INTRODUCTION TO

OPERATIONS
MANAGEMENT
CHAPTER CONTENT

 Operations Management and the Operations Function

 Production of Goods versus Delivery of Services
 The Scope of Operations Management
 Responsibility of Operations Managers
 Operations Management and Decision Making
 The Historical Evolution of Operations Management
 Trends in Business

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1
OPERATIONS MANAGEMENT AND THE
OPERATIONS FUNCTION
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THE THREE BASIC FUNCTIONS OF BUSINESS
ORGANIZATIONS

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“ Operations is that part of an
organization that is responsible for
producing goods and/or services

William J. Stevenson

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“ Operations management is the
management of systems or processes
that create goods and/or provide
services

William J. Stevenson

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“
Operations management is the systematic design,
direction and control of processes that
transform inputs into services and products
for internal, as well as external customers

Lee J. Krajewski, Manoj K. Malhotra,

Larry P. Ritzman, Samir K. Srivastava

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Operations and supply
chains are intrinsically
linked, and no business
organization could
exist without both.

A supply chain is the

sequence of organizations
—their facilities, functions,
and activities—that are
involved in producing and
delivering a product or
service.

Illustration: A supply chain for bread 8

FIGURE: A SIMPLE PRODUCT SUPPLY CHAIN

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 The Operations Function
The operations
function involves
conversion of inputs
into outputs.
The essence of the
operations function is
to add value during the
transformation
process.

Value Added = Value/ Price of Output - Cost of Input

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cntd.

• In for-profit organizations, the value of outputs is measured by the prices

that customers are willing to pay for those goods or services.
• Firms use the money generated by value-added for research and
development, investment in new facilities and equipment, worker salaries,
and profits.
• Consequently, the greater the value-added, the greater the amount of funds
available for these purposes.
• Value can also be psychological, as in branding.

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Examples of
Different Inputs,
Transformation and
Outputs

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2
PRODUCTION OF GOODS VERSUS
DELIVERY OF SERVICES
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THE GOODS-SERVICE CONTINUUM

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TYPICAL DIFFERENCES BETWEEN MANUFACTURING
AND SERVICE ORGANIZATIONS

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3
THE SCOPE OF OPERATIONS
MANAGEMENT
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 SCOPE OF OPERATIONS MANAGEMENT

The operations function includes many interrelated activities.

 Forecasting  Design of work systems

 Product and service  Facilities layout
design  Scheduling
 Capacity planning  Managing inventories
 Locating facilities  Assuring quality
 Process selection  Motivating and training employees

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4
RESPONSIBILITY OF
OPERATIONS MANAGERS
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RESPONSIBILITY OF OPERATIONS
MANAGERS

A primary function of an operations manager is to guide

the system by decision making.

Certain decisions affect the design of the system, and

others affect the operation of the system.

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RESPONSIBILITY OF OPERATIONS
MANAGERS

System design involves decisions that relate to system capacity,

the geographic location of facilities, arrangement of departments,
product and service planning, acquisition of equipment and placement
of equipment within physical structures.

These decisions usually, but not always, require long-term

commitments. Moreover, they are typically strategic decisions.

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RESPONSIBILITY OF OPERATIONS
MANAGERS

System operation involves management of personnel,

inventory planning and control, scheduling, project management, and
quality assurance.

These are generally tactical and operational decisions.

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 RESPONSIBILITY OF OPERATIONS
MANAGERS

In many instances, the operations manager is more involved in day-to-day operating

decisions than with decisions relating to system design.

However, the operations manager has a vital stake in system design because system
design essentially determines many of the parameters of system operation.

Even though the operations manager is not responsible for making all design
decisions, he or she can provide those decision makers with a wide range of
information that will have a bearing on their decisions.
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RESPONSIBILITY OF OPERATIONS
MANAGERS (Brief Summary)

Planning Organizing Staffing

• Capacity • Degree of • Hiring/Laying

• Location Centralization Off
• Products and • Process • Use of
Services Selection Overtime
• Make or Buy
• Layout
• Projects
• Scheduling

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RESPONSIBILITY OF OPERATIONS
MANAGERS (Brief Summary)

Directing Controlling

• Issuance of • Inventory
work orders • Quality
• Incentive Plans • Cost
• Job • Productivity
assignments

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 RESPONSIBILITY OF OPERATIONS
MANAGERS

The kinds of jobs that operations

managers oversee vary tremendously
from organization to organization
largely because of the different
products or services involved.

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5
OPERATIONS MANAGEMENT AND
DECISION MAKING
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 What: What resources will be needed, and in what
amounts?

Key When: When will each resource be needed? When should

Decisions 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?

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6
THE HISTORICAL
EVOLUTION OF OPERATIONS
MANAGEMENT
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The Industrial Revolution

Scientific Management

The Human Relations Movement

Decision models and management

science

The Influence of Japanese

Manufacturers

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Historical
Summary of
Operations
Management

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7
TRENDS IN BUSINESS
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 Internet, E-commerce and E-
business
Major Trends
Management of Technology (Product
and service technology, Process
Technology, Information Technology)

Globalization

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 Operations strategy

Working with fewer resources

Revenue management
OTHER IMPORTANT
Process analysis and improvement and Quality
CONSIDERATIONS Improvement (six sigma)

Agility (the ability to respond quickly to demands or

opportunities)

Lean System (System that uses minimal amounts of

resources to produce a high volume of high-quality
goods with some variety)
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IMPORTANT ISSUES FOR TODAY’S
BUSINESS OPERATIONS

1. Environmental Concerns

2. Ethical Conduct

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ENVIRONMENTAL
CONCERNS

REDUCING CARBON FOOTPRINT &

CARE FOR SUSTAINABILITY

by

 Responsible product and service design

 Consumer education programs
 Disaster preparation and response
 Supply chain waste management
 Responsible outsourcing decisions

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ETHICAL CONDUCT

• Financial statements: accurately representing the

organization’s financial condition.

• Worker safety: providing adequate training, maintaining

equipment in good working condition, maintaining a safe working
environment.

• Product safety: providing products that minimize the risk of injury

to users or damage to property or the environment.

• Quality: honoring warranties, avoiding hidden defects

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ETHICAL CONDUCT

• The environment: not doing things that will harm the

environment.

• The community: being a good neighbor.

• Hiring and firing workers: avoiding false pretenses (e.g.,

promising a long-term job when that is not what is intended).

• Closing facilities: taking into account the impact on a

community, and honoring commitments that have been made.

• Workers’ rights: respecting workers’ rights, dealing with

workers’ problems quickly and fairly.

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THANKS!
Any questions?

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