What is Operations Management?

 It is a management function
 Organization’s core function
 Every organization has OM function
 Service or Manufacturing
 For profit or Not for profit

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Typical Organization Chart

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What is Operations Management
Role?

 OM Transforms inputs to outputs

 Outputs are goods and services

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OM’s Transformation Process

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OM’s Transformation Role
 To add value
 Increase product value at each stage
 Value added is the net increase between output product
value and input material value

 Provide an efficient transformation

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 Goods & Services
 Manufacturing  Services
 Tangible product  Intangible product
 Product can be  Product cannot be
inventoried inventoried
 Low customer contact  High customer contact
 Longer response time  Short response time
 Capital intensive  Labor intensive

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 On the other hand…
 Both use technology
 Both have quality, productivity, & response
issues
 Both must forecast demand
 Both will have capacity, layout, and location
issues
 Both have customers, suppliers, scheduling and
staffing issues
 Manufacturing often provides services
 Services often provides tangible goods

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 Hybrid organizations
 Some organizations are a blend of
service/manufacturing/quasi-
manufacturing Quasi-Manufacturing
(QM) organizations
 QM characteristics include
 Low customer contact & Capital Intensive

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Trends in OM
 Service sector growing
to 50-80% of non-farm
jobs- See Figure 1-4
 Global competitiveness
 Demands for higher
quality
 Huge technology
changes
 Time based competition
 Work force diversity

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OM Decisions
 All organizations are based on decisions
 Decisions follow a similar path
 First decisions very broad – Strategic
decisions
 Strategic Decisions – set the direction for the
entire company; they are broad in scope and
long-term in nature
 Following decisions focus on specifics -
Tactical decision

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OM Decisions
 Tactical decisions focus on
 Specific day-to-day issues
 Resource needs, schedules, & quantities to
produce
 Tactical decisions are very frequent
 Strategic decisions less frequent
 Tactical decisions must align with strategic
decisions

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OM Decisions

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Plan of Book-Chapters link to Types
of OM Decisions

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Why OM?
 For long-run success companies must place
much important on their operations
 The 1950-1960 era was the U.S. golden era where
primary opportunities were marketing
 The 1970-1980 U.S. companies experienced a
large decline in productivity growth – international
firms began to challenge in many markets
 The 1970-1980 era saw U. S. firms lagging behind
in methods and processes
 The resurgence of American business in the 1990’s
capitalized on improved operations

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 Historical Development of OM
 Industrial revolution Late 1700s
 Scientific management Early 1900s
 Human relations/Human Resources
1930s -
 Management science Mid-1900s
 Computer age 1970s
 Environmental Issues 1970s

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 Historical Development of OM
 Just-in-Time Systems (JIT) 1980s

 Total quality management (TQM) 1980s

 Reengineering 1990s

 Global competition 1980s

 Flexibility 1990s
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 Historical Development of OM

 Time-Based Competition 1990s

 Supply chain Management 1990s

 Electronic Commerce 2000s

 Outsourcing and
flattening of the world 2000s
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OM in Practice
 OM has the most diverse organizational
function
 Manages the transformation process
 OM has many faces and names such as;
 V. P. operations, Director of supply chains,
Manufacturing manager
 Plant manger, Quality specialists, etc.
 All business functions need information from
OM in order to perform their tasks

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Business Information Flow

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OM Across the Organization
 Most businesses are supported by the
functions of operations, marketing, and
finance
 The major functional areas must
interact to achieve the organization
goals

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OM Across the Organization -
continued
 Marketing is not fully capable of meeting customer
needs if they do not understand what operations can
produce
 Finance cannot judge the need for capital investments
if they do not understand operations concepts and
needs
 Information systems enables the information flow
throughout the organization
 Human resources must understand job requirements
and worker skills
 Accounting needs to consider inventory management,
capacity information, and labor standards

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Chapter 1 Highlights
 OM is the business function that is responsible for
managing and coordinating the resources needed to
produce a company’s products and services.
 Its role of OM is to transform organizational inputs
into company’s products or services outputs
 OM is responsible for a wide range of decisions,
ranging from strategic to tactical.
 Organizations can be divided into manufacturing and
service organizations, which differ in the tangibility of
the product or service

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Chapter 1 Highlights -
continued
 A number of historical milestones have shaped OM.
Some of the more significant of these are the
Industrial Revolution, scientific management, the
human relations movement, management science,
and the computer age
 OM is highly important function in today’s dynamic
business environment. Among the trends with
significant impact are just-in-time, TQM,
reengineering, flexibility, time-based competition,
SCM, global marketplace, and environmental issues
 OM works closely with all other business functions

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