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DS 412 Spring 2014

1. 2. 3. 4. Define operations management. Three major functional areas of organization. Service vs. manufacturing operations. Decision making in operations management (OM).

What is Operations Management?

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

The Organization
The Three Basic Functions

Manage cash flows, assets and capital investments

Manage people, equipment, material, technology, information. Produce goods and

Mange customer demand. Generate sales for goods/services

Conversion of inputs into outputs

The Operations Function

The operations function involves the conversion of inputs into outputs
Value-added is the difference between the cost of inputs and the value or price of outputs.

Value added
Labor Facilities Equipment Material Capital Technology

Transformation/ Conversion process

Outputs Goods Services


Goals of the Transformation Process

1. To add value
Value added is the net increase between output product value and input material value.

2. To improve efficiency
Efficiency means performing activities well for least possible cost.

DS 412 will cover several methods and approaches to achieve these goals.

Manufacturing Goods vs. Providing Services

Key Differences Output Uniformity of input Goods Tangible High Services Intangible Low

Uniformity of output
Customer contact Time lag

Low High

High Short

Labor content
Measuring productivity Quality assurance

Easier Easier

Harder Harder

Goods-Service Continuum


Surgery, teaching Song writing, software development Computer repair, restaurant meal

Automobile Repair, fast food Home remodeling, retail sales Automobile assembly, steel making

Similarities for Service/Manufacturers

use technology must forecast demand have quality, productivity, & response issues can have capacity, layout, and location issues have customers, suppliers, scheduling and staffing issues Many of the topics we cover in DS 412 apply to both services and manufacturing.

Decisions in OM
All organizations make decisions and follow a similar path First decisions Strategic decisions set the direction for the entire company; broad in scope and long-term in nature. Second decisions Tactical decisions focus on specific day-to-day issues like resource needs, schedules, & quantities to produce

Tactical and Strategic decisions must align

How are Decisions Made in OM?

Extensive use of:
Models and Quantitative approaches. Models are abstractions of reality.
Easy to use, less expensive. Provide useful insight to the problem. Enable what if questions. usually a Mathematical model

Numerical results may be over-emphasized over qualitative information. Models may be poorly designed.

Analysis of trade-offs and priorities.

What are the pros and cons?


Model Example
Abstract Real Life Problem Make Assumpitions Model

What are the Key Questions/Decisions?

What: What resources/what amounts When: Needed/scheduled/ordered Where: Work to be done How: Designed Who: To do the work

To answer these questions , tradeoffs must be made on Cost? Quality? Time? Flexibility? All of the above? Some?

Organization of Text Book

Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 13 Chapter 14 Chapter 15 Chapter 16 Supplement B Introduction Strategy and Competiveness Product Design & Process Selection Supply Chain Management Total Quality Management Statistical Quality Control Just in Time and Lean Systems Forecasting Capacity Planning & Facility Location Facility Layout Work System Design Inventory Management Aggregate Planning Resource Planning Scheduling Project Management Introduction to Optimization


We will omit shaded chapters. The chapters we cover are shown in red: 1,5,6,8,9,12,16

Sequence of Topics in this Course

Chapter 1: Introduction to Operations Management Chapter 8: Forecasting Chapter 9: Capacity Planning & Facility Location Supplement B: Introduction to Optimization Chapter 12: Inventory Management Chapter 16: Project Management Chapters 5 & 6: Quality Management