CHAPTER 1:

INTRODUCTION
TO OPERATIONS
MANAGEMENT
PART 1

JOMAR B. TORRES, LPT, MBA, MPA, CMP, CSSWB

LEARNING OBJECTIVES
At the end of the session, students are
expected to:
1. Understand the importance of operations
in every organization;
2. Identify the function areas of business;
3. Explain the impact of operations with
other functional areas of the organziation.
WHAT IS OPERATIONS MANAGEMENT?
Operations is that part of a business organization that is
responsible for producing goods and/or services.

Goods are physical items that include raw materials, parts,

sub-assemblies, and final products.

Services are activities that provide some combination of

time, location, form, and physical value.
OPERATIONS MANAGEMENT (CONT’D)
IMPORTANT: In a business organization, its ideal situation or ultimate
goal is to achieve an economic match of supply and demand.

Having excess supply or excess capacity is wasteful

and costly.

Having too little supply or capacity means lost

opportunity and possible customer dissatisfaction.
BASIC FUNCTIONS OF AN ORGANIZATION

ORGANIZATION

FINANCE OPERATIONS MARKETING

FUNCTIONAL AREAS OF AN ORGANIZATION
FINANCE OPERATIONS MARKETING

responsible for the sale

responsible for securing
and promotion of the
financial resources at
responsible for goods and/or services of
favorable prices and
producing the an organization. Also,
allocating those
goods and/or marketing is responsible
resources throughout
providing the for assessing customer
the organization, as well
services offered by needs and wants and
as budgeting, providing
the organization. communicating those to
funds for operations,
operations people and
etc.
design people.
OPERATIONS MANAGEMENT: DEFINED
Operations Management is the management of systems and/or
processes that create goods and/or provide services.

Systems include the organization's Quality Management

Systems.

Quality Management Systems includes Procedure

Manuals, Quality Manuals, Forms Manual, Work
Instructions, and Reference Manuals.
OTHER FUNCTIONAL AREAS OF AN
ORGANIZATION

MANAGEMENT
INFORMATION
SYSTEM

PUBLIC LEGAL
RELATIONS

OPERATIONS

PERSONNEL/
ACCOUNTING HUMAN
RESPURCE
 QUESTION

WHICH SIDE OF THE

EQUILIBRIUM DO
OPERATIONS LIE?
 DID YOU KNOW?

SUPPLY DEMAND

OPERATIONS SALES

SUPPLY CHAIN MARKETING

NOTE: While the operations function is responsible

for producing products and/or delivering services; it
needs the support and input from other areas of the
organization.
 DID YOU KNOW?

OPERATIONS AND
SUPPLY SUPPLY CHAINS ARE
INTRINSICALLY LINKED
WITH EACH OTHER.
OPERATIONS

SUPPLY CHAIN “NO BUSINESS CAN

EXIST WITHOUT THE
BOTH”
 QUESTION

WHY ARE OPERATIONS

AND SUPPLY CHAINS
INSTRINSICALLY
LINKED WITH EACH
OTHER?
 SIMPLE SUPPLY CHAIN

Suppliers Direct Producer Distributor Final

Suppliers Suppliers Customer

As seen in the above illustration, a supply chain refers to the series of

organizations that depend on the other in the delivery of goods and/or services
that align with the organization's purpose.

NOTE: Supply chains are both external and internal to the

organization.
 COMPLEX SUPPLY CHAIN

Farm Trucking Mill Trucking

NOTE: Suppliers that may be needed in

between the chain:
Equipment suppliers
Equipment repair
Feed, seed, fertilizers, pesticides,
Energy/fuel
Tires
Drivers Bakery Trucking Supermarket
Other ingredients

NOTE: The value of the product as it moves through the supply

chain.
 LET’S PLAY!

Marketing Machine Human Accounting

Team Operator Resource Team
Team

Legal Team Trucking Retailer/ Shipping

Services Distributor Lines

Raw Air Freight

Material Consultant Customer Services
Supplier
VALUE-ADDED : DEFINED
Value-added is a term used to describe the difference between the
cost of inputs and the value or price of outputs

Value-added = Value of Outputs - Cost of Inputs

For Non-Profit Organizations, value-added is their value

to the society.

For Profit Organizations, value-added is measured by

the price that the customer is willing to pay for a
certain product.
VALUE-ADDED (CONT’D)
Value-added affects the design and management of operations
systems. Among them are:
1. Degree of involvement of customers in the process; and
2. Degree of technology used to produce and/or deliver a
product.

NOTE:
1. The greater the degree of customer involvement,
the more challenging it is to manage the operation.
2. Technology choices impact productivity, costs,
flexibility, quality, and customer satisfaction.
PRODUCTION: TRANSFORMATION OR
COVERSION OF INPUTS INTO OUTPUTS
VALUE-ADDED

INPUTS
1. Land Transformation OUTPUTS
2. Labor /conversion 1. Goods
3. Capital process 2. Services
4. Information

Measurement
Measurement and Feedback Measurement
and Feedback and Feedback

Control

NOTE:
1. Value-added is incorporated during the transformation process.
2. Control is enforced throughout the process to ensure quality standards.
3. Measurement and feedback is in place to improve any deviations form the
process, if any.
DIFFERENCE BETWEEN PRODUCTION OF
GOODS AND PROVISION OF SERVICES
Characteristic Goods Services

Output Tangible Intangible

Customer Contact Low High

Labor Contect Low High

Uniformity of Input High Low

Measurement of Productivity Easy Difficult

DIFFERENCE BETWEEN PRODUCTION OF
GOODS AND PROVISION OF SERVICES
Characteristic Goods Services

Opportunity to Correct Problems

High Low
before delivery

Inventory Much Little

Wages Narrow range Wide range

Patentable Usually Not usually

THANK YOU!!!