Chapter 1 - Introduction to

Operations
Management

Operations Management
by

R. Dan Reid & Nada R. Sanders

2nd Edition © Wiley 2005

PowerPoint Presentation by R.B. Clough - UNH

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What is Operations Management?

The business function responsible for

planning, coordinating, and
controlling the resources needed to
produce a company’s products and
services

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Typical Organization Chart

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OM’s Transformation Role

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value added
 The difference between the value of
inputs and output.

 Efficiency: performing activities at the

lowest possible cost.

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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.

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Manufacturing vs. Service
organizations
 Service org.
 Manufacturing org.
 Quasi-manufacturing.

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OM Decisions

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Operation Management
Decisions for Gourmet Wafers
 P. 8

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Plan of Book-Chapters link to Types
of OM Decisions

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 Historical Development of OM
 Industrial revolution Late 1700s
 Replacement of human with machine
 James Watt – Steam engine – development of railroad
 Adam Smith – Division of labor
 Eli Whitney – interchangeable part

 Scientific management Early 1900’s

 People motivated by money
 Separation of planning from doing
 Piece rate system
 Henry Ford – Assembly line – mass production

 Human relations movement 1930s to 1960s

 Elton Mayo –
 Job enlargement – more tasks
 Job enrichment – involvement in planning

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 Management science Mid-1900s
 Use of mathematical techniques
 Harris – 1913 the first mathematical equation to solve OM issues

 Computer age 1970s

 Data processing – computerized mathematical equation – Material Requirement
Planning software (MRP) for inventory control.

 Just-in-Time Systems (JIT) 1980s

 Philosophy developed in Japan in the 80’s –

 Total quality management (TQM) 1980’s

 Deming – ISO 9000 (International Organization for Standardization)

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 Reengineering 1990s
 Reducing the company cost by increasing efficiency “we’ve always done it this
way” ask why?

 Flexibility 1990s
 Mass customization

 Time-Based Competition 1990s

 Supply chain Management 1990’s

 Management of the flow of material and information from suppliers to customers

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 Global Competition 1990s
 Customizing - Meeting customers needs everywhere

 Environmental Issues – sustainability and green operation

1990s
 Reducing waste and pollution ISO 14000

 Electronic Commerce Late 1990s

 The use of internet for conducting business - B2B, B2C, C2C

 Outsourcing and flattening of the world

 Help companies focus on what they do best

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Today’s OM Environment
 Customers demand better quality, faster
deliveries, and lower costs. Which lead many
companies to adopt:
 Lean system approach: a system that pulls
together best practices (JIS), (TQM), (SCM),
in order to create efficient operations through
out the organization.

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Today’s OM Environment
In addition many transition rely on
Enterprise Resource Planning (ERP):
A sophisticated software system use to
identify and plan all resources needed
to produce a product and to coordinate
activities through out the org.

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Today’s OM Environment
 However, applying the best practices is not enough to give a
company competitive edge. Simply today best practices can
easily passed to competitors.

 To gain competitive advantage companies continuously look at

ways to better respond to customers requirements.

Toady businesses rely on

 Customer relation management (CRM) systems: Software
solution that enabled the company to collect data on its loyal
customers.
 CRM and ERP Enterprise Resource Planning) can be
integrated to connect customers requirements with the available
resources.

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Today’s OM Environment
 Another characteristics of today's OM is the
increase use of
 Cross Functional decision making:
coordinated interaction and decision making
between different departments of the
organization.

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Operation management in
practice
 Many top CEO come from OM
background. The head of OM usually
carries a title such as VP of operations,
below her middle managers. OM
decisions based on feed back from
other departments and many other
departments decisions based on feed
back from OM see fig 1-10.
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Business Information Flow

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Chapter 1 Highlights
 OM is 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 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

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