Introduction 4 Operations is tat part ofa business organization that's responsibie fr producing goods andlor services. Goods are physical tems that Include raw materials, pats, subassemblies such as motherboards that go Into computers, and hal products such as cell phones and automobiles. Services are aces that provide some combination of time, locaton, form or psychological value Examples af goods and ‘services are found al aroung you. Every Book you fead. every vgeo you watch, every eal you send, every telephone conversation you have, and every medical ealment you receive involves the operations function of one or mote organlzations. So does everthing you ‘wear eat, avalin, st on, and access the Intemet wth. The operations function in business can also Be Viewed fram a more fat-eaching petepectie: The colectve success of failure of companies! operation functions has an impact onthe ablty ofa nation to compete with ‘other nations, and on the nation’s econo. “The ideal situation for a business organzaton ist achieve a match of supply and demand. Having excess supply or excess capacty is wasteful and cost: having io lle means lst opportunty ane possible custome clssalisfacton. The key functions on the supply side are operations and supply chains, and sales ‘and marketing en the demand side, while the operations function is response for producing products andor delvering services, i needs the support and input from other areas ofthe crganization, Susiness organizations nave three basic functional areas, as Gepicted in Flgute 1.1: hance, marketing, anc operations. it doesnt mater wheter te business fa real sore, a nespkal, a manufacturing Than, a carwash, of some ether Iype of business. all business organizations have these three basic functions. Finance Is respensibe fer securing fmancial resources at favorable prices ana alocatng those resources throughout the organization, as well as Duageting. ‘analyzing investment proposals, and providing funds fr operations. Marketing and operations are Ine primary, of ne." unctons. Marketing i raspansibe tor assessing consumer wanis and needs, ant seling and promoting the organization's goods or services. Operations is responsi for producing the goods or prowling ine senvces ofered by tne organization. To pu is ino perspective, a business organtzaton were a car. operations would De ts engine. An just a5 the engine fs he core of wnat a car does, a business organization, operation Is he core of what the organlzation does. Operations management fs responsible for managing that core. Hence, operations management f he management o systems or processes that create goods andlor provide Series, (operations and supply chains are intinsicaly inked an no business organization could ext without both. A supply chain isthe sequence of organizations—their facies, functions, and actvas—that are involved in producing and delvering a product or service ‘The sequence bagins with basic suppers of raw materials and extends all the way tothe final customer, as seen in Figure 12. Facies might inctce warenouses, actors, processing centers, oMiees, cistibutlon centers, and fetal outlets. Functions and actviles ncuge forecasting, purchasing, Inventory management, formation management, ually assurance, scheduling, production, distbutlon, Celery. and customer Service igure 1 provides another istration ofa supply chain a chain that begins with wheat growing on & farm and ends win a customer buying leaf of bread in @ supermarket Notice thatthe value ofthe product increases as t moves through ‘ne suppy chain. FIGURE 1.1 ‘Tne three basic unctons of business organtzations orn pS FIGURE 1.2 A imple procuct supply chain BH eS ‘Supply chains are bot extemal ad internal othe organization. The extemal parts ofa supply chain provide raw materials, pat, equipment supplies, andior ner puts tothe erganzaton, and they detver outputs tat are goeds to the organtzaton's customers. Te internal parts of a supaly chain are par. orth operations function Rs. supplying operations with parts and materials, perorming work on products andlor services, and passing the work onto the neat step in tne process. “The creation cf goods or services involves transforming or conveting inputs nto outputs. Various inputs such as capéal, labor, and information are used to ‘create gonds of senvces using one or more transformation prooesses (2.9. sionng. ransporting.repating), To ensure thatthe desired ouipus are obtained, an ‘organation takes measurements at vanous points inthe transformation process (reecoack) and then compares them wi previously estaplsnea standards fo ‘determine whether corrective action fs needed (conto), Figute 1.4 depts the conversion system. “Table 11 provides some examples of inputs transformation processes, and oulputs. Aktiough goods and services ate listed separately in Table 11 Ris important to note that goods and serves often occur pint. For example, having tne ol changed in your car isa service, but the oilthat is delvered is a good, ‘Similary, nouse painting 1 a Service, out ne paint 8 good. The goods-service combination fsa continuum. It can range trom primary geoes, win ite service, to primany service, wn few googs. Fiqure + § Mustrates this continuum. Because there are relatwely Tew pure goods or pure services, companies usually Sell ‘product packages, which are a combination of goods and services. There are elements of both goods production and service delvery in these produet packages. ‘This makes managing operations more interesting, and also more challenging,FIGURE 1.3 ‘A supply chain for bread FIGURE 1.4 ‘The operations function involves the conversion of inputs into outputs aoe a _| Table 1.2 provides some specific ilustrations ofthe transformation process “The essence of the operations function isto sad value curing the transformation process: Value-aded is tne term used to describe the citference between the ‘cost of Inputs ana the value or price of outputs. In nanpfott organizations, the value of outputs (e.g. highway construction, police and fre pretection) 1s thelr value to Society: tne greater the value-added, the greater the emtecveness of these operation. In or-prote argantzatlons, te value of outputs Is measured by ‘ne prices that customers are willng to pay for those goods or services. Frms use the money generated by value-added for research and develope, investrent in new facities and equipment, worker salaries, and profts. Consequently, the greater the value-added, the greater he amount of funds avaiatve for these purposes. Value can also be psychological. as in branding TABLE 1.1 Examples of inputs, transformation, and outputs tome cae. ny Pace ator Troceent eset tthe cat FIGURE 1.5 sourals nae ‘The goods-service continuum tet Sap. tort ‘aaa conmee Comey re ches Sig snap tga org ‘asc a San Scam we ‘mcr Caran ‘ses oan tr toss Se aes hows nmin or consis er repos Many factors affect the design and management of operations systems. Among them are the degree of involvement of customers inthe process and the degree to wnich technology 's used to produce anavor deiner a product or service The greater ie degree of customer involvement, the more challenging It can be to ‘esign and manage the operation. Technology cholces can have a major impact on productvly, costs, Nexiblly, and qually and customer sailstactionProduction of Goods versus Delivery of Services ‘Although goods and services ofen go hand in hand, there are sume very basi differences between the two, diferences thal impact the management ofthe ‘goods portion versus management ofthe service portion. There are also many simanties between the two Production of goods results in a tangible output, such as an automobile, eyegiasses, a golf bala refigerator—anything that we can see or touch. it may take place in a factory, but can ocour elsewhere. For example. faring produces nonmanufactured goods. Delivery of service, on the other hand, generally implies an fact. A physician's examination, TV and auto repair lawn care, and the projection ofa fimin a theater are examples of services, The majorty of service jobs fall Into these categories TABLE 1.2 Iusirations of the transforration process odPreset — Ranvusttor aug mvegtas Newloees Mirgea ier ‘es ry Coat oe Peta ‘une ors ecupmee | Dacor,mses Sati osesceats as suey Mee ates Merona pnt Nees