1-1 Introduction to Operations Management

Operations Management
 1-2 Introduction to Operations Management

CHAPTER 1

Operations- is part of a business organization that is responsible for producing goods

and/or services. Management of any activities/process that create goods and
provide services.
Exemplary Activities: Forecasting, Scheduling, Quality management

Goods- are physical item that include raw materials, parts, subassemblies such as
motherboards that go into computer, and final product such as cellphone and
automobiles

Services- Are activities that provide some combination of time,

location, form or psychological value.
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

Simple Product Supply Chain

Supply Chain: A sequence of activities and organizations

involved in producing and delivering a good or service.
1-5 Introduction to Operations Management
1-6 Introduction to Operations Management

Value-Added
Figure 1.4
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

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
1-8 Introduction to Operations Management

Hospital Process
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
1-9 Introduction to Operations Management

Production of Goods vs. Providing of Services

 Production of goods – tangible output

 Delivery of services – an act

 Service job categories

 Government
 Wholesale/retail

 Financial services

 Healthcare

 Personal services

 Business services

 Education
1-10 Introduction to Operations Management

Key Differences

1. Degree of Customer contact

2. Uniformity of input
3. Labor content of jobs
4. Measurement of productivity
5. Quality assurance
6. Inventory
7. Wages
8. Ability to patent
1-11 Introduction to Operations Management

 The operations function

 Consists of all activities directly related to
producing goods or providing services

 Finance and operation management personnel

cooperate by exchanging information such
activities as the following :

 Budgeting
 Economic analysis of investment proposals

 Provision of funds
1-12 Introduction to Operations Management

Business Operations Overlap

Figure 1.5

Operations

Marketing Finance
And sales
1-13 Introduction to Operations Management

Operations Interfaces

legal Public
Relations

Operations
Accounting Personnel

MIS
1-14 Introduction to Operations Management

Process Management – a process consist of one or

more actions that transform inputs into outputs. In
essence, the central role of all management is
management process.

Three categories of business process:

1.Upper-management processes

2.Operational processes

3.Supporting processes
1-15 Introduction to Operations Management

Process Variation – occurs in all business processes. It

can be due to variety or variability.

Four basic sources of variation:

1. The variety of goods or services being offered

2. Structural variation in demand
3. Random variation
4. Assignable variation
1-16 Introduction to Operations Management

The scope of operations management

Operations management people are involve in

product and service design, process selection and
management of technology design of work system
and quality improvement of the organization’s
products or services.

Operations functions include;

1.Forecasting

2.Capacity planning
1-17 Introduction to Operations Management

Operations functions include;

1.Forecasting

2.Capacity planning
3.Locating facilities

4.Facilities and layout

5.Scheduling

6.Managing inventories

7.Assuring Quality

8.. Motivating and training employes

1-18 Introduction to Operations Management

Operations Management and decision making

 The chief role of an operations manager is that of planner and decision making.

Operations management professionals make a number of key decision that affect the
entire organizations this include the following:

 What
What resources/what amounts
 When
Needed/scheduled/ordered
 Where
Work to be done
 How
Designed
 Who
To do the work
1-19 Introduction to Operations Management

Models

 A model is a abstraction of reality, a simplified

representation of something.

Models are sometimes classified as

Physical- look like the real life counterparts.
Schematic- are more abstract than physical
Mathematical- are most abstract.
1-20 Introduction to Operations Management

 Quantitative Approaches – often embody attempt to

obtain mathematically optimal solutions to managerial
problems.
 Performance Metrics- to manage and controls operations.
 Analysis of trades-offs – operations personal frequently
encounter decisions.
 Degree of customization- major influence on the entire
organization.
 A systems Approach- beneficial and decision making.
System set of enter related parts that must work together.
 Establishing priorities- Manager discover that certain
issues or items are more important than others.
1-21 Introduction to Operations Management
Pareto Phenomenon

• A few factors account for a high percentage of

the occurrence of some event(s).
1-22 Introduction to Operations Management

The historical evolution of operations management

 Industrial revolution (1770’s)

 Scientific management (1911)
 Mass production
 Interchangeable parts
 Division of labor
 Human relations movement (1920-60)
 Unemployment insurance
 Pension plans
 Decision models (1915, 1960-70’s)
 Influence of Japanese manufacturers (1970-1990)
1-23 Introduction to Operations Management

Other pioneers also conrtibutted

 Frank Gilbreth- industrial engineer, the father of

motions study.
 Henry Gantt – recognize the value of non-
monetary rewards to motivate workers.
 Harrington Emerson- applied taylor’s ideas to
organization structure.
 Henry Ford- the great industrialist ,employed
scientific management techniques in his factories.
1-24 Introduction to Operations Management

Operations Today

 Internet-offers great potential for business

organization.
 E-business-involved the use of the internet to
transact business.
 E-commerce-consumer-business transaction such
as buying online or requesting information.
 Technology-refers to the application of scientific
knowledge to development and improvement of
goods and services.
1-25 Introduction to Operations Management

AGILITY CREATES A COMPETITVE EDGE

 Revenue Management- is a method used by
someone companies to maximize the revenue they
receive from fixed operating capacity influencing
demand through price manipulation.
 Six Sigma- a process for reducing cost, improving
quality , and increasing customer satisfaction.
 Agility- the ability of an organization to respond
quickly to demands or opportunities.
 Lean system- uses minimal amounts of resources
to produce a high volume of high-quality goods
with some variety.
1-26 Introduction to Operations Management

Key Issues For Today’s Business Operastions

 Economic Conditions
 Innovating

 Quality Problems

 Risk Management

 Cyber-security

 Competing in a global economy

Environmental Concerns- concern about global

warming and pollution has had an increasing
effect on how business operate.
1-27 Introduction to Operations Management

ETHICAL CONDUCT

 Ethics- is a standard of behavior that guides how

one should act in various situations.

Five principles for thinking ethically:

1. Utilitarian Principle

2. Rights Principle

3. Common Good Principle

4. Virtue Principle
1-28 Introduction to Operations Management

The need to Manage the supply chain

Supply chain management- is being increasing

attention as business organizations face mounting
pressure to improve management of their supply
chain.
1-29 Introduction to Operations Management

Issues in supply chain:

1. The need to improve operation

2. Increasing levels of outsourcing
3. Increasing transportation cost
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-business
7. The complexity of supply chain
8. The need inventories
1-30 Introduction to Operations Management

Elements of Supply Chain Management

 Supply involves coordinatating activities across to

supply chain. Central to this is taking customer
demand translating it into corresponding activities
at each level of the supply chain.
1-31 Introduction to Operations Management

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