Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.

Operations is one of the principal business functions along with marketing and finance. Operations is the most interesting business function because we actually make something: transform inputs into outputs. Operations management is planning, coordinating, and executing all the activities that create goods and services.

A production system is defined as a user of resources to transform inputs into some desired outputs. .


      Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications .

strategy. Hierarchy of production decisions.    Classifying productive systems ◦ by volume and customization ◦ by good vs. . and decisionmaking. service Identifying the operations deliverables Linking deliverables.


text books.   Project: unique goal. e.g.g. bakeries. . on-site. e. customized product. e. jobs vary with customer. output may be standardized or customized. print shop. Batch processing: moderate amounts of similar products. large scale. food processors. new parking garage Job shop: small quantities. health care.g.

g. e. Continuous process: highly uniform product/service.  Repetitive Process: one or only a few standardized products/services. May involve automation or use of specialized equipment. e. sugar refineries. .g. semiconductor manufacturing. oil.

Low Volume Project Job Shop Batch Repetitive Process Customized High Volume Continuous Process Standardized .

Low Volume Customized Project planning and activity scheduling Capacity management/server scheduling Batch sizing and capacity planning Production control and procurement planning High Volume Standardized Procurement planning and job scheduling .

” (True or false?) .” (Good or service?)  “Services never include goods and goods never include services. it won’t hurt you. “If you drop it on your foot.

 Services ◦ Activity oriented ◦ intangible ◦ Variable input ◦ Variable output ◦ Difficult to measure productivity ◦ Unable to correct problems before delivery. . Goods ◦ Product oriented ◦ tangible ◦ Uniform input ◦ Uniform outputs ◦ Easy to measure productivity ◦ Able to correct problems before delivery.


subjective/qualitative. Must measure and control variability from one server to another and within the same server over time. Capacity planning is very important because there is no inventory or storage. .   Careful attention to measuring productivity and quality -.



Quality Flexibility Operations Management Speed Price (or cost Reduction) .

Value-Added Services .

Problem Solving Information Operations Management Sales Support Field Support .

  Low Cost High Quality VALUE   Delivery speed and reliability Flexibility in ◦ Volume ◦ Variety AVAILABILITY .


.Let’s look at the structure of decision-making first….

.. ◦ How much do we make in January? ◦ How much do we plant? ◦ Do we build a warehouse in Chicago or St. Louis?  Objectives: The basis for selecting between alternative policies…. ◦ ◦ ◦ ◦ Minimize cost Maximize revenue Maximize quality Minimize lead or queue time . Decision Variables or Policies: What do we have to select.

 Capabilities/Deliverables translate into Objectives and Constraints depending upon the nature of the market/customer.00 per bushel ◦ Lead time must be no more that 7 days. Constraints: Boundaries within which we must select a policy (resource constraints) ◦ Quality must be no less that 99% conformance ◦ Cost must be no more that $5. .

Customer or Market Requirements Organization Goals/Objectives Policies and Procedures .



◦ For example. . organizational goal may be to be high quality producer.  Externally inconsistent ◦ Organizational goals are inconsistent with customer needs. customer wants high quality but organization emphasizes low cost. ◦ For example. Internally inconsistent ◦ Policies and Procedures do not contribute to organizational objectives and goals. but manufacturing policies stress rapid delivery.

Incentive systems that do not support organizational objectives.   Lack of communication about customer needs. . Lack of understanding of customer needs.

Forecast Aggregate Plan Master Prod Sched Procurement Plan Operations Sched .

TQM= Total Quality Management 3 3 .  Industrial revolution Scientific management 1900s Human relations movement Management science Computer age Environmental Issues JIT & TQM* ◦ Hawthorne Effect Late 1700s Early 1930s1940s1960s1970s1980s1930s      *JIT= Just in Time.

companies must place much importance on their operations 3 4 .       Reengineering Global competition 1980Flexibility Time-Based Competition 1990Supply chain Management 1990Electronic Commerce Outsourcing & flattening of world 2000- 19901990- 2000- For long-run success.

greater speed. and lower costs Companies implementing lean system concepts – a total systems approach to efficient operations Recognized need to better manage information using ERP and CRM systems Increased cross-functional decision making 3 5 .    Customers demand better quality.

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