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©The McGraw-Hill Companies, Inc., 2004
1
Chapter 1
Overview: Introduction to
the Field
©The McGraw-Hill Companies, Inc., 2004
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• Operations Management
• Why Study Operations Management?
• Production System Defined
• Operations as a Service
• Plan of This Book
• Historical Development of OM
• Current Issues in OM
OBJECTIVES
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What is Operations Management?Defined
Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products & services. This involves the transformation of inputs to outputs and is the core of any business.
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Why Study Operations Management?
• OM is related to all areas of any business
• There is no business without Operations
• Education on how to produce goods or services
• Most costs are incurred in creating goods or services
• Global nature of operations and competition
• Impetus of new technologies
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Why Study Operations Management?
Business Education
Systematic Approach to Org. Processes
Career Opportunities
Cross-Functional Applications
OperationsManagement
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What is a Production System?Defined
A production system is defined as a user of resources to transform inputs into some desired outputs
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OM Involves Managing Transformations
• People• Plants• Parts• Processes• Planning and Control
TransformationProcess
(Value Adding)
TransformationProcess
(Value Adding)Input Output
Transformation is enabledBy the 5 P’s of OM
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Transformations
• Physical--manufacturing
• Locational--transportation
• Exchange--retailing
• Storage--warehousing
• Physiological--health care
• Informational--telecommunications
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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?)
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What About McDonald’s?
• Service or manufacturing?
• The company certainly manufactures tangible products
• Why then would we consider McDonald’s a service business?
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OM in the Organization Chart
OperationsOperations
Plant Manager
Plant Manager
OperationsManager
OperationsManager
DirectorDirector
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Manufacturing, Production control, Quality assurance, Engineering,
Purchasing, Maintenance, etc
Finance Marketing
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Core services are basic things that customers want from products they purchase
Core ServicesDefined
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Core Services Performance Objectives
OperationsManagement
Flexibility
Quality
Speed
Price (or cost Reduction)
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Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way
Value-Added ServicesDefined
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Value-Added Service Categories
OperationsManagement
Information
Problem Solving
Sales Support
Field Support
• Performance data on products• Use data for improvements
• Help internal/external groups solve problems
• Enhance sales/marketing through equipment demos
• Replace defective parts quickly
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Plan of This Book
I. Operations Strategy and Managing Change
1. Introductionto the Field
2. Operations Strategy and Competitiveness
3. Project Management
III. SupplyChain Design
9. Supply Chain Strategy
10. Strategic Capacity
Management
11. Just-in-Time and Lean Systems
IV. Planning and Controlling the Supply Chain
12. Forecasting and Demand Management
13. Aggregate Sales and Operations Planning
14. Inventory Control
15. Materials Requirements Planning 8. Operations Consulting
and Reengineering
16. Operations Scheduling
II. Product Designand Process
Selection
4. ProcessAnalysis
5. ProductDesign and
Process Selection-Manufacturing
6. ProductDesign and
Process Selection-Services
7. QualityManagement
17. Synchronous Manufacturing and Theory of Constraints
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Historical Development of OM
• JIT and TQC
• Manufacturing Strategy Paradigm
• Service Quality and Productivity
• Total Quality Management and Quality Certification
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Historical Development of OM (cont’d)
• Business Process Reengineering
• Supply Chain Management
• Electronic Commerce
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Current Issues in OM
• Effectively consolidating the operations resulting from mergers
• Developing flexible supply chains to enable mass customization of products and services
• Managing global supplier, production and distribution networks
• Increased “commoditization” of suppliers
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Current Issues in OM (cont’d)
• Achieving the “Service Factory”
• Enhancing value added services
• Making efficient use of Internet technology
• Achieving good service from service firms
