management with the information it needs to effectively manage. This occurs mainly through designing systems to capture relevant information and designing reports. MIS is also important for managing the control and decision-making tools used in operations managemen

Front 7

The personnel or human resources department

Back 7

concerned with recruitment and training of personnel, labor relations, contract negotiations, wage and salary administration, assisting in manpower projections, and ensuring the health and safety of employee

Front 8

Operations interfaces with a number of supporting functions

Back 8

Front 9

Model

Back 9

is an abstraction of reality, a simplified representation of something.

Front 10

Model Categories

Back 10

Physical models:
look like their real-life counterparts. Examples include miniature cars, trucks, airplanes, toy animals and trains, and scale-model buildings. The advantage of these models is their visual correspondence with reality.


Schematic models:
are more abstract than their physical counterparts; that is, they have less resemblance to the physical reality. Examples include graphs and charts, blueprints, pictures, and drawings. The advantage of schematic models is that they are often relatively simple to construct and change. Moreover, they have some degree of visual correspondence.


Mathematical models:
are the most abstract: They do not look at all like their real-life counterparts. Examples include numbers, formulas, and symbols. These models are usually the easiest to manipulate, and they are important forms of inputs for computers and calculators.

Front 11

Operations management professionals make a number of key decisions that affect the entire organization.

Back 11

What: What resources will be needed, and in what amounts?


When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? When is corrective action needed?


Where: Where will the work be done?

p. 18
How: How will the product or service be designed? How will the work be done (organization, methods, equipment)? How will resources be allocated?


Who: Who will do the work?

Front 12

Managers use models in a variety of ways and for a variety of reasons. Models are beneficial because they

Back 12

1.


Are generally easy to use and less expensive than dealing directly with the actual situation.

2.


Require users to organize and sometimes quantify information and, in the process, often indicate areas where additional information is needed.

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3.


Increase understanding of the problem.

4.


Enable managers to analyze what-if questions.

5.


Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem.

6.


Enable users to bring the power of mathematics to bear on a problem.

Front 13

Limitations of Models

Back 13

1.


Quantitative information may be emphasized at the expense of qualitative information.

2.


Models may be incorrectly applied and the results misinterpreted. The widespread use of computerized models adds to this risk because highly sophisticated models may be placed in the hands of users who are not sufficiently knowledgeable to appreciate the subtleties of a particular model; thus, they are unable to fully comprehend the circumstances under which the model can be successfully employed.

3.


The use of models does not guarantee good decisions.

Front 14

Quantitative Approaches
(Book Info)

Back 14

Quantitative approaches to problem solving often embody an attempt to obtain mathematically optimal solutions to managerial problems. Linear programming and related mathematical techniques are widely used for optimum allocation of scarce resources. Queuing techniques are useful for analyzing situations in which waiting lines form. Inventory models are widely used to control inventories. Project models such as PERT (program evaluation and review technique) and CPM (critical path method) are useful for planning, coordinating, and controlling large-scale projects. Forecasting techniques are widely used in planning and scheduling. Statistical models are currently used in many areas of decision making.

In large measure, quantitative approaches to decision making in operations management (and in other functional business areas) have been accepted because of calculators and computers capable of handling the required calculations. Computers have had a major impact on operations management. Moreover, the growing availability of software packages for quantitative techniques has greatly increased management's use of those techniques.

Although quantitative approaches are widely used in operations management decision making, it is important to note that managers typically use a combination of qualitative and quantitative approaches, and many important decisions are based on qualitative approaches.

Front 15

Performance Metrics

Back 15

`All managers use metrics to manage and control operations. There are many metrics in use, including those related to profits, costs, quality, productivity, flexibility, assets, inventories, schedules, and forecast accuracy. As you read each chapter, note the metrics being used and how they are applied to manage operations.

Front 16

Analysis of Trade-Offs

Back 16

Operations personnel frequently encounter decisions that can be described as trade-off decisions. For example, in deciding on the amount of inventory to stock, the decision maker must take into account the trade-off between the increased level of customer service that the additional inventory would yield and the increased costs required to stock that inventory.

Throughout this book you will be presented with decision models that reflect these kinds of trade-offs. Decision makers sometimes deal with these decisions by listing the advantages and disadvantages—the pros and cons—of a course of action to better understand the consequences of the decisions they must make. In some instances, decision makers add weights to the items on their list that reflect the relative importance of various factors. This can help them “net out” the potential impacts of the trade-offs on their decision.

Front 17

Degree of Customization

Back 17

A major influence on the entire organization is the degree of customization of products or services being offered to its customers. Providing highly customized products or services such as home remodeling, plastic surgery, and legal counseling tends to be more labor intensive than providing standardized products such as those you would buy “off the shelf” at a mall store or a supermarket or standardized services such as public utilities and Internet services. Furthermore, production of customized products or provision of customized services is generally more time consuming, requires more highly skilled people, and involves more flexible equipment than what is needed for standardized products or services. Customized processes tend to have a much lower volume of output than standardized processes, and customized output carries a higher price tag. The degree of customization has important implications for process selection and job requirements. The impact goes beyond operations and supply chains. It affects marketing, sales, accounting, finance, and information systems.

Front 18

System

Back 18

A system A set of interrelated parts that must work together. can be defined as a set of interrelated parts that must work together

Front 19

A Systems Approach

Back 19

A systems viewpoint is almost always beneficial in decision making. A system A set of interrelated parts that must work together. can be defined as a set of interrelated parts that must work together. In a business organization, the organization can be thought of as a system composed of subsystems (e.g., marketing subsystem, operations subsystem, finance subsystem), which in turn are composed of lower subsystems. The systems approach emphasizes interrelationships among subsystems, but its main theme is that the whole is greater than the sum of its individual parts. Hence, from a systems viewpoint, the output and objectives of the organization as a whole take precedence over those of any one subsystem. An alternative approach is to concentrate on efficiency within subsystems and thereby achieve overall efficiency. But that approach overlooks the facts that organizations must operate in an environment of scarce resources and that subsystems are often in direct competition for those scarce resources, so that an orderly approach to the allocation of resources is called for.

A systems approach is essential whenever something is being designed, redesigned, implemented, improved, or otherwise changed. It is important to take into account the impact on all parts of the system. For example, if the upcoming model of an automobile will add antilock brakes, a designer must take into account how customers will view the change, instructions for using the brakes, chances for misuse, the cost of producing the new brakes, installation procedures, recycling worn-out brakes, and repair procedures. In addition, workers will need training to make and/or assemble the brakes, production scheduling may change, inventory procedures may have to change, quality standards will have to be established, advertising must be informed of the new features, and parts suppliers must be selected

Front 20

Establishing Priorities

Back 20

Establishing Priorities

In virtually every situation, managers discover that certain issues or items are more important than others. Recognizing this enables the managers to direct their efforts to where they will do the most good.




Typically, a relatively few issues or items are very important, so that dealing with those factors will generally have a disproportionately large impact on the results achieved. This well-known effect is referred to as the Pareto phenomenon A few factors account for a high percentage of the occurrence of some event(s).. The implication is that a manager should examine each situation, searching for the few factors that will have the greatest impact, and give them the highest priority. This is one of the most important and pervasive concepts in operations management. In fact, this concept can be applied at all levels of management and to every aspect of decision making, both professional and personal.

Front 21

Pareto phenomenon.

Back 21

A few factors account for a high percentage of the occurrence of some event(s)..

Front 22

The Industrial Revolution

Back 22

hen, a number of innovations in the 18th century changed the face of production forever by substituting machine power for human power. Perhaps the most significant of these was the steam engine, because it provided a source of power to operate machines in factories. Ample supplies of coal and iron ore provided materials for generating power and making machinery. The new machines, made of iron, were much stronger and more durable than the simple wooden machines they replaced.

Front 23

craft production

Back 23

highly skilled workers using simple, flexible tools produced goods according to customer specifications.


Craft production had major shortcomings. Because products were made by skilled craftsmen who custom fitted parts, production was slow and costly. And when parts failed, the replacements also had to be custom made, which was also slow and costly. Another shortcoming was that production costs did not decrease as volume increased; there were no economies of scale, which would have provided a major incentive for companies to expand. Instead, many small companies emerged, each with its own set of standards.

Front 24

Economies of scale

Back 24

Economies of scale, in microeconomics, refers to the cost advantages that a business obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.[1] Diseconomies of scale are the opposite. The common sources of economies of scale are purchasing (bulk buying of materials through long-term contracts), managerial (increasing the specialization of managers), financial (obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments), marketing (spreading the cost of advertising over a greater range of output in media markets), and technological (taking advantage of returns to scale in the production function). Each of these factors reduces the long run average costs (LRAC) of production by shifting the short-run average total cost (SRATC) curve down and to the right. Economies of scale are also derived partially from learning by doing.

Front 25

Mass production

Back 25

a system of production in which large volumes of standardized goods are produced by low-skilled or semiskilled workers using highly specialized, and often costly, equipment.

Front 26

Interchangeable parts

Back 26

Parts of a product made to such precision that they do not have to be custom fitted.

Front 27

ASSEMBLY LINES

Back 27

ssembly lines are one of several approaches to the production of goods and delivering services. But the importance of assembly lines to business and society is hard to overstate. Often associated with Henry Ford's automobile production, they were the hallmark of mass production, achieving high volumes of standardized products. As such, they played a pivotal role in the development of what we now refer to as industrialized nations. By shifting from craft production methods to assembly lines, producers were able to successfully employ large numbers of unskilled workers. By using assembly lines, they achieved tremendous gains in industrial productivity, produced affordable products, and in the process greatly increased the standard of living of people in industrial nations. As you will learn later in the book, assembly lines also play an important role in a newer approach to operations called lean production or, more generally, lean operations

Front 28

Pioners of the scientific movement

Back 28

Frank Gilbreth was an industrial engineer who is often referred to as the father of motion study. He developed principles of motion economy that could be applied to incredibly small portions of a task.


Henry Gantt recognized the value of nonmonetary rewards to motivate workers, and developed a widely used system for scheduling, called Gantt charts.


Harrington Emerson applied Taylor's ideas to organization structure and encouraged the use of experts to improve organizational efficiency. He testified in a congressional hearing that railroads could save a million dollars a day by applying principles of scientific management.


Henry Ford, the great industrialist, employed scientific management techniques in his factories.

Front 29

Division of labor

Back 29

The breaking up of a production process into small tasks, so that each worker performs a small portion of the overall job.,

Front 30

Decision Models and Management Science

Back 30

The factory movement was accompanied by the development of several quantitative techniques. F. W. Harris developed one of the first models in 1915: a mathematical model for inventory order size. In the 1930s, three coworkers at Bell Telephone Labs, H. F. Dodge, H. G. Romig, and W. Shewhart, developed statistical procedures for sampling and quality control. In 1935, L.H.C. Tippett conducted studies that provided the groundwork for statistical-sampling theory.

At first, these quantitative models were not widely used in industry. However, the onset of World War II changed that. The war generated tremendous pressures on manufacturing output, and specialists from many disciplines combined efforts to achieve advancements in the military and in manufacturing. After the war, efforts to develop and refine quantitative tools for decision making continued, resulting in decision models for forecasting, inventory management, project management, and other areas of operations management.

During the 1960s and 1970s, management science techniques were highly regarded; in the 1980s, they lost some favor. However, the widespread use of personal computers and user-friendly software in the workplace contributed to a resurgence in the popularity of these techniques.

Front 31

The Influence of Japanese Manufacturers

Back 31

The influence of the Japanese on U.S. manufacturing and service companies has been enormous and promises to continue for the foreseeable future. Because of that influence, this book will provide considerable information about Japanese methods and successes.

Front 32

Electronic business

Back 32

Electronic business, or e-business Use of the Internet to transact business., involves the use of the Internet to transact business. E-business is changing the way business organizations interact with their customers and their suppliers. Most familiar to the general public is e-commerce Consumer-to-business transactions., consumer–business transactions such as buying online or requesting information. However, business-to-business transactions such as e-procurement represent an increasing share of e-business. E-business is receiving increased attention from business owners and managers in developing strategies, planning, and decision making.

Front 33

Technology

Back 33

The application of scientific discoveries to the development and improvement of goods and services.

Front 34

Kinds of Techology in operations management

Back 34

Product and service technology refers to the discovery and development of new products and services. This is done mainly by researchers and engineers, who use the scientific approach to develop new knowledge and translate that into commercial applications.


Process technology refers to methods, procedures, and equipment used to produce goods and provide services. They include not only processes within an organization but also supply chain processes.


Information technology (IT) refers to the science and use of computers and other electronic equipment to store, process, and send information. Information technology is heavily ingrained in today's business operations. This includes electronic data processing, the use of bar codes to identify and track goods, obtaining point-of-sale information, data transmission, the Internet, e-commerce, e-mail, and more.

Front 35

Important Trade Agreements

Back 35

The North American Free Trade Agreement (NAFTA) opened borders for trade between the United States and Canada and Mexico. The General Agreement on Tariffs and Trade (GATT) of 1994 reduced tariffs and subsidies in many countries, expanding world trade. The resulting global competition and global markets have had an impact on the strategies and operations of businesses large and small around the world. One effect is the importance business organizations are giving to management of their supply chains.

Front 36

Impact of globalization

Back 36

Globalization and the need for global supply chains have broadened the scope of supply chain management. However, tightened border security in certain instances has slowed some movement of goods and people. Moreover, in some cases, organizations are reassessing their use of offshore outsourcing.

Front 37

Competitive pressures and changing economic conditions have caused business organizations to put more emphasis on

Back 37

Operations strategy.


Working with fewer resources.


Revenue management.


Process analysis and improvement, and quality improvement.


Agility


Lean production.

Front 38

Process analysis and improvement i

Back 38

includes cost and time reduction, productivity improvement, process yield improvement, and quality improvement and increasing customer satisfaction. This is sometimes referred to as a six sigma A process for reducing costs, improving quality, and increasing customer satisfaction. process.

Front 39

six sigma

Back 39

A process for reducing costs, improving quality, and increasing customer satisfaction.

Front 40

Agility

Back 40

The ability of an organization to respond quickly to demands or opportunities.

Front 41

Lean systems

Back 41

System that uses minimal amounts of resources to produce a high volume of highquality goods with some variety.

Front 42

Key Issues for Today's Business Operations

Back 42

There are a number of issues that are high priorities of many business organizations. Although not every business is faced with these issues, many are. Chief among the issues are the following:

Economic Conditions

Innovating

Quality Problems

Risk Management

Competing In a Global Economy

Front 43

Economic conditions.

Back 43

The lingering recession and slow recovery in various sectors of the economy has made managers cautious about investment and rehiring workers that had been laid off during the recession.

Front 44

Competing in a global economy

Back 44

Low labor costs in third-world countries have increased pressure to reduce labor costs. Companies must carefully weigh their options, which include outsourcing some or all of their operations to low-wage areas, reducing costs internally, changing designs, and working to improve productivity.

Front 45

Sustainability

Back 45

Using resources in ways that do not harm ecological systems that support human existence.

Front 46

Ethical Conduct (Topic)

Back 46

he need for ethical conduct in business is becoming increasingly obvious, given numerous examples of questionable actions in recent history. In making decisions, managers must consider how their decisions will affect shareholders, management, employees, customers, the community at large, and the environment. Finding solutions that will be in the best interests of all of these stakeholders is not always easy, but it is a goal that all managers should strive to achieve. Furthermore, even managers with the best intentions will sometimes make mistakes. If mistakes do occur, managers should act responsibly to correct those mistakes as quickly as possible, and to address any negative consequences.

Front 47

The Fair Trade Certified™

Back 47

abel guarantees to consumers that strict economic, social, and environmental criteria were met in the production and trade of an agricultural product.

Front 48

Operations managers, like all managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects of operations management, including

Back 48

Operations managers, like all managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects of operations management, including

Front 49

Ethics

Back 49

A standard of behavior that guides how one should act in various situations.

Front 50

Ethical Principles

Back 50

Front 51

ethical framework

Back 51

A sequence of steps intended to guide thinking and subsequent decision or action.

1.Recognize an ethical issue by asking if an action could be damaging to a group or an individual. Is there more to it than just what is legal?

2.Make sure the pertinent facts are known, such as who will be impacted, and what options are available.

3.Evaluate the options by referring to each of the preceding five ethical principles.

4.Identify the “best” option and then further examine it by asking how someone you respect would view it.

5.In retrospect, consider the effect your decision had and what you can learn from it.

Front 52

The Need to Manage the Supply Chain
(Topic)

Back 52

Supply chain management is being given increasing attention as business organizations face mounting pressure to improve management of their supply chains. In the past, most organizations did little to manage their supply chains. Instead, they tended to concentrate on their own operations and on their immediate suppliers. Moreover, the planning, marketing, production and inventory management functions in organizations in supply chains have often operated independently of each other. As a result, supply chains experienced a range of problems that were seemingly beyond the control of individual organizations. The problems included large oscillations of inventories, inventory stockouts, late deliveries, and quality problems.