2. 1-2
You should be able to:
LO 1.1 Define the terms operations management and supply chain
LO 1.2 Identify similarities and differences between production and service
operations
LO 1.3 Explain the importance of learning about operations management
LO 1.4 Identify the three major functional areas of organizations and explain
how they interrelate
LO 1.5 Summarize the two major aspects of process management
LO 1.6 Describe the operations function and the nature of the operations
manager’s job
LO 1.7 Explain the key aspects of operations management decision making
LO 1.8 Briefly describe the historical evolution of operations management
LO 1.9 Describe the current issues in business that impact operations
management
LO 1.10 Explain the need to manage the supply chain
Chapter 1: Learning Objectives
3. 1-3
Operations Management
⚫What is operations?
⚫ The part of a business organization that is responsible
for producing goods or services
⚫How can we define operations management?
⚫ The management of systems or processes that create
goods and/or provide services
LO 1.1
5. 1-5
Operation Function
The operations function involves the conversion of
inputs into outputs.
LO 1.1
The difference between the cost of inputs
and the value or price of outputs
6. ⮚ Goods :Physical items produced by business
organizations.
⮚ Services: Activities that provide some combination of time,
location, form, and psychological value.
⮚ There are some very basic differences between the two,
differences that impact the management of the goods portion
versus management of the service portion.
⮚There are also many similarities between the two.
PRODUCTI
OF GOOD
VERSUS
PROVIDIN
SERVICES
LO 1.2
8. 1-8
PRODUCTION OF GOODS VERSUS
PROVIDING SERVICES
LO 1.2
Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
9. 1-9
Automobile Assembly, Steelmaking
Products are typically neither purely service- or purely goods-
based.
Goods Services
Home Remodeling, Retail Sales
Computer Repair, Restaurant Meal
Songwriting, Software Development
Surgery, Teaching
Goods-service Continuum
LO 1.2
10. 1-10
⚫ Every aspect of business affects or is affected by
operations
⚫ Many service jobs are closely related to operations
⚫ Financial services
⚫ Marketing services
⚫ Accounting services
⚫ Information services
⚫ Through learning about operations and supply chains
you will have a better understanding of:
⚫ The world you live in
⚫ The global dependencies of companies and nations
⚫ Reasons that companies succeed or fail
⚫ The importance of working with others
Why Study Operations Management?
LO 1.3
11. 1-11
Function Overlap
⚫ Finance & Operations
⚫ Budgeting
⚫ Economic analysis of investment
proposals
⚫ Provision of funds
⚫ Marketing & Operations
⚫ Demand data
⚫ Product and service design
⚫ Competitor analysis
⚫ Lead time data
LO 1.4
12. 1-12
Process Management
Process - one or more actions that transform inputs into outputs
Three Categories of Business Processes:
Upper-management processes These govern the operation of the entire
organization.
Operational processes These are core processes that make up the
value stream.
Supporting processes These support the core processes.
LO 1.5
13. 1-13
Process Management
Two basic aspects for operations management :
1. Managing processes to meet demand
2. Dealing with process variability
LO 1.6
14. 1-14
Function and the nature of the operation
manager’s job.
⚫ The Operations Function consists of all activities
directly related to producing goods or providing
services.
⚫ The operations function includes many interrelated
activities, such as:
⚫ forecasting, capacity planning, scheduling, managing
inventories, assuring quality, motivating employees,
deciding where to locate facilities, and more.
⚫ A primary function of the operations manager is to
guide the system by decision making.
LO 1.6
15. 1-15
⚫ Most operations decisions involve many alternatives that can
have quite different impacts on costs or profits
⚫ Typical operations decisions include:
⚫ What: What resources are 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?
⚫ Where: Where will the work be done?
⚫ How: How will he product or service be designed? How will the work be
done? How will resources be allocated?
⚫ Who: Who will do the work?
OPERATIONS MANAGEMENT
AND DECISION MAKING
LO 1.7
16. 1-16
⚫ General approaches to decision making:
⚫ Metrics
⚫ Analysis of trade-offs
⚫ Models & Systems
⚫ Models are often a key tool used by all decision makers.
⚫ Quantitative methods
⚫ Priorities,
⚫ Ethics
OPERATIONS MANAGEMENT
AND DECISION MAKING
LO 1.7
17. 1-17
⚫ Performance Metrics
⚫ All managers use metrics to
manage and control operations
⚫ Profits
⚫ Costs
⚫ Quality
⚫ Productivity
⚫ Flexibility
⚫ Inventories
⚫ Schedules
⚫ Forecast accuracy
Metrics and Trade-Offs
⚫ Analysis of Trade-Offs
⚫ A trade-off is giving up one
thing in return for
something else
⚫ Carrying more inventory
(an expense) in order to
achieve a greater level of
customer service
LO 1.7
a system or standard of measurement
18. 1-18
⚫ Model : An abstraction of reality; a
simplified representation of
something.
⚫ Physical models: look like
their real-life counterparts.
Examples include miniature
cars, trucks, airplanes, toy
Animals
⚫ Schematic models : graphs and
charts, blueprints, pictures, and
drawings.
⚫ Mathematical Models
Model and System
⚫ A system
⚫ A system 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),
LO 1.7
19. 1-19
Historical Evolution of OM
⚫Industrial Revolution
⚫Scientific Management
⚫Human Relations Movement
⚫Decision Models and Management Science
⚫Influence of Japanese Manufacturers
LO 1.8
22. 1-22
The Need for Supply Chain Management
⚫In the past, organizations did little to manage the
supply chain beyond their own operations and
immediate suppliers which led to numerous
problems:
⚫ Oscillating inventory levels
⚫ Inventory stockouts
⚫ Late deliveries
⚫ Quality problems
LO 1.10
23. 1-23
Supply Chain Issues:
Why Supply Chain?
1. The need to improve operations
2. Increasing levels of outsourcing
3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-business
7. The need to manage inventories
LO 1.10
