Textbook For The Subject

TITLE: OPERATIONS MANAGEMENT AND

TOTAL QUALITY MANAGEMENT
2020 ed.
AUTHORS: COLLIER, EVANS, AND LINDSAY

AVAILABLE AT REX BOOK STORE

CHAPTER I: OPERATIONS MANAGEMENT AND
VALUE CHAINS
• Learning Objectives:
1. Explain the concept and importance of operations management.
2. Describe what operations managers do.
3. Differentiate goods from services.
4. Define concept of value and discuss how the value of goods and
services can be enhanced.
5. Describe a customer benefit package.
6. Differentiate value chain from supply chain and identify 3 types
of processes in a business.
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• Learning Objectives:
7. Contrast the three different frameworks for describing value
chains.
8. Summarize the historical development of OM.
9. Describe key challenges facing OM.
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• OPERATIONS MANAGEMENT:
– Is the science and art of ensuring that goods and services are created and
delivered successfully to customers:
– It includes the design of goods, services and the process that create them;
the day-to-day management of those processes; and the continual
improvement of those goods, services and processes
– OM is important because it makes companies successful – Success Story of
Procter & Gamble – William Cooper Procter grandson of the founder.

• OM in the Workplace and its Usage:

1. Process Design – When introducing a new product
2. Inventory management – controls and track down cost to avoid extra cost
3. Scheduling – ensures enough production
4. Quality management – to conform standards of products.
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• UNDERSTANDING GOODS AND SERVICES:
• GOOD – is a physical product that you can see, touch or possibly
consume. Ex. Cell phones, appliance, food etc.
➢ Durable Good – is one that does not quickly wear out and typically last at
least three years. Ex. Vehicles, furnitures, etc.
➢ Nondurable Good – is one that is no longer useful once it is used or last for
more that 3 years. Ex shoes, clothing and food.

• SERVICE – is any primary or complementary activity that does

not directly produce a physical product. It represent the non-
goods part of a transaction.
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• SIGNIFICANT DIFFERENCES BETWEEN GOODS AND SERVICES:
1. Goods are tangible while services are experienced.
2. Customers participate in many service processes, activities and
transactions.
- Service encounter – is an interaction between the customer and the service
provider. Ex. Making hotel reservation, purchase a website.
3. The demand for service is more difficult to predict than the
demand for goods.
4. Service can not be stored as physical inventory.
5. Service management skills are paramount to a successful
service encounter.
 CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• SIGNIFICANT DIFFERENCES BETWEEN GOODS AND SERVICES:
6. Service facilities typically need to be in close proximity to the customer.
7. Patent do not protect service.
• HOW GOODS AND SERVICES AFFECT OM ACTIVITIES
OM ACTIVITY GOODS SERVICE
1. Forecasting Forecast involve long-term Forecast horizon are short
2. Facility Location production should be near to facility should be close to
raw materials customer
3. Facility Lay-out warehouse designed for designed for good customer
and Design efficiency interaction
 CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
OM ACTIVITY GOODS SERVICE
4. Technology production on automation rely on info based hdwe.
5. Quality define clear and measurable account for customer
quality perception of quality
6. Inventory/capacity use physical inventory quality measurement
and Design efficiency
7. Process Design controllable (can be automated) extensively participated
8. Job/Service production skills required behavioral and service
Encounter Design skills
9. Scheduling revolves around the location focus on assigned employee
10. Supply chain focus on physical flow of goods focus on flow of people
Management
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• THE CONCEPT OF VALUE
✓ Value – is the perception of the benefits associated with a good, service, or bundle of goods
and services in relation to what buyers are willing to pay for them.
✓ Formula - Value = Perceived benefits /
Price(cost)to customer

• CUSTOMER BENEFIT PACKAGES

✓ Bundling on goods and services, and digital content is a certain way to provide value to
customers that differentiates products from competitor.
✓ Customer Benefit Package – is a clearly defined set of tangible (goods content) and
intangible (service content) features that the customer recognizes, pay for, uses, or
experience.

Samples:
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• VALUE CHAINS
- Is a network of facilities and processes that describes the flow of materials, finished goods and
services, information, and financial transaction from suppliers, through the facilities and
processes that create goods and services, and those that deliver them to the customer.

➢ Key Processes in business includes:

1. Core Processes – focus on production and delivery of products
2. Support Processes – includes purchasing of materials and suppliers and others
3. General Management Processes – includes accounting, IT systems, HR and marketing
• VALUE CHAIN FRAMEWORKS
3 Different Perspective
a. input-output framework – (cradle-to-grave) begins with suppliers of materials to goods and service
providing process.
b. Pre-and Postproduction Service Framework – Pre include customized and team oriented product design,
consulting services and others while Post include on-site installations or application services.
c. Hierarchical Supply Chain Framework – Supply chains are the foundation of most value chain. Ex HP ships
thousands of computers daily and spends US$50B or 64% of its revenue on supply chain activity.
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• OM: A HISTORY OF CHANGE AND CHALLENGE
7 major ERAs of Operations Management
1. Focus on Cost and Efficiency – It was on the Industrial Revolution where many inventions
came to being.
2. The Quality Revolution – US and Japanese focused on this after the 2nd world war.
3. Customization and Design – because of competition, companies emphasized innovative
designs
4. Time-Based Competition – Quick response to competition by continually improving and
reengineering processes
5. The Service revolution – in 1955, about 50% of US workforce were employed in goods
producing industries and 50% at service. Today 90% of employees are already in service
process
6. Sustainability – (refers to an organizations ability to strategically address current business
needs and successfully develop a long-term strategy to preserve future generations)
7. Data Analytics – very important in evaluating operations performance.
CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS
• OTHERS AND TERMS:
3 Perspectives of Sustainability:
1. Environmental Sustainability – is an organization’s commitment to the long-term quality of our
environment.
2. Social Sustainability – is an organizations commitment to maintain a healthy communities and
a society that improves the quality of life.
3. Economic Sustainability – is an organizations commitment to address current business needs
and economic vitality
– Business Analytics – is a process of transforming data into actions through analysis and insights
in the context of organizational decision making and problem solving.

END OF MODULE 1
ASSIGNMENT:
1. Read the “Zappos Case Study” on page 25 & 26 and answer only the first 2 questions.
15 points
1. Send answers through the inbox in canvass.