CHAPTER OUTLINE  1.1 Defining Operations Management   1.1.1 Understanding Operations 1.1.2 Comparing goods and services

1.1.3 Operations Add Value 1.1.4 Technology and Operations1.1.5 International Trade and Competition 1.1.6 Operations and Teamwork

1.2 Understanding the Systems Approach to Operations

  1.2.1 The organization as Part of the Economic andGovernment System  1.2.2 Operations as Part of the Organization

1.2.3 Operations as a Series of Related Subsystems

1.1 Defining Operations

Management Operations are the processes by which people,

capital, and material( inputs ) are combined to produce the services and goods consumed by the public (outputs). .Operations employ labor and management (people) and use facilites and equipment (capital) to change materials into finished goods or to provide services.

Services are intangible products, and goods are physical products.

Examples of goods and services produced by organizations:

Goods

Profit: Not-for-profit:-electronics -dams-air conditioners -license plates-starter motors -highways

Services Profit: Not-for-

profit:-health care -health care-telephone services -parks and

recreations-banking -police

protection

1.1.1 Understanding operations 

Organizations produce and deliver the services and goods demanded by customers.To understand operations and how they can contribute to the succes of an organization, it is important to understand the differences and similarities between producing services and producing goods, the value-added nature of operations, the impact that technology can have on performance, the increasing level of international competition, and the importance of teamwork in achieving operating and organizational objectives.

  1.1.2 Comparing goods and services 

Although operating decisions for services and goods have many similarities, there is one important difference between the two products: a good is tangible, and a service is not. This has two important consequences:

- first, a service operations cannot inventory finished goods because a service is intangible;

- second, because a good is tangible, the product designer must deal with physical characteristics.

 

1.1.3 Operations add value 

Consumers are willing to pay more for an organization's services and goods than the total cost of the inputs.Without profits, a company cannot raise capital to continue its operations and will eventually become a casualty of competition. With profits, organizations are able to invest innew technology and new facilities, which lead to improved operations and lower prices.

1.1.4 Technology and operations 

Technology is application of knowledge to solve problems. Product design is the determination of the characteristics and performance of the product.Process refers to how the product is made, and process technology is the application of knowledge to improve process. 

 1.1.4 International trade and competition 

A country that wants to enhance the living standard of its people will engage in international trade. The country will import those goods and services that are not available locally, or that cost more to make at home than their foreign-made counterparts.Relative advantage is defined as the difference between the lowest-cost producer and the next-lowest- cost producer.Organizations that will be successful in the nineties and into the twenty-first century will develop an understanding of marketing, distribution systems, financial and capital markets, accounting, and operations that is global rather than national. International competition has had and will continue to have a tremendous impact on operations and operations managers. Product performance, product quality, efficiency, and delivery lead time are all elements of competition affected by operations. The impact of international competition on operations is discussed throughout the text.

 1.1.5 Operations and teamwork 1. For the organization, the ability to meet the increasing demand

for high- quality, low-cost products can lead to greater success in competitive world markets.

2. For labor, well-managed operations provide continuing job opportunities. An inefficient operation drives prices up and makes the service or good subject to competitive pressure from efficient producers, both foreign and domestic.

3. For consumers, a lower price means that more people will be able to buy the product. In addition, consumers will have money left for other purchases.

4. For management, lower production costs can lead to increased sales and higher profit.

In order to effectively design, plan, and manage and control operations, managers should be aware that:

 1. Operations are composed of a series of related subsystems.2. An organization is part of the total economic and

government system. 3. Operations are an integral part of the organization.   

1.2 Understanding the systems approach to operations

  1.2.1 The organization as part of the economic and

government system 

Organizations operate in an environment that includes several interest groups- stockholders, management, labor, consumers, and the general public. Business leaders have realized that to achieve long-term success and to be good corporate neighbors, they should serve all of these interests. Thus, they should be responsive to issues involving wage rates, working conditions, pollution, product safety, and international competition, in addition to the stockholders' return on investment. All of these factors are part of the larger economic and government system within which organizations operate.

The importances of these broader issues becomes clear as the following factors are discussed.

 

Factor Interest group Impact of operations decisions

Wage rates and working conditions

Labor and middle management

Good working conditions and fair wages can be positive factors in employee performance.

Pollution General public Well-managed operations should not cause pollution.

Product saftey Consumers When products are well designed, consumers are safer and more satisfied.

International competition

Stockholders, labor, middle management

When operations are well managed, costs are not excessive. This coupled with high quality discourages foreign competitors.

1.2.2 Operations as part of the organizations • Strategy   Operations should be linked to the organization by developing

operating strategies consistent with the organization's overall strategy. Links between operations and the rest of the organization can be built into the planning process. A plan is a list of actions that management expects to take. A plan is a basis for allocating the organization's resources to deal with opportunities and problems present in the environment. Resources allocated by operations managers should help the organization achieve its goals.The links between strategy and operations can be illustrated by comparing a fast-food restaurant with a four-star restaurant. Customers expect fast-food restaurants to deliver good-quality food at a low price, with a wait of only a few, minutes. This implies a limited menu, some advance preparation, and a service operation with a smooth and simple means of communicating orders and delivering food. The training of counter workers and cooks should emphasize speed, efficient movement, and uniform performance of duties.

Structure 

The development of strategy leads to the questions of organizational structure. Organizational structure is the formal relationship between different functions or subsystems.

  Understanding the operations and marketing

interface 

Communications 

An organization should have a strategy (goals and methods for attaining them), key policies (broad guidelines as to how the objectives might be achieved), and a structure(a logical way to organize its resources). To be effective, an organization must develop a means of communicating its strategic direction and key policies to all areas or subsystems of the organization.

 

 

The business system

This exhibit shows the operations manager passing these plans along to the facility managers, who prepare detailed plans for each facility or plant. Part of the product plan is called an operating budget. It includes estimates of the costs of the material, labor, and other facilities necessary to meet the forecasted production goal.

1.2.3 Operations as a series of related subsystems Earlier sections have described the

relationships between the organization and the environment in which it operates. These sections also described an organization as a series of related subsystems, with operations as one of those subsystems.

 Overview of the systems approach to operations  The three parts of the exhibit (designing,

planning, and managing and controlling) comprise the three major sections of the text.

Designing the system includes all the decisions necessary to establish the facilities and information systems required to produce the service or good. Planning the system relates to the way in which the organization expects to use physical facilities, people, and materials to meet the estimated demand.Managing and controlling the system includes executing production plans and measuring, evaluating, and providing feedback on performance.

Designing the system  Product design has a direct impact on both system capacity

and process design. Capacity is the maximum number of units that can be produced in a given time period. Processdesign determines how the product will be produced.Designing the production system requires a careful look at the information requirements for managing operations. Providing this information should be an integral part of the production system.

Planning the SystemPlanning operations involve considering how present facilities can be used to meet customer demand in existing facilities may require changes to become more effective.This presents a fundamental problem for planners because a firm's productive assets are fixed and are not easily or cheaply changed. On the other hand, demand changes continually and is difficult to forecast. Thus, the problem is how to satisfy changing demand with fixed production resources. Two solutions are

1.Building flexibility into the facilities so that changes can be made easily.

2.Examining facilities to find ways to modify them easily.order to satisfy organizational goals. This may lead back to the design phase because

 

Managing and Controlling OperationsAfter a system is designed and planned, it can produce services and goods. In some organizations, more than 50 percent of the finished product cost is material. Material management and inventory control deserve special attention because of the tremendous impact they can have on organizational performance.Finally, the true test of an organization's success in operations is determined in the marketplace. Feedback can be gathered from customers and used to improve product and process designs, production planning and scheduling practices, quality management systems, and other vital areas within operations and the organization.