CHAPTER I: OPERATIONS MANAGEMENT AND

Textbook For The Subject VALUE CHAINS

• Learning Objectives:
1. Explain the concept and importance of operations management.
TITLE: OPERATIONS MANAGEMENT AND 2. Describe what operations managers do.
TOTAL QUALITY MANAGEMENT 3. Differentiate goods from services.
2020 ed. 4. Define concept of value and discuss how the value of goods and
services can be enhanced.
AUTHORS: COLLIER, EVANS, AND LINDSAY 5. Describe a customer benefit package.
6. Differentiate value chain from supply chain and identify 3 types
of processes in a business.
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CHAPTER I: OPERATIONS MANAGEMENT CHAPTER I: OPERATIONS MANAGEMENT

AND VALUE CHAINS AND VALUE CHAINS
• Learning Objectives: • OPERATIONS MANAGEMENT:
– Is the science and art of ensuring that goods and services are created and
7. Contrast the three different frameworks for describing value delivered successfully to customers:
chains. – It includes the design of goods, services and the process that create them;
the day-to-day management of those processes; and the continual
8. Summarize the historical development of OM. improvement of those goods, services and processes
– OM is important because it makes companies successful – Success Story of
9. Describe key challenges facing OM. Procter & Gamble – William Cooper Procter grandson of the founder.

• OM in the Workplace and its Usage:

1. Process Design – When introducing a new product
2. Inventory management – controls and track down cost to avoid extra cost
3. Scheduling – ensures enough production
4. Quality management – to conform standards of products.
 CHAPTER I: OPERATIONS MANAGEMENT CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS AND VALUE CHAINS
• UNDERSTANDING GOODS AND SERVICES: • SIGNIFICANT DIFFERENCES BETWEEN GOODS AND SERVICES:
• GOOD – is a physical product that you can see, touch or possibly 1. Goods are tangible while services are experienced.
consume. Ex. Cell phones, appliance, food etc. 2. Customers participate in many service processes, activities and
Ø Durable Good – is one that does not quickly wear out and typically last at transactions.
least three years. Ex. Vehicles, Furnitures, etc. - Service encounter – is an interaction between the customer and the service
Ø Nondurable Good – is one that is no longer useful once it is used or last for provider. Ex. Making hotel reservation, purchase a website.
more that 3 years. Ex shoes, clothing and food.
3. The demand for service is more difficult to predict than the
• SERVICE – is any primary or complementary activity that does demand for goods.
not directly produce a physical product. It represent the non- 4. Service can not be stored as physical inventory.
goods part of a transaction.
5. Service management skills are paramount to a successful
service encounter.

CHAPTER I: OPERATIONS MANAGEMENT CHAPTER I: OPERATIONS MANAGEMENT

AND VALUE CHAINS AND VALUE CHAINS
• SIGNIFICANT DIFFERENCES BETWEEN GOODS AND SERVICES: OM ACTIVITY GOODS SERVICE

6. Service facilities typically need to be in close proximity to the customer. 4. Technology production on automation rely on info based hdwe.
5. Quality define clear and measurable account for customer
7. Patent do not protect service.
quality perception of quality
• HOW GOODS AND SERVICES AFFECT OM ACTIVITIES 6. Inventory/capacity use physical inventory quality measurement
OM ACTIVITY GOODS SERVICE and Design efficiency
1. Forecasting Forecast involve long-term Forecast horizon are short 7. Process Design controllable (can be automated) extensively participated
2. Facility Location production should be near to facility should be close to 8. Job/Service production skills required behavioral and service
raw materials customer Encounter Design skills
3. Facility Lay-out warehouse designed for designed for good customer 9. Scheduling revolves around the location focus on assigned employee

and Design efficiency interaction 10. Supply chain focus on physical flow of goods focus on flow of people
Management
CHAPTER I: OPERATIONS MANAGEMENT CHAPTER I: OPERATIONS MANAGEMENT
AND VALUE CHAINS AND VALUE CHAINS
• THE CONCEPT OF VALUE • VALUE CHAINS
- Is a network of facilities and processes that describes the flow of materials, finished goods and
ü Value – is the perception of the benefits associated with a good, service, or bundle of goods
services, information, and financial transaction from suppliers, through the facilities and
and services in relation to what buyers are willing to pay for them. processes that create goods and services, and those that deliver them to the customer.
ü Formula - Value = Perceived benefits
Price(cost)to customer Ø Key Processes in business includes:
1. Core Processes – focus on production and delivery of products
• CUSTOMER BENEFIT PACKAGES 2. Support Processes – includes purchasing of materials and suppliers and others
ü Bundling on goods and services, and digital content is a certain way to provide value to 3. General Management Processes – includes accounting, IT systems, HR and marketing
customers that differentiates products from competitor.
ü Customer Benefit Package – is a clearly defined set of tangible (goods content) and
• VALUE CHAIN FRAMEWORKS
intangible (service content) features that the customer recognizes, pay for, uses, or 3 Different Perspective
experience. a. input-output framework – (cradle-to-grave) begins with suppliers of materials to goods and service
providing process.
b. Pre-and Postproduction Service Framework – Pre include customized and team oriented product design,
Samples: consulting services and others while Post include on-site installations or application services.
c. Hierarchical Supply Chain Framework – Supply chains are the foundation of most value chain. Ex HP ships
thousands of computers daily and spends US$50B or 64% of its revenue on supply chain activity.

CHAPTER I: OPERATIONS MANAGEMENT CHAPTER I: OPERATIONS MANAGEMENT

AND VALUE CHAINS AND VALUE CHAINS
• OM: A HISTORY OF CHANGE AND CHALLENGE • OTHERS AND TERMS:
3 Perspectives of Sustainability:
7 major ERAs of Operations Management
1. Environmental Sustainability – is an organization’s commitment to the long-term quality of our
1. Focus on Cost and Efficiency – It was on the Industrial Revolution where many inventions environment.
came to being. 2. Social Sustainability – is an organizations commitment to maintain a healthy communities and
2. The Quality Revolution – US and Japanese focused on this after the 2nd world war. a society that improves the quality of life.
3. Customization and Design – because of competition, companies emphasized innovative 3. Economic Sustainability – is an organizations commitment to address current business needs
designs and economic vitality
– Business Analytics – is a process of transforming data into actions through analysis and insights
4. Time-Based Competition – Quick response to competition by continually improving and in the context of organizational decision making and problem solving.
reengineering processes
5. The Service revolution – in 1955, about 50% of US workforce were employed in goods
producing industries and 50% at service. Today 90% of employees are already in service END OF MODULE 1
process
6. Sustainability – (refers to an organizations ability to strategically address current business ASSIGNMENT:
needs and successfully develop a long-term strategy to preserve future generations) 1. Read the “Zappos Case Study” on page 25 & 26 and answer 2 questions (choose only 2).
7. Data Analytics – very important in evaluating operations performance. 2. Send answers through the inbox in canvass.