Operations Management - Are intangible

- Involve higher customer interaction

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 The collective success or failure of

There are variety of reasons, to be sure. companies’ operations functions has an
However, an important key in a company’s impact on the ability of a nation to
success or failure is how well it manages its compete with other nations, and on the
operations. nation’s economy.

Operations – the part of a business organization Manufacturing – Is goods-oriented

that is responsible for producing goods or
services. Service – is act oriented.

Goods – are physical items that include raw Operations Management – the management of
materials, parts, subassemblies, and final /or provide services. systems or processes that
products. create goods and services.

- This is what consumer buys - The collective success or failure of

- Physical, tangible aspect companies’ operations functions has an
- Goods can be resold impact on the ability of a nation to
- Goods can be inventoried complete with other nations, and on the
- Some aspects of quality are measurable nation’s economy. The ideal situation
- Selling is distinct from production of for a business organization is to achieve
goods a match of supply and demand.
- Goods are transportable Because:
- Often easy to automate production of 1. Having excess supply or excess
goods capacity is wasteful and costly.
- Are tangible 2. Having too little means lost
opportunity and possible customer
- Involve less customer interaction
dissatisfaction.
Examples:  The key functions on the supply side
are operations and supply chains, and
 Automobile sales and marketing on the demand
 Computer side.
 Oven
The 3 Basic Functions of Business
 Shampoo
Organizations
Services – are activities that provide some
1. MARKETING - is responsible for
combination of time, location, form, or
assessing consumer wants and needs and
psychological value.
selling and promoting the organization’s
goods or services.
- How the value is provided
2. OPERATIONS – is responsible for
- Intangible aspect
producing the goods or providing the
- Reselling services is unusual
services offered by the organization.
- Services cannot be inventoried
3. FINANCE – is responsible for securing
- Many aspects of quality are difficult to financial resources at favorable prices
measure and allocating those resources
- Selling is often a part of production of throughout the organization, as well as
service budgeting, analyzing investment
- Service provider, not the service, is proposals, and providing funds for
transportable operations.
- Service is often difficult to automate
  Marketing and operations are the and materials, performing work
primary, or “line” functions. To put on products and/or services, and
this in perspective, if a business passing the work on to the next
organization were a car, operations step of the process.
would be its engine. And just as the
engine is the core of what a car does, in Scope of Operations Management
a business organization, operations is
the core of what the organization does. The scope of operations management ranges
 Operations management is across organization. OM people are involved in
responsible for managing that core. product and service design , process selection,
Hence, operations management is the selection and management of technology, design
management of systems or processes of work systems, location planning, facilities
that create goods and/or provide planning, and quality improvement of the
services. organization’s products or services.

Supply Chain – a sequence of activities and The operations function includes many
organizations involved in producing and interrelated activities such as:
delivering a good or service.
 Forecasting – predicting the quantity
Supply Chain: and timing of customer demand
 Capacity planning – matching supply
and demand
 Scheduling -
 Managing inventories – meeting
demand requirements while managing
the costs of holding inventory
 Assuring quality -
 Motivating employees
- Operations and supply chains-one  Deciding where to locate facilities and
couldn’t exist without the other, and no more . . .
business organization could exist
without both. Roles of Operation Manager
- a sequence of activities and
- An operations manager is a key part of a
organizations involved in producing and
management team and oversees high-
delivering a good or service. The
level HR duties, such as attracting talent
sequence begins with basic suppliers of
and setting training standards and hiring
raw materials and extends all the way to
procedures. They also analyze and
the final customers as seen on the
improve organizational processes, and
screen.
work to improve quality, productivity,
- Example of facilities are warehouses,
and efficiency.
factories, processing centers, officers,
- A primary function of the operations
distribution centers, and retail outlets.
manager is to guide the system by
 Supply chains are both internal
decision making.
and external to the organization.
 The Operations Function consists of all
 The external parts of a supply
activities directly related to producing
chain provide raw materials,
goods or providing services.
parts, equipment, supplies,
and/or other inputs to the
organization, and they deliver
outputs that are goods to the A primary function of the operations manager is
organization’s customers. to guide the system by decision making.
 The internal parts are part of the
operations function itself, 1. System Design Decisions – involves
supplying operations with parts decisions that relate to system capacity,
 the geographic location of facilities, When: When will each resource be needed?
arrangement of departments and When should the work be scheduled? When
placement of equipment within physical should materials and other supplies be ordered?
structures, product and service planning,
and acquisition of equipment. These Where: Where will the work be done?
decisions are typically strategic
decisions. How: How will he product or service be
2. System Operation Decisions – involves designed? How will the work be done? How
management of personnel, inventory will resources be allocated?
planning and control, scheduling,
Who: Who will do the work?
product management, and quality
assurance. These are generally tactical General Approaches to DECISION MAKING
and operational decisions.
- Need to make decision on opportunities
Why study Operations Management? and problems.
 Model – is an abstraction of reality, a
 Every aspect of business revolves
simplified representation of something.
around operations
 Many service jobs are closely related to - Example: Income Statement
operations:  Quantitative Approaches to problem
 Financial services solving – often embody an attempt to
obtain mathematically optimal solutions
 Marketing services
to managerial problems.
 Accounting services
- Example: mean, median, mode
 Information services
- Use of software in the form of systems
 There is a significant amount of
like accounting systems
interaction and collaboration amongst
- Need to interpret data
the functional areas
 It provides an excellent vehicle for 3 Models
understanding the world in which we 1. Physical models – miniature,
live. condominiums, & buildings to
encourage people
Career Opportunities in OM - Advantage: Visual correspondence to
reality.
 Operations manager 2. Schematic Model – less
 Production analyst resemblance to the physical reality.
 Production manager - Example: Blueprints, drawings
 Industrial engineer 3. Mathematical Model – most abstract
 Time study analyst - Do not look like, it is the counterpart of
 Inventory manager physical model
 Quality analyst - Needs to interpret
 Quality manager - Easiest to manipulate because it is only
can be in output.
OM and DECISION MAKING - Example: Numbers, Formulas, and
Symbols
- Most operations decisions involve many  Performance metrics – are used to
alternatives that can have quite different manage and control operations.
impacts on costs or profits. - Based on performance
 Analysis of Trade-Offs – operations
Typical operations decisions include:
personnel frequently, encounter
decisions that can be described as trade-
What: What resources are needed, and in what
off decision. For example, in deciding
amounts?
on the amount of inventory to stock, the
decision maker must take into account
the tradeoff between the increased level
 of customer service that the additional  Industrial Revolution - the process of
inventory would yield, and the increased change from an agrarian and handicraft
costs required to stock inventory. economy to one dominated
- You need to trade off something by industry and machine manufacturing.
- Tradeoff between two decisions These technological changes introduced
- Need to consider pros and cons novel ways of working and living and
 Degree of Customization – a major fundamentally transformed society.
influence on the entire organization is - Era of craftsmanship
the degree of customization of products - Highly skilled people used to
or services being offered to its customized goods.
customers.  Scientific Management – scientific
- Customized products like home management is a theory of management
remodeling and plastic surgery that analyzes and synthesizes
- Most labor intensive, cannot be seen on workflows.
the mall - Its main objective is improving
- Not standard economic efficiency, especially labor
- Need highly skilled people. productivity. ... Frederick Taylor began
 A Systems Approach – a system is the theory's development in the United
defined as a set of interrelates parts that States during the 1880s and 1890s
must work together. The systems within manufacturing industries,
approach emphasizes interrelationships especially steel.
among subsystems, but its main theme - Frederick Winslow Taylor (the Father
is that the whole is greater than the sum of)
of its individual parts. - Technical aspect
- Impact of all parts of the system  Human Relations Movement –
- Need to consider all parts movement refers to the researchers of
- Need to view the change – take into organizational development who study
consideration the cost and instruction the behavior of people in groups,
repair procedures particularly in workplace groups and
- Workers needs to be trained and other related concepts in fields such as
knowledgeable. industrial and organizational
psychology.
 Establishing Priorities – in virtually
every situation, managers discover that - Emphasis on human resources
certain issues or items are more - Importance of employees
important than others. The Pareto  Decision Models and Management
Principle states that 80% of Science - a decision model is an
consequences come from 20% of the idealized representation of the problem.
causes. Decision model refers to structured
- You will see that you need to prioritize presentation of the problem, solution
something there to and stimulation of working of
- Can be apply to all levels of the solution. The model’s purpose is to
management. enable the decision analyst to forecast
 Ethics – operations managers, like all the effect of factors crucial to the
mangers have the responsibility to make solution of the problem.
ethical decisions. Many organizations - Decision models
have developed code of ethics to guide  Influence of Japanese Manufacturers – a
employee’s conduct. decision model is an idealized
- Ethical decision representation of the problem. Decision
model refers to structured presentation
Historical Evolution of OM of the problem, solution there to and
stimulation of working of the solution.
- Existed since Asian time The model’s purpose is to enable the
- Example: construction of pyramid decision analyst to forecast the effect of
 factors crucial to the solution of the led to public outcries and congressional
problem. investigations.
- Continuous improvement & quality in
goods and services. Chapter 2:
 Lean production: uses less resources to
produce a large number of outputs with
some variability, they combine the
advantages of mass production (high
volume and low unit cost) and craft
production (high variety and flexibility)
Quality is better than mass production.

Key Trends and Issues in Business

 E-Business & E-Commerce – is the use

of the internet to transact business & E-
Commerce is the consumer-to business
transaction
 Management of Technology - can be
viewed from many different
perspectives since the word technology
itself is subject to various
interpretations. Technology is the
application of scientific discoveries to
the development and improvement of
goods and services.
- The use of technology like computers
that has a tremendous impact on
business.
 Globalization – is the spread of
products, technology, information, and
jobs across nations.
- One clear result of globalization is that
an economic downturn in one country
can create a domino effect through its
trade partners.
- Need for global supply chain
 Management of Supply Chains -
 Outsourcing – or Business Process
Outsourcing, Global
Outsourcing involves contracting the
operations of a specific business process
to a third-party provider.
 Agility – is the ability of an organization
to respond quickly to demands or
opportunities.
 Ethical Behavior - is commanding
increased attention from management at
all levels. Acctg scandals, stockbrokers
releasing misleading information,
product liability claims, and breaches in
privacy and security of computer files
are just some of the behaviors that have