Chapter 1 Introduction to

Operations Management
Operations is that part of a business
organization that is responsible for
producing goods & services.
• Goods are physical items produced
by business organizations.

• Services are activities that provide

some combination of time, location,
form, and psychological value.
3 Basic Functions of Business
Organizations

Organization

Finance Operations Marketing

 Overlap

Operations

Finance Marketing
 Overlap

•Budgeting
Operations
•Investments
•Funds
Finance Marketing •Lead Time
• Operations management is the
management of systems or processes
that create goods and provide services.

• Supply chain is a sequence of activities

and organizations involved in producing
and delivering a good or service.
 Product Supply Chain

Distributo
Suppliers Producer Customers
r
 Value-added

Conversio
Inputs Outputs
n
 Value-added

Inputs: Conversion: Outputs:

Land Goods
Transformation
Labor process (Control) Services
Capital
• Value-added is the difference
between the cost of inputs and
the value or price of outputs.
 Why study operations management?

• OM will serve you well in your career.

• Better understanding of the world you live in.
• Global dependence of companies & nations.
• Importance of working with others.
• Lead time is the time between
ordering a good or service and
receiving it.
 Process Management
• Process management is one or more
actions that transform inputs into outputs.

Customer
Suppliers Business s
Inputs Outputs
 Process Management
•Process is one or more actions that transform inputs
into outputs.
•Business processes form a sequence of suppliers and
customers to meet demand.

Customer
Suppliers Business s
Inputs Transformation Outputs
(to meet demand)
• Supply chains are the sequential
systems of suppliers and
customers that begins with basic
sources of inputs and ends with
final customers of the system.
 Elements of Supply Chain
• Customers • Inventory
• Forecasting • Purchasing
• Design • Suppliers
• Capacity planning • Location
• Processing • Logistics
 3 categories of business process:

–1. Upper management process

–2. Operational process
–3. Supporting process
Supporting Functions

Legal

Public Human
Relations Resource

Operations

Information
Accounting
System
 Operation Management
• What resources will be needed?
• When will each resource be needed?
• Where will the work be done?
• How will the product or service be designed?
• Who will do the work?
 Operation Management involves
• System design • Inventory & supply
• management
Capacity planning
• Production planning
• Process selection
• Quality assurance
• Location selection • Scheduling
• Work management • Project management