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