Student Slide OM - Chapter 1

Chapter I: Introduction to
Operations Management
Delivered by: Dr. Bui Cong Son
Learning Objectives
1. LO1.1 Define the terms operations management and supply chain.
2. LO1.2 Identify similarities and differences between production and service operations.
3. LO1.3 Explain the importance of learning about operations management.
4. LO1.4 Identify the three major functional areas of organizations and describe how they interrelate.
5. LO1.5 Summarize the two major aspects of process management.
6. LO1.6 Describe the operations function and the nature of the operations manager’s job.
7. LO1.7 Explain the key aspects of operations management decision making.
8. LO1.8 Briefly describe the historical evolution of operations management.
9. LO1.9 Describe current issues in business that impact operations management.
10.LO1.10 Explain the need to manage the supply chain.

Production of Goods VS Providing Services
• Operations is that that is responsible for
producing goods and/or services.
• Goods Physical items produced by .
• Services Activities that provide of time, location,
form, and psychological value.

• Operations management is the

management of that
create goods and/or provide services.
• A supply chain is the sequence of

organizations - their facilities, functions, and
activities - that are
.The sequence begins
with basic suppliers of raw materials and
extends all the way to the final customer.
FIGURE 1.1 The three basic functions of business organizations
FIGURE 1.2 A simple product supply chain

• The essence of the operations

function is to add value during FIGURE 1.4
The operations function involves the conversion of inputs into outputs
the transformation process:
is the term used to
describe the difference between
the cost of inputs and the value
or price of outputs.
15 mins Group
discussion: Pick up
a service/ product
then analyze it
operation process
Identify the similarities and differences between
production and service operations.
Typical differences between production of goods
and provision of services
Characteristic Product Service
Output Tangible Intangible
Customer contact Low High
Labor content Low High
Uniformity of input High Low
Measurement of productivity Easy Difficult
Opportunity to correct problems before delivery High Low
Inventory Much Little
Wages Narrow range Wide range
Patentable Usually Not Usually
Why Learn about Operations Management?
• There are many career-related reasons for wanting to learn about operations management,
whether you plan to work in the field of operations or not.
• Every aspect of business affects or is operations. Operations and sales are the
two in a business organization. All other functions—accounting, finance,
marketing, IT, and so on—support the two line functions.
• Working together successfully means that all members of the organization understand not only
their own role, but they also . In practice, there is significant
interfacing and collaboration among the various functional areas, involving exchange of
information and cooperative decision making.
Finance and operations management personnel cooperate by exchanging
information and expertise in such activities as the following:

• Budgeting. Budgets must be periodically prepared to plan financial requirements. Bud- gets must
sometimes be adjusted, and performance relative to a budget must be evaluated.
• Economic analysis of investment proposals. Evaluation of alternative investments in plant and

equipment requires inputs from both operations and finance people.
• Provision of funds. The necessary funding of operations and the amount and timing of funding can
be important and even critical when funds are tight. Careful planning can help avoid cash-flow
FIGURE 1.6 The three
major functions of business problems.
organizations overlap
Marketing, operations, and finance must interface on product and process design,
forecasting, setting realistic schedules, quality and quantity decisions, and keeping
each other informed on the other’s strengths and weaknesses.

Legal
Public
Accounting
relations
Operation
Personnel
MIS
/ HR
Operations interfaces with a number

of supporting functions
Process Management
• A key aspect of operations management is process management.
• A process consists of one or more actions that transform inputs into outputs. In essence, the
central role of all management is process management.
• There are three categories of business processes:

1. . These govern the operation of the entire organization.
Examples include organizational governance and organizational strategy.
2. . These are the core processes that make up the value stream.
Examples include purchasing, production and/or service, marketing, and sales.
3. These support the core processes. Examples include

accounting, human resources, and IT (information technology).
Process Management
• Business process management (BPM) activities include ,
, and process monitoring.
• Two basic aspects of this for operations and supply chain management are
to meet demand and dealing with .
• Ideally, the capacity of a process will be such that its output just matches demand.
Excess capacity is ; too little capacity means dissatisfied
customers and lost revenue.
• Process variation and demand variability can make the achievement of a match
between . Variation occurs in all business processes. It
can be due to variety or variability.
Forecasting
The Scope of Capacity planning
Operations Locating facilities
Management Facilities and layout
Scheduling
Managing inventories
Assuring Quality
Motivating and training employees

Operations Management and Decision Making
• The is that of planner and decision maker.
• Operations management professionals make a number of that

affect the entire organization. These include the following:
• What: What resources will be needed, and in what amounts?
• When: When will each resource be needed? When should the work be scheduled? When
• should materials and other supplies be ordered? When is corrective action needed?
Where: Where will the work be done?
• How: How will the product or service be designed? How will the work be done
(organization, methods, equipment)? How will resources be allocated?
• Who: Who will do the work?
Operations Management and Decision Making
General approaches to decision making
Quantitative
Model methods
Analysis trade- Establishing

off priorities
Systems
Ethic
approach
The Historical Evolution of Operations Management
The Historical Evolution of Operations Management
Operations Today
• Advances in information technology and have had a major
influence on operations management. While the Internet offers great potential for
business organizations, the potential as well as the risks must be clearly understood in
order to determine if and how to exploit this potential.
• Technology The application of scientific knowledge to the development and

improvement of products and services and operations processes.
• is changing the way business organizations interact with their

customers and their suppliers. Most familiar to the general public is e-commerce,
consumer–business transactions such as buying online or requesting information.
Key Issues for Today’s Business Operations
Economic conditions.
Innovating.
Quality problems.
Risk management.
Cyber-security.
Competing in a global economy.

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Chapter I: Introduction to

3. LO1.3 Explain the importance of learning about operations management.

5. LO1.5 Summarize the two major aspects of process management.

7. LO1.7 Explain the key aspects of operations management decision making.

8. LO1.8 Briefly describe the historical evolution of operations management.

9. LO1.9 Describe current issues in business that impact operations management.

10.LO1.10 Explain the need to manage the supply chain.

• Operations is that that is responsible for

producing goods and/or services.

• Goods Physical items produced by .

• Services Activities that provide of time, location,

form, and psychological value.

• Operations management is the

• A supply chain is the sequence of

FIGURE 1.1 The three basic functions of business organizations

FIGURE 1.2 A simple product supply chain

• The essence of the operations

information and expertise in such activities as the following:

• Economic analysis of investment proposals. Evaluation of alternative investments in plant and

each other informed on the other’s strengths and weaknesses.

Operations interfaces with a number

• There are three categories of business processes:

3. These support the core processes. Examples include

The Scope of Capacity planning

Operations Locating facilities

Management Facilities and layout

Motivating and training employees

• Operations management professionals make a number of that

Analysis trade- Establishing

• Technology The application of scientific knowledge to the development and

• is changing the way business organizations interact with their

Competing in a global economy.

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