Introduction to

Operations Management

1
 Learning Objectives

 Define OM
 Role of OM in business
 Decisions that operations managers make
 OM differences between service and mfg.
 Major historical developments in OM
 Identify current trends in OM
 Define information flow between OM and other
business functions

2
 What is Operations Management?

The business function responsible for planning,

coordinating, and controlling the resources needed to
produce a company’s products and services.
 It is a management function.
 Organization’s core function.
 Every organization has the OM function
 Manufacturing or Service
 For Profit or Not For Profit

3
Typical Organization Chart

4
 Systems Concept

inputs outputs mission

land transformations goods goals
labor services objectives
capital
•facilities SYSTEM
•equipment
Physical
•tools
energy Locational
O
materials Exchange
I
data Storage
productivity
Physiological
Informational
5
 Why OM?

 “In business today, the emphasis is not so much

on what you make, but on how you do
business. Dell makes computers just like every
other PC manufacturer.” Quote: KT CEO on
CNBC 4/99

 The resurgence of American business in the

1990’s capitalized on improved operations.

6
Differences between Manufacturers and
Service Organizations

 Services:  Manufacturers:
 Intangible product  Tangible product
 Product cannot be  Product can be inventoried
inventoried  Low customer contact
 High customer contact  Longer response time
 Short response time  Capital intensive
 Labor intensive

7
 Similarities-Service/Manufacturers

 All use technology

 Both have quality, productivity, & response issues
 All must forecast demand
 Each will have capacity, layout, and location issues
 All have customers and suppliers
 All have scheduling and staffing issues

8
Trends in OM
 Service sector growing to 80%
of non-farm jobs- See Figure 1-
4
 Global competitiveness
 Demands for higher quality
 Huge technology changes
 Time based competition
 Work force diversity

9
OM Decisions

10
Types of OM Decisions

11
 Historical Development of OM
 Industrial revolution Late 1700’s
 Scientific management Early 1900’s
 Human relations movement 1930’s to 1960’s
 Management science Mid-1900’s
 Computer age 1970’s
 Just-in-Time Systems (JIT) 1980’s
 Total quality management (TQM) 1980’s
 Reengineering 1990’s
 Flexibility 1990’s
 Time-Based Competition 1990’s
 Supply chain Management 1990’s
 Global Competition 1990’s
 Environmental Issues 1990’s
 Electronic Commerce Late 1990’s

12
 Today’s OM Environment

 Customers demand better quality, faster

deliveries, and lower costs
 Increased cross-functional decision making
 Recognized need to better manage information
using ERP and CRM systems
 Global competition

13
Business Information Flow

14
Highlights
 OM is the function that manages the resources that add value
 Its role is to transform inputs into products or services
 Decisions are many and vary from daily tactical to long-term strategic
 Key differences between mfg. and service companies are tangibility of
product and degree of customer contact
 Historical milestones range from 1700s Industrial Revolution to the
modern Electronic Commerce age
 OM must understand and implement major process changes like JIT,
TQM, supply chain management, and environmental changes
 OM works closely with all other business functions

15