Chapter 1:
Introduction to Operations
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Chapter 1 Learning
Objectives
•LO 1.1 Define operations and supply chain management.
•LO 1.2 Review the role of operations in the firm and the economy.
•LO 1.3 Describe the five main decisions made by operations and supply chain
managers.
•LO 1.4 Explain the nature of cross-functional decision making with operations.
•LO 1.5 Describe typical inputs and outputs of an operations transformation
system.
•LO 1.6 Analyze trends in operations and supply chain management.
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Definition of Operations
Management
Operations management
focuses on decisions for the
internal production of the
firm’s products or services.
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A Typical Supply Chain
(Figure 1.1)
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Operations and Supply Chain
Management
Deals with the sourcing,
production, and distribution of the
product or service along with
managing the relationships with
supply chain partners.
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Importance of
Operations and Supply
Chain
Providing the Sustaining our
products and way of life while
services that we working to
use and enjoy protect the planet
Constantly Creating revenue
improving both from products &
productivity and services to drive
innovation firm profitability
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Role of Operations in the
Economy
Gross Domestic Product (GDP) - monetary value of all goods
and services produced in a country.
Productivity - value of goods/services output, relative to input.
Productivity = output
capital + labor
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Productivity Example
A retail (quick) clinic has the following output (revenue) and labor expenses.
Did productivity improve from Year 1 to Year 2? (assume equivalent capital costs)
Annual
Year 1 Year 2 Inflation
Output (revenue) $thousands $842 $883 2%
Labor $thousands $280 $292 4%
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Productivity Example -
Solution
A retail (quick) clinic has the following output (revenue) and labor expenses.
Did productivity improve from Year 1 to Year 2? (assume equivalent capital costs)
Productivity year 1 = Output year 1 = 842 = 3.01
Labor year 1 280
Productivity year 2 = Output year 2 = 883(.98) = 3.09
Labor year 2 292(.96)
Change in productivity = 3.09 = 1.027 which is a 2.7% increase
3.01
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Why Study Operations
Management?
Challenging and interesting career
opportunities – domestic, international
Cross-functional nature of decisions
– what every major needs to know
Principles of process thinking can be
applied across the organization
ammentorp/123RF
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Careers in
Operations and Supply Chain
Management
Supply Chain Analyst
Supply Chain Analytics
Plant Lead on Sustainability
Sourcing Specialist
Global Sourcing Analyst
Transportation Planner
Risk Consultant
NetPics/Alamy Stock Photo Customs Specialist
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3 Aspects of
Operations and Supply Chain
Management
Decisions:
The operations manager must decide:
• Process, quality, capacity, inventory, and supply chain
Function:
Major functional areas in organizations:
• Operations, marketing, finance
Process:
Planning and controlling the transformation process and its interfaces
(internal/external)
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Let’s Manage Operations
at Pizza USA!
Steve Mason/Getty Images
Managing operations
is about making decisions.
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Major Decisions at Pizza
USA
Process
◦ How should we produce pizzas?
Quality
◦ How do we meet quality standards and ensure a good customer experience?
Capacity
◦ How much output do we need at various times?
Inventory
◦ Which ingredients, when & how much?
Supply Chain
◦ How to source inputs and manage logistics?
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Framework for Operations
Decisions (Figure 1.2)
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Cross-Functional Decision
Making
Operations is critical in every firm.
Marketing = create demand
Operations = produce and distribute goods and services
Finance = acquire and allocate capital
Supporting functions: human resources, information systems, accounting
Cross-functional decision making - see Table 1.2
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Operations as a Process
Inputs Transformation Outputs
(Conversion)
Process
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Operations as a Process
(Figure 1.3)
Energy
Materials
Labor Transformation
(Conversion) Goods or
Capital Services
Process
Information
Feedback information for
control of process inputs
and process technology
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Transformation Process
Examples (Table 1.3)
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Trends in
Operations and Supply Chain
Management
▪ Sustainability – triple bottom line
▪ Services
▪ Digital Technologies
▪ Integration of Decisions Internally and Externally
▪ Globalization of Operations and the Supply Chain
StreetVJ/Shutterstock
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Chapter 1 Summary
•LO 1.1 Define operations and supply chain management.
•LO 1.2 Review the role of operations in the firm and the economy.
•LO 1.3 Describe the five main decisions made by operations and supply chain
managers.
•LO 1.4 Explain the nature of cross-functional decision making with operations.
•LO 1.5 Describe typical inputs and outputs of an operations transformation
system.
•LO 1.6 Analyze trends in operations and supply chain management.
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Questions for Discussion
•What do you hope to learn in this course?
•Review the operations and supply chain trends on slide 1-20. Which of
these is most interesting to you and why?
•What production systems have you seen in person? How do they
produce the intended product or service?
•Describe a transformation process that you recently experienced. Think
about a medical or dental clinic visit, or a restaurant visit.
•Why are global factors important in operations and supply chain?
•How is operations and supply chain related to environmental
responsibility?
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