McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

1

Introduction to Operations

Management

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Learning Objectives

Define the term operations management Identify the three major functional areas of

organizations and describe how they interrelate

Compare and contrast service and manufacturing operations

Describe the operations function and the nature of the operations manager’s job

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Learning Objectives

Differentiate between design and operation of production systems

Describe the key aspects of operations management decision making

Briefly describe the historical evolution of operations management

Identify current trends that impact operations management

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Operations Management

Operations Management is: The management of systems or processes

that create goods and/or provide services

Operations Management affects: Companies’ ability to compete Nation’s ability to compete internationally

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The Organization

The Three Basic Functions

Organization

Finance Operations Marketing

Figure 1.1

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Value-Added Process

The operations function involves the conversion of inputs into outputs

Inputs Land Labor Capital

Transformation/Conversion

process

Outputs Goods Services

Control

Feedback

FeedbackFeedback

Value added

Figure 1.2

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Value-Added and Product Packages

Value-added elements make the difference between the cost of inputs and the value or price of outputs.

Product packages are a combination of goods and services.

Product packages can make a company more competitive.

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Automobile assembly, steel making

Home remodeling, retail sales

Automobile repair, fast food

The Goods–Service ContinuumFigure 1.3

Computer repair, restaurant meal

Song writing, software development

Goods Service

Surgery, teaching

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Food Processor

Inputs Processing Outputs

Raw vegetables Cleaning Canned vegetables Metal sheets Making cans

Water CuttingEnergy CookingLabor PackingBuilding LabelingEquipment

Table 1.2

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Hospital

Inputs Processing Outputs

Doctors, nurses Examination Treated patientsHospital Surgery

Medical supplies MonitoringEquipment MedicationLaboratories Therapy

Table 1.2

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Manufacturing or Service?

Tangible Act

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Production of Goods vs. Delivery 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

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Key Differences

1. Customer contact2. Uniformity of input3. Labor content of jobs4. Uniformity of output5. Measurement of productivity

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Key Differences

6. Production and delivery7. Quality assurance8. Amount of inventory9. Evaluation of work10. Ability to patent design

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Goods vs. Service

Characteristic Goods ServiceCustomer contact Low HighUniformity of input High LowLabor content Low HighUniformity of output High Low

Output Tangible IntangibleMeasurement of productivity Easy DifficultOpportunity to correct problems High LowInventory Much LittleEvaluation Easier DifficultPatentable Usually Not usually

Table 1.3

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Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating and training employees Locating facilities Supply chain management And more . . .

Scope of Operations Management

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Types of OperationsTable 1.4

Operations ExamplesGoods Producing Farming, mining, construction,

manufacturing, power generationStorage/Transportation Warehousing, trucking, mail

service, moving, taxis, buses,hotels, airlines

Exchange Retailing, wholesaling, financial advising, renting or leasing

Entertainment Films, radio and television,concerts, recording

Communication Newspapers, radio and TV newscasts, telephone, satellites

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Challenges of Managing Services

Service jobs are often less structured than manufacturing jobs

Customer contact is higher Worker skill levels are lower Services hire many low-skill, entry-level workers Employee turnover is higher Input variability is higher Service performance can be affected by worker’s

personal factors