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  1. 1. © Wiley 2007 1What is OperationsManagement?The business function responsible forplanning, coordinating, andcontrolling the resources needed toproduce a company’s products andservices
  2. 2. © Wiley 2007 2What is OperationsManagement? It is a management function Organization’s core function Every organization has OM function Service or Manufacturing For profit or Not for profit
  3. 3. © Wiley 2007 3Typical Organization Chart
  4. 4. © Wiley 2007 4What is Operations ManagementRole? OM Transforms inputs to outputs Inputs are resources such asPeople, Material, and Money Outputs are goods and services
  5. 5. © Wiley 2007 5OM’s Transformation Process
  6. 6. © Wiley 2007 6OM’s Transformation Role To add value Increase product value at each stage Value added is the net increase between output productvalue and input material value Provide an efficient transformation Efficiency – perform activities well at lowest possible cost
  7. 7. © Wiley 2007 7Differences between Manufacturersand Service Organizations Services: Intangible product Product cannot beinventoried High customer contact Short response time Labor intensive Manufacturers: Tangible product Product can beinventoried Low customer contact Longer response time Capital intensive
  8. 8. © Wiley 2007 8Similarities-Service/Manufacturers All use technology Both have quality, productivity, & responseissues All must forecast demand Each will have capacity, layout, and locationissues All have customers, suppliers, scheduling andstaffing issues
  9. 9. © Wiley 2007 9Service - Manufacturing Manufacturing often provides services Services often provides tangible goods Some organizations are a blend ofservice/manufacturing/quasi-manufacturing Quasi-Manufacturing(QM) organizations QM characteristics include Low customer contact & Capital Intensive
  10. 10. © Wiley 2007 10Trends in OM Service sector growingto 50-80% of non-farmjobs- See Figure 1-4 Global competitiveness Demands for higherquality Huge technologychanges Time based competition Work force diversity
  11. 11. © Wiley 2007 11OM Decisions All organizations are based ondecisions Decisions follow a similar path First decisions very broad – StrategicdecisionsStrategic Decisions – set the direction for theentire company; they are broad in scope andlong-term in nature Following decisions focus on specifics -Tactical decision
  12. 12. © Wiley 2007 12OM Decisions Tactical decisions focus on Specific day-to-day issuesResource needs, schedules, & quantities toproduce Tactical decisions are very frequent Strategic decisions less frequent Tactical decisions must align with strategicdecisions
  13. 13. © Wiley 2007 13OM Decisions
  14. 14. © Wiley 2007 14Plan of Book-Chapters link to Typesof OM Decisions
  15. 15. © Wiley 2007 15Why OM? For long-run success companies must placemuch important on their operations The 1950-1960 era was the U.S. golden era whereprimary opportunities were marketing The 1970-1980 U.S. companies experienced alarge decline in productivity growth – internationalfirms began to challenge in many markets The 1970-1980 era saw U. S. firms lagging behindin methods and processes The resurgence of American business in the1990’s capitalized on improved operations
  16. 16. © Wiley 2007 16Historical Development of OM Industrial revolution Late 1700s Scientific management Early 1900s Human relations movement 1930s to1960s Management science Mid-1900s Computer age 1970s Environmental Issues 1970s
  17. 17. © Wiley 2007 17Historical Development of OM Just-in-Time Systems (JIT) 1980s Total quality management (TQM) 1980s Reengineering 1990s Global competition 1980s Flexibility 1990s
  18. 18. © Wiley 2007 18Historical Development of OM Time-Based Competition 1990s Supply chain Management 1990s Electronic Commerce2000s Outsourcing andflattening of the world 2000s
  19. 19. © Wiley 2007 19Today’s OM Environment Customers demand better quality, greaterspeed, and lower costs Companies implementing lean systemsconcepts – a total systems approach toefficient operations Recognized need to better manageinformation using ERP and CRM systems Increased cross-functional decision making
  20. 20. © Wiley 2007 20OM in Practice OM has the most diverse organizationalfunction Manages the transformation process OM has many faces and names such as; V. P. operations, Director of supply chains,Manufacturing manager Plant manger, Quality specialists, etc. All business functions need information fromOM in order to perform their tasks
  21. 21. © Wiley 2007 21Business Information Flow
  22. 22. © Wiley 2007 22OM Across the Organization Most businesses are supported by thefunctions of operations, marketing, andfinance The major functional areas mustinteract to achieve the organizationgoals
  23. 23. © Wiley 2007 23OM Across the Organization -continued Marketing is not fully capable of meeting customerneeds if they do not understand what operations canproduce Finance cannot judge the need for capitalinvestments if they do not understand operationsconcepts and needs Information systems enables the information flowthroughout the organization Human resources must understand job requirementsand worker skills Accounting needs to consider inventorymanagement, capacity information, and laborstandards
  24. 24. © Wiley 2007 24Chapter 1 Highlights OM is the business function that is responsible formanaging and coordinating the resources needed toproduce a company’s products and services. Its role of OM is to transform organizational inputsinto company’s products or services outputs OM is responsible for a wide range of decisions,ranging from strategic to tactical. Organizations can be divided into manufacturing andservice organizations, which differ in the tangibility ofthe product or service
  25. 25. © Wiley 2007 25Chapter 1 Highlights -continued A number of historical milestones have shaped OM.Some of the more significant of these are theIndustrial Revolution, scientific management, thehuman relations movement, management science,and the computer age OM is highly important function in today’s dynamicbusiness environment. Among the trends withsignificant impact are just-in-time, TQM,reengineering, flexibility, time-based competition,SCM, global marketplace, and environmental issues OM works closely with all other business functions
  26. 26. © Wiley 2007 26The End Copyright © 2007 John Wiley & Sons, Inc. All rights reserved.Reproduction or translation of this work beyond that permitted inSection 117 of the 1976 United State Copyright Act without theexpress written permission of the copyright owner is unlawful.Request for further information should be addressed to thePermissions Department, John Wiley & Sons, Inc. Thepurchaser may make back-up copies for his/her own use onlyand not for distribution or resale. The Publisher assumes noresponsibility for errors, omissions, or damages, caused by theuse of these programs or from the use of the informationcontained herein.