Introduction To Operations Management

Introduction to
Operations Management
1
Learning Objectives
 Define and explain OM
 Explain the role of OM in business
 Describe the decisions that operations
managers make
 Describe the differences between service
and manufacturing operations
 Describe the flow of information between
OM and other business functions
2
Operations Management is:
The business function responsible for

planning, coordinating, and
controlling the resources needed to
produce products and services for a
company
3
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
…Chase
4
 A management function
 An organization’s core function
 In every organization whether Service
or Manufacturing, profit or Not for profit
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Why Operations Management?
 Operations Management is the design and management of

the transformation processes that create value for society.
 Firms exist to create value; and the production or operations
area of an organization is where the goods are produced, or
services rendered, that justify the existence of the firm.
 In a manufacturing company, this area generally accounts for
the single largest concentration of human and capital
investment.
 Operations Management is not only critical to the success of
any firm, it is at the core of what the firm does to survive.
Without OM, there would be nothing to market, nothing to
finance, nothing to account for.
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Typical Organization Chart
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What is Role of OM?
 OM Transforms inputs to outputs

 Inputs are resources such as
 People, Material, Equipment and Money
 Outputs are goods and services
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OM’s Transformation Process
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OM’s Transformation Role
 A transformation process is defined as a use of
resources to transform inputs into some desired outputs
 To add value
 Increase product value at each stage
 Value added is the net increase between output product value and
input material value
 Provide an effective & efficient transformation

 Performing activities well for least possible cost
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Transformations
 Physical--manufacturing
 Locational--transportation
 Exchange--retailing
 Storage--warehousing
 Physiological--health care
 Informational--telecommunications
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?)
Manufacturers vs Service
Organizations
 Services:  Manufacturers:
 Intangible product  Tangible product
 Product cannot be  Product is inventoried
inventoried  Low customer contact
 High customer contact  Longer response time
 Short response time  Capital intensive
 Labor intensive
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Similarities for Service/Manufacturers
 Both use technology
 Both have quality, productivity, & response
issues
 Both must forecast demand
 Both can have capacity, layout, and location
issues
 Both have customers, suppliers, scheduling
and staffing issues
14
Service vs Manufacturing
 Manufacturing often provides services
 Services often provides tangible goods
 Some organizations are a blend of
service/manufacturing/quasi-
manufacturing Quasi-Manufacturing
(QM) organizations
 QM characteristics include
 Low customer contact & Capital Intensive
15
Growth of the Service Sector
 Service sector growing
to 50-80% of non-
farm jobs
 Global competitiveness
 Demands for higher
quality
 Huge technology
changes
 Time based
competition
 Work force diversity
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Core Services Defined
Core services are basic things

that customers want from
products they purchase
Core Services Performance Objectives
Quality
Operations
Flexibility Speed
Management
Price (or cost

Reduction)
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
Value-Added Service Categories
Problem Solving
Operations Sales Support

Information
Management
Field Support
OM Decisions
21
Today’s OM Environment
 Customers demand better quality, greater
speed, and lower costs
 Companies implementing lean system
concepts – a total systems approach to
efficient operations
 Recognized need to better manage
information using ERP and CRM systems
 Increased cross-functional decision making
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Business Information Flow
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Highlights
 OM is the business function that is responsible for
managing and coordinating the resources needed to
produce a company’s products and services.
 The role of OM is to transform organizational inputs
into company’s products or services outputs
 OM is responsible for a wide range of decisions,
ranging from strategic to tactical.
 Organizations can be divided into manufacturing and
service organizations, which differ in the tangibility of
the product or service
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Highlights – con’t
 Many historical milestones have shaped OM. Some
of these are the Industrial Revolution, scientific
management, the human relations movement,
management science, and the computer age
 OM is highly important function in today’s dynamic
business environment. Among the trends with
significant impact are just-in-time, TQM,
reengineering, flexibility, time-based competition,
SCM, global marketplace, and environmental issues
 OM works closely with all other business functions
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Introduction to

The business function responsible for

Operations management (OM) is

 Operations Management is the design and management of

 OM Transforms inputs to outputs

 Outputs are goods and services

 Provide an effective & efficient transformation

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

 “Services never include goods and

Core services are basic things

Price (or cost

Value-added services differentiate

Operations Sales Support

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