Chapter 1: Introduction to Operations Management

Operations Management is the management of systems or processes that create goods and/or provide services.

Business Organizations Basic Functions1. Finance responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations.2. Operations responsible for producing the goods or providing the services offered by the organization. Core function of an organization.

3. Marketing responsible for assessing consumer wants and needs, and selling and promoting the organizations goods or services.

Inputs Converted Into Outputs Capital Labor Information Land Human Capital Raw Materials Equipment Facilities

Sequence of Conversion of Inputs Into OutputsOutputs

Transformation/Conversion Process

Inputs

Control

Product Packages combination of goods and services.

Value-added the difference between the cost of inputs and the value or price of outputs.

Service Jobs Categories Government Wholesale/retail Financial Services Health care Personal Services Business Services Education

Manufacturing goods-oriented.Service act-oriented.

Differences of Manufacturing and ServiceCharacteristicsGoodsServices

Customer ContactLowHigh

Uniformity of InputHighLow

Labor Content of JobsLowHigh

Uniformity of OutputHighLow

Measurement of ProductivityTangibleIntangible

Production and DeliveryEasyDifficult

Quality AssuranceHighLow

Amount of InventoryMuchLittle

Evaluation of WorkEasierMore Difficult

Ability to Patent DesignUsuallyNot Usually

Involvement of Operations Management Peoplea. Product and Service Designb. Process Selectionc. Selection and Management of Technologyd. Design of Work Systemse. Location Planningf. Facilities Planningg. Quality Improvement of the organizations products or services

Operations Function Activitiesa. Forecastingb. Capacity Planningc. Schedulingd. Managing Inventoriese. Assuring Qualityf. Motivating Employeesg. Deciding where to locate facilities

The success of business depends on short- and long-term planning.

Operations Manager its primary function is to guide the system by decision making. Key figure in the system. Has the ultimate responsibility for the creation of goods or provision of services

Certain decisions affect the design of the system, and other affect the operation of the system.

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 involves management of personnel, inventory planning and control, scheduling, project management, and quality assurance.

Strategic Decisions for long-term; for system design.

Tactical and Operational Decisions for short-term; for system operation.

System design essentially determines many of the parameters of system operation.

Areas of Operations Functiona. Purchasing responsibility for procurement of materials, supplies, and equipment.b. Industrial Engineering concerned with scheduling, performance standards, work methods, quality control, and material handling.c. Distribution involves the shipping of goods to warehouses, retail outlets, or final customers.d. Maintenance responsible for general upkeep and repair of equipment, buildings and grounds, heating and air-conditioning; removing toxic wastes; parking; and security.

Model an abstraction of reality; a simplified representation of something.

Classification of Modelsa. Physical Models look like their real-life counterparts. The advantage of these models is their visual correspondence with reality.b. Schematic Models more abstract that their physical counterparts; they have less resemblance to the physical reality. The advantage of these models is that they are often relatively simple to construct and change; they have some degree of visual correspondence.c. Mathematical Models - most abstract; they do not look at all like their real-life counterparts. These models are usually the easiest to manipulate.

Why Are Models Beneficial They are generally easy to use and less expensive than dealing directly with the actual situation. Require users to organize and sometimes quantify information and, in the process, often indicate areas where additional information is needed. Increase understanding of the problem. Enable managers to analyze What if? questions. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem. Enable users to bring the power of mathematics to bear on a problem.

Limitations of Model Quantitative information may be emphasized at the expense of qualitative information. Models may be incorrectly applied and the results misinterpreted. The use of models does not guarantee good decisions.

System a set of interrelated parts that must work together.

Pareto Phenomenon a few factors account for high percentage of the occurrence of some event(s).

Lead Time the time between ordering a good or service and receiving it

Craft Production system in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods.

Mass Production system in which low-skilled workers use specialized machinery to produce high volumes of standardized goods.

Interchangeable Parts parts of a product made to such precision that they do not have to be custom fitted.

Division of Labor the breaking up of a production process into small tasks, so that each worker performs a small portion of the overall job.