The Operations Function: Reserved

Chapter 1:
The Operations Function
Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

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Chapter 1 Learning Objectives
• LO 1.1 Define operations management.
• LO 1.2 Describe the five main decisions made by operations
and supply chain managers.
• LO 1.3 Explain the nature of cross-functional decision making
with operations.
• LO 1.4 Define typical inputs and outputs of an operations
transformation system.
• LO 1.5 Identify contemporary challenges facing operations and
supply chain managers.

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Why Study Operations Management?
• Cross-functional nature of decisions

• Operations is a major function in every organization
• Principles of process thinking can be applied across the
organization
• Operations Management is an interesting and challenging field
of study

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Definition of Operations Management
Operations management focuses

on decisions for the production
and delivery of the firm’s products
and services.

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Three aspects of Operations mManagement
Decisions:
The operations manager must decide:
• Process, quality, capacity, inventory, and supply chain
Function:
Major functional areas in organizations:
• Operations, marketing, finance
Process:
Planning and controlling the transformation process and its
interfaces (internal/external)

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Definition of Supply Chain
• Network of manufacturing and service operations that supply
one another
• From raw materials through production to the end consumer
• Flows of materials, money, and information
• Links operations across organizations

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Major Decisions at Pizza USA
• Process
• How should we produce pizzas?
• Quality
• How do we meet quality standards and ensure a good customer
experience?
• Capacity
• How much output do we need at various times?
• Inventory
• Which ingredients, when & how much?
• Supply Chain
• How to source inputs and manage logistics?

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Contingencies
Decisions related to process, quality, capacity, inventory
and supply chain must account for:
- upstream suppliers
- downstream customers
- other functions (marketing, finance)
- support functions (HR, Info systems, accounting)
- situations (supply disruption, seasonal demand peaks)
- conditions (economy, changing customer preferences)
- many other contingencies
In other words, there is no single set of
“best” practices. The best decision-making
will depend on the situation.
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Cross-Functional Decision Making
• Operations as the primary production function.
• Other primary functions:
• Marketing
• Finance
• Supporting functions: all others
• Major cross-functional decision making relationships (See
Table 1.2)

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Operations as a Process
Inputs Transformation Outputs

(Conversion)
Process

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Operations as a Process
Inputs Transformation Transformation Outputs

Fabrication Assembly
Fabrication: making the parts

Assembly: putting the parts together
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Operations as a Process (Figure 1.2)
Energy
Materials
Labor Transformation
Goods or
(Conversion)
Capital Services
Process
Information
Feedback information for

control of process inputs
and process technology
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Contemporary Operations Challenges
• Service and Manufacturing (differences and

implications)
• Customer-Directed Operations (“voice of the customer”)
• Integration of Decisions Internally and Externally
• Environmental Sustainability
• Globalization of Operations and the Supply Chain

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Chapter 1 Summary
• LO 1.1 Define operations management.
• LO 1.2 Describe the five main decisions made by operations
and supply chain managers.
• LO 1.3 Explain the nature of cross-functional decision making
with operations.
• LO 1.4 Define typical inputs and outputs of an operations
transformation system.
• LO 1.5 Identify contemporary challenges facing operations and
supply chain managers.

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Chapter 1:

The Operations Function

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

• Cross-functional nature of decisions

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Operations management focuses

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

• From raw materials through production to the end consumer

• Flows of materials, money, and information

• Links operations across organizations

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Inputs Transformation Outputs

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Inputs Transformation Transformation Outputs

Fabrication: making the parts

Feedback information for

• Service and Manufacturing (differences and

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

Copyright © 2018 by The McGraw-Hill Companies, Inc. All rights

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