OPM 311 1st Edition Exam 1 Study Guide Chapter 1 2 3 5 Chapter 1 Introduction to Operations Management Operations the part of the business responsible for producing goods and services Operations management the management of systems processes that create goods and or provide services Two Main Sides to Businesses Demand Sales and Marketing responsible for forecasts affecting customer behaviors getting orders for products or services Supply Fulfillment Operations and Supply Chain Management responsible for making and delivering products and services Accounting function that coaches and keeps score for the business through profit and cost analysis Goods are physical items that include raw materials parts subassemblies and final products Services are activities that provide some combination of time location form or psychological value Supply Chain a sequence of activities and organizations involved in producing and delivering a good or service The transformation process within the supply chain creates wealth This includes conversion of raw materials into saleable products and services Feedback measurements taken at various points in the transformation process Control the comparison of feedback against previously established standards to determine if corrective action is needed The Goods Service Continuum Because products are typically neither purely service or purely goods based companies usually sell product packages which are a combination of goods and services Why Study Operations Management Every aspect of business affects or is affected by operations Many service jobs are closely related to operations o Financial services o Marketing services o Accounting services o Information services Through learning about operations and supply chains you will have a better understanding of o The world you live in o The global dependencies of companies and nations o Reasons that companies succeed or fail o The importance of working with others OM and Supply Chain Career Opportunities Operations manager Supply chain manager Production analyst Industrial engineer Purchasing manager Inventory manager Quality manager Master Scheduler Buyer APICS The Association for Operations Management the premier professional group in the Operations and Supply Chain Management space Process Management There are three categories of business processes 1 Upper management processes govern the operation of the entire organization organizational governance and organizational strategy Ex 2 Operational processes core processes that make up the value stream purchasing production and or service marketing and sales Ex 3 Supporting processes support the core processes Ex include accounting human resources and IT information technology Supply Demand Ideally the capacity of a process will be such that its output just matches demand Supply Demand Excess capacity is wasteful and costly Supply Demand Too little capacity means dissatisfied customers and lost revenue Process Variation there are four basic sources of variation 1 The variety of goods or services being offered The greater the variety of goods and services the greater the variation in production or service requirements 2 Structural variation in demand include trends and seasonal variations are generally predictable Particularly important for capacity planning 3 Random variation natural variability is present to some extent in all processes as well as in demand for services and products and it cannot generally be influenced by managers 4 Assignable variation caused by defective inputs incorrect work methods out of adjustment equipment etc Can be reduced or eliminated by analysis and corrective action Variations can be disruptive to operations and supply chain processes They may result in additional costs delays and shortages poor quality and inefficient work systems If high customer service is to be offered buffer inventory buffer capacity or capacity flexibility is required to offset variation The Scope of Operations Management includes many interrelated activities such as Forecasting capacity of processes but not customer demand except in poorly run organizations Facilities and layout Managing inventories Assuring quality Motivating employees Role of Operations Manager The Operations Function consists of all activities directly related to producing goods or providing services A primary function of the operations manager is to guide the system by decision making System Design Decisions determine parameters of system operation usually require long term commitment of resources Capacity Facility location Facility layout Product and service planning Acquisition and placement of equipment System Operation Decisions generally tactical and operational decisions more time spent on system operation decision than any other decision area Management of personnel Inventory management and control Scheduling Project management Quality assurance Analytics to Support Decisions in Operations Dash board metrics Standards labor material P L Profit and loss also called the Income Statement Forecast data Customer behaviors Historical data Demand and supply seasonality Mathews Tighe Industries Market understanding Quality data SPC control charts Cpk process capabilities Process capability Performance Metrics All managers use metrics to manage and control operations Customer Service MOST IMPORTANT Costs MOST IMPORTANT Profits Quality such as FTQ and Cost of Quality Productivity Flexibility Inventories Schedule accuracy Forecast accuracy Data accuracy FTQ First Time Quality of work that is 100 right in each process step with no rework tweaks adjustments etc Analysis of Trade Offs Trade off giving up one thing in return for something else Ex Carrying more inventory an expense in order to achieve a greater level of customer service Main trade offs include customer service cost inventory buffer cash capacity cushion cost leap frogging capacity needs in large increments vs small incremental growth strategy Efficiency how productive an organization is Effectiveness achieving objectives in a timely basis Value as perceived by the customer A Systems Approach System a set of interrelated parts that must work together The business organization is a system composed of subsystems marketing subsystem operations subsystem finance subsystem The systems approach emphasizes interrelationships among subsystems Main theme is that the whole is greater than the sum of its parts The output and objectives of the