1

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 2

Chapter 1

Introduction to the Field

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 3

OBJECTIVES
 Operations Management
 Why Study Operations Management?
 Transformation Processes Defined
 Operations as a Service
 The Importance of Operations
Management
 Historical Development of OM
 Current Issues in OM

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 4

What is Operations Management?

Defined
Operations management (OM) is
defined as the design, operation,
and improvement of the systems
that create and deliver the firm’s
primary products and services

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 5

Why Study Operations

Management?
Systematic Approach
to Org. Processes

Business Education Operations Career Opportunities

Management

Cross-Functional
Applications

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 6

What is a Transformation
Process?

Defined
A transformation process is defined
as a user of resources to transform
inputs into some desired outputs

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 7

Transformations
 Physical--manufacturing
 Locational--transportation
 Exchange--retailing
 Storage--warehousing
 Physiological--health care
 Informational--telecommunications

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 8

What is a Service and What is a

Good?

 “If you drop it on your foot, it won’t

hurt you.” (Good or service?)

 “Services never include goods and

goods never include services.” (True
or false?)

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 9

OM in the Organization Chart

Finance Operations Marketing

Plant Operations Director

Manager Manager

Manufacturing, Production control,

Quality assurance, Engineering,
Purchasing, Maintenance, etc

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 10

Core Services
Defined

Core services are basic things

that customers want from
products they purchase

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 11

Core Services Performance Objectives

Quality

Operations
Flexibility Speed
Managemen
t

Price (or cost

Reduction)

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 12

Value-Added Services
Defined
Value-added services
differentiate the organization
from competitors and build
relationships that bind
customers to the firm in a
positive way

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 13

Value-Added Service Categories

Problem Solving

Operations Sales Support

Information
Management

Field Support

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 14

The Importance of Operations

Management

 Synergies must exist with other

functional areas of the
organization
 Operations account for 60-80%

of the direct expenses that

burden a firms profit.

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 15

Historical Development of OM
 JIT and TQC
 Manufacturing Strategy Paradigm
 Service Quality and Productivity
 Total Quality Management and Quality
Certification

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 16

Historical Development of OM
(cont’d)
 Business Process Reengineering

 Supply Chain Management

 Electronic Commerce

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 17

Current Issues in OM
 Coordinate the relationships between
mutually supportive but separate
organizations.
 Optimizing global supplier, production,
and distribution networks.
 Increased co-production of goods and
services

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 18

Current Issues in OM (cont’d)

 Managing the customers
experience during the service
encounter
 Raising the awareness of
operations as a significant
competitive weapon

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 19

End of Chapter 1

©The McGraw-Hill Companies, Inc., 2006