1-1 Introduction to Operations Management

Operations Management

William J. Stevenson

8th edition
 1-2 Introduction to Operations Management

CHAPTER
1

Introduction to
Operations Management

McGraw-Hill/Irwin
1-3 Introduction to Operations Management

Operations Management
Figure 1.1

The management of systems or processes

that create goods and/or provide services

Organization

Finance Operations Marketing

1-4 Introduction to Operations Management

Operations Interfaces
Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS
1-5 Introduction to Operations Management

operations function

 The operations function

 Consists of all activities directly related to
producing goods or providing services
1-6 Introduction to Operations Management

Value-Added
Figure 1.2
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
1-7 Introduction to Operations Management

Goods-service Continuum
Figure 1.3

Steel production Home remodeling Auto Repair Maid Service Teaching

Automobile fabrication Retail sales Appliance repair Manual car wash Lawn mowing

High percentage goods Low percentage goods

Low percentage service High percentage service
1-8 Introduction to Operations Management

Food Processor
Table 1.2

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
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Hospital Process
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
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BUSINESS PROCESS MANAGEMENT

A process consists of one or more actions that transform inputs into outputs.

1. Upper-management processes.
These govern the operation of the entire organization. Examples include organizational
governance and organizational strategy.

2. Operational processes. These are the core processes that make up the value
stream.
Examples include purchasing, production and/or service, marketing, and sales.

3. Supporting processes. These support the core processes. Examples include

accounting,
human resources, and IT (information technology).

process design, process execution, and process monitoring

 1-11 Introduction to Operations Management

Managing a Process to Meet Demand

Managing Process Variation

1.The variety of goods or services being offered. The greater the variety of goods
and services, the greater the variation in production or service requirements.
2. Structural variation in demand. These variations, which include trends and
seasonal variations, are generally predictable. They are particularly important for
capacity planning.
3. Random variation. This natural variability is present to some extent in all
processes, as well as in demand for services and products, and it cannot generally be
influenced by managers.
4. Assignable variation. These variations are caused by defective inputs, incorrect
work methods, out-of-adjustment equipment, and so on. This type of variation can be
reduced or eliminated by analysis and corrective action.
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Scope of Operations Management

 Operations Management includes:
 Forecasting
 Capacity planning

 Scheduling

 Managing inventories

 Assuring quality

 Motivating employees

 Deciding where to locate facilities

 And more . . .
1-13 Introduction to Operations Management

Responsibilities of Operations Management

Table 1.6

Planning Organizing
– Capacity – Degree of centralization
– Location – Process selection
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling/Improving – Issuance of work orders
– Inventory – Job assignments
– Quality
– Costs
– Productivity
1-14 Introduction to Operations Management

Key Decisions of Operations Managers

 What
What resources/what amounts
 When
Needed/scheduled/ordered
 Where
Work to be done
 How
Designed
 Who
To do the work
1-15 Introduction to Operations Management

Trends in Business
 Major trends
 The Internet, e-commerce, e-business
 Management technology

 Globalization

 Management of supply chains

 Agility