CHAPTER ONE

PRODUCTION/OPERATIONS
MANAGEMENT
SIXTH EDITION

PRODUCTION AND OPERATIONS MANAGEMENT

WILLIAM J. STEVENSON

Rochester Institute of Technology

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McGraw-Hill
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PART ONE
CHAPTER
ONE

PRODUCTION AND OPERATIONS MANAGEMENT

INTRODUCTION

Chapter One
Production and Operations Management
Chapter Two
Productivity, Competitiveness, and Strategy

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Operations Management

Operations function consists of all activities directly

related to producing goods or providing services.
Organization

Finance

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Production/
Operations

Marketing

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Business Operations Overlap

Production/
Operations

Marketing

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Finance

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Types of Operations
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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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Value-Added
The difference between the cost of inputs
and the value or price of outputs.

Value added
Inputs
Land
Labor
Capital

Outputs
Goods
Services

Transformation/
Conversion
process
Feedback

Feedback
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Control

Feedback
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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Food Processor
Inputs

Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment

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Processing Outputs
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling

Canned vegetables

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Hospital Process
Inputs

Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories

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Processing Outputs
Examination
Surgery
Monitoring
Medication
Therapy

Healthy patients

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Operations Interfaces
Industrial
Engineering

Distribution

Maintenance

Operations

Purchasing
Accounting
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Public Relations

Personnel
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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

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

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Decision Making
System operation
personnel
inventory
scheduling
project
management
quality assurance

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Major Characteristics of
Production Systems
Degree of standardization
Type of operation
project
job shop
repetitive production
continuous processing

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Manufacturing or Service?

Tangible

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Act

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Key Differences

Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Quality assurance

These differences are beginning to fade

in many cases
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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Manufacturing vs Service
Characteristic

Manufacturing Service

Output

Tangible

Customer contact

Low

High

Uniformity of input

High

Low

Labor content

Low

High

Uniformity of output

High

Low

Measurement of productivity

Easy

Difficult

Opportunity to correct
quality problems

High

Low

Intangible

High

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Responsibilities of
Operations Management
Planning
Capacity
Location
Products and services
Make or buy
Layout
Projects
Scheduling
Controlling
Inventory
Quality

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Organizing
Degree of centralization
Subcontracting
Staffing
Hiring/laying off
Use of Overtime
Directing
Incentive plans
Issuance of work orders
Job assignments
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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Models

A model is an abstraction of reality.

Physical
Schematic
Mathematical

Tradeoffs

What are the pros and cons of models?

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Systems Approach
The whole is greater than the sum of the parts.

Suboptimization
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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Quantitative Approaches
Linear programming

Queuing Techniques
Inventory models
Project models
Statistical models

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Pareto Phenomenon
A vital few things are important for reaching
an objective or solving a problem.
80/20 Rule - 80% of problems are caused by
20% of the activities.

How do we identify the vital few?

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CHAPTER ONE

PRODUCTION AND OPERATIONS MANAGEMENT

Recent Trends
Global competition
Operations strategy
Total quality management (TQM)
Flexibility
Time reduction Technology

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Recent Trends (Continued)

Worker involvement
Reengineering
Environmental issues
Service

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