Chapter 1: Introduction to Operations
Management
You should be able to:
1. Define the term operations management
2. Identify the three major functional areas of organizations and
describe how they interrelate
3. Identify similarities and differences between production and
service operations
4. Describe the operations function and the nature of the operations
manager’s job
5. Explain the key aspects of operations management decision
making
6. Briefly describe the historical evolution of operations
management
7. Characterize current trends in business that impact 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.
◦ To create the highest level of efficiency possible
within an organization.
The scope of operations management ranges
across the organization.
The operations function includes many interrelated
activities such as:
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
Location facilities
And more . . .
Goods are physical items that include raw
materials, parts and final products.
• Automobile
• Computer
• Oven
• Shampoo
Services are activities that provide some
combination of time, location, form or
psychological value.
• Air travel
• Education
• Haircut
• Legal counsel
Degree of customer contact
Uniformity of inputs
Measurement of productivity
Quality assurance
Inventory
Ability to patent
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
There is a significant amount of interaction and
collaboration amongst the functional areas
It provides an excellent vehicle for understanding
the world in which we live
Supply Chain – a sequence of activities and
organizations involved in producing and delivering
a good or service
Suppliers’ Direct Final
Producer Distributor
suppliers suppliers Customers
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 stock outs
◦ Late deliveries
◦ Quality problems
One or more actions that transform inputs into
outputs.
Upper-management processes: These govern
the operation of the entire organization.
Examples include organizational governance and
organizational strategy.
Operational processes: These are the core
processes that make up the value stream.
Examples include purchasing, production and/or
service, marketing, and sales.
Supporting processes: These support the core
processes. Examples include accounting, human
resources, and IT (information technology).
Value-Added
Inputs Transformation/ Outputs
•Land Conversion •Goods
•Labor •Services
Process
•Capital
•Information
Measurement
and Feedback
Measurement Measurement
and Feedback Control and Feedback
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 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: System design involves
decisions that relate to system capacity, the geographic
location of facilities, arrangement of departments and
placement of equipment within physical structures,
product and service planning, and acquisition of
equipment.
◦ System Operation Decisions: involves management of
personnel, inventory planning and control, scheduling,
project management, and quality assurance.
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?
Industrial Revolution (1770s)
Scientific Management
(Frederick Winslow Taylor: Improving work methods)
(Adam Smith: Division of labor)
From Craft production to Mass production
Human Relations Movement
1. (Lillian Gilbreth & Frank Gilberth) Human factor in work
2. Abraham Maslow developed motivational theories in
1940s
3. Theory X and Y (Douglas McGregor) 1960s
4. William Ouchi added Theory Z, which combined the
Japanese approach in 1970s with such features as
lifetime employment, employee problem solving, and
consensus building
Decision Models and Management Science:
1. F.W. Harris developed one of the first models in
1915: a mathematical model for inventory
management
2. In the 1930s, three coworkers at Bell Telephone
Labs, H. F. Dodge, H. G. Romig, and W.
Shewhart, developed statistical procedures for
sampling and quality control
Influence of Japanese Manufacturers:
Emphasized quality and continual improvement,
worker teams and empowerment, and achieving
customer satisfaction.
The Internet and e-business:
Supply chain management:.
Quality and process improvement:
Process improvement can result in
improved quality, cost reduction, and time
reduction.
Globalization:
Operational strategy:
Environmental issues:
Corporate downsizing:
Lean production:
Economic conditions
Innovating
Quality problems
Risk management
Competing in a global economy
Operations manager
Supply chain manager
Production analyst
Schedule coordinator
Production manager
Purchasing manager
Inventory manager
Quality manager