1 Productivity and Yield
Operations
Management
1-1
The Hard Rock Cafe
First opened in 1971
Now – 129 restaurants in over 40 countries
Rock music memorabilia
Creates value in the form of good food
and entertainment
3,500+ custom meals per day in Orlando
How does an item get on the menu?
Role of the Operations Manager
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What Is Operations Management?
Operations management (OM) is the set of activities that
create value in the form of goods and services by
transforming inputs into outputs
Production is the creation of goods and services
Organizing to Produce Goods and Services
Essential functions:
1. Marketing – generates demand
2. Production/operations – creates the product
3. Finance/accounting – tracks how well the organization
is doing, pays bills, collects the money
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Organizational Charts
Airline
Operations Finance/ Marketing
Ground support accounting Traffic
equipment Accounting administration
Maintenance Payables Reservations
Ground Operations Receivables Schedules
General Ledger Tariffs (pricing)
Facility
maintenance Finance Sales
Catering Cash control Advertising
Flight Operations International
exchange
Crew scheduling
Flying
Communications
Dispatching
Management science
Figure 1.1(B)
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Organizational
Manufacturing
Charts
Operations Finance/ Marketing
Facilities accounting Sales
Construction; maintenance Disbursements/ promotion
Production and inventory control credits Advertising
Scheduling; materials control Receivables Sales
Quality assurance and control Payables Market
Supply-chain management General ledger research
Manufacturing Funds Management
Tooling; fabrication; assembly Money market
Design International
Product development and design
exchange
Detailed product specifications Capital requirements
Industrial engineering Stock issue
Efficient use of machines, space, Bond issue
and personnel and recall
Process analysis
Development and installation of
production tools and equipment
Figure 1.1(C)
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Why Study OM?
1. OM is one of three major functions of any organization, we want to
study how people organize themselves for productive enterprise
2. We want (and need) to know 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
Planning
What Organizing
Operations Staffing
Managers Do
Leading
Controlling
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The Critical Decisions
1. Design of goods and services
What good or service should we offer?
How should we design these products and services?
2. Managing quality
How do we define quality?
Who is responsible for quality?
3. Process and capacity design
What process and what capacity will these products
require?
What equipment and technology is necessary for these
processes?
4. Location strategy
Where should we put the facility?
On what criteria should we base the location decision?
Table 1.2 (cont.)
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The Critical Decisions
5. Layout strategy
How should we arrange the facility?
How large must the facility be to meet our plan?
6. Human resources and job design
How do we provide a reasonable work environment?
7. How much can we expect our employees to produce? Supply-
chain management
Should we make or buy this component?
Who should be our suppliers and how can we integrate
them into our strategy?
8. Inventory, material requirements planning, and JIT
How much inventory of each item should we have?
When do we re-order?
Table 1.2 (cont.)
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The Critical Decisions
9. Intermediate and short–term scheduling
Are we better off keeping people on the payroll during
slowdowns?
Which jobs do we perform next?
10. Maintenance
How do we build reliability into our processes?
Who is responsible for maintenance?
Table 1.2 (cont.)
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Significant Events in OM
Figure 1.3
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Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate
from consumption
Can be inventoried
Low customer interaction
Characteristics of Service
Intangible product
Produced and consumed at same time
Often unique
High customer interaction
Inconsistent product definition
Often knowledge-based
Frequently dispersed
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