CHAPTER 1
INTRODUCTION TO
OPERATIONS
MANAGEMENT
Understand the role of How to organize the Understand the
Operations Management production of goods and productivity challenge
services.
Examples of operations
Military Army
DEFINITIONS
ü “Operations Management (OM) is defined as the design,
operation, and improvement of the production systems
that create the firm’s primary products or services” (Chase
and Aquilano, 1995)
ü “OM is the set of activities that creates value in the form
of goods and services by transforming inputs into
outputs” (Slack et al, 2013)
ü “OM is the management of processes or systems that
create goods and/or provide services” (Stevenson, 2002,
2018)
The process of operations
Illustrations of the transformation process
Manufacturing or Service?
Tangible Act
1-18
Goods vs. Service?
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
Business Operations Overlap
Business Operations Overlap
1-21
(Heizer et al, 2020)
Business Operations Overlap
1-22
(Heizer et al, 2020)
Business Operations Overlap
1-23
(Heizer et al, 2020)
Operations
Interfaces
1-24
(Slack et al, 2013)
Group
discussion
Choose a business you are
familiar with, describe and
visualize its operations
activities. Outline the
operations,
finance/accounting, and
marketing functions of that
organization.
The
Evolution of
Operations
The
Evolution of
Operations
Military Army
TEN OM STRATEGIC
DECISIONS
1. Design of goods and services
2. Managing quality
3. Process strategies
4. Location strategies
5. Layout strategies
6. Human resources
7. Supply chain management
8. Inventory management
9. Scheduling
10. Maintenance
PRODUCTIVITY
vProductivity is the ratio of output (goods and services)
divided by the inputs (resources, such as labor and
capital).
vThe improvement can be achieved in two ways:
ü A reduction in inputs while output remains constant
ü An increase in output while input remains constant
Ø High production may imply
PRODUCTIVITY only that more people are
working and that employment
levels are high (low
unemployment), but it does
not imply high productivity
Ø Measurement of productivity
is an excellent way to evaluate
a country’s ability to provide
an improving standard of
living for its people
COMPUTING PRODUCTIVITY
SOME EXAMPLES OF
PARTIAL PRODUCTIVITY MEASURES
EXAMPLE
Determine the productivity for these cases:
a. Four workers installed 720 square yards of carpeting in eight
hours.
b. A machine produced 70 pieces in two hours. However, two
pieces were unusable.
EXAMPLE
Determine the multifactor productivity for the combined input
of labor and machine time using the following data:
Output: 7,040 units Input
Labor: $1,000
Materials: $520
Overhead: $2,000