Chapter 1: Introduction to Operations Management

Chapter 1: Introduction to Operations Management

• Operations management is the management of systems or processes that create goods and/or provide services.
• Operations is the part of a business organization responsible for producing goods or services.
• Supply chain is a sequence of activities and organizations involved in producing and delivering a good or service.

Learning Objectives (Chapter 1)

• Define the terms operations management and supply chain.
• Identify similarities and differences between production and service operations.
• Explain the importance of learning about operations management.
• Identify the three major functional areas of organizations and explain how they interrelate.
• Summarize the two major aspects of process management.
• Describe the operations function and the nature of the operations manager's job.
• Explain the key aspects of operations management decision making.
• Briefly describe the historical evolution of operations management.
• Describe the current issues in business that impact operations management.
• Explain the importance of ethical decision making.
• Explain the need to manage the supply chain.

Goods or Services

• Goods are physical items (e.g., automobile, computer, oven, shampoo).
• Services are activities (e.g., air travel, education, haircut, legal counsel).

Supply Chain

• Illustrates the sequence of activities and organizations in producing & delivering a product/service.
• Diagram depicts a chain with suppliers' suppliers, direct suppliers, producer, distributor, and final customers.

Transformation Process

• Transformation/Conversion Process: Inputs (land, labor, capital, information) are changed into outputs (goods and services).
• Measurement and Feedback: Ensures the process remains consistent.
• Control: Corrective actions are taken based on feedback.

Goods-Service Continuum

• Products are typically neither purely service-based nor purely goods-based.
• Examples of goods-service continuum: Assembly, Retail, Meal prep, Teaching.

Illustrations of the Transformation Process

• Table provides examples of inputs, processing, and outputs for a food processor and a hospital.

Manufacturing vs. Service

• Lists key characteristics differentiating manufacturing and service systems: customer contact, labor content, uniformity, measurement, quality, inventory, wages, and patentability.

Table of Typical Differences Between Production of Goods and Provision of Services

• Presents a table contrasting goods and services based on output, customer contact, labor content, uniformity, measurement of productivity, opportunity to correct problems before delivery, inventory levels, wages, and patentability.

Degree of Customization

• Degree of customization influences the entire organization.
• High customization leads to being more labor-intensive, more time-consuming, and requiring skilled labor, flexible equipment, low volume, and high price tags.

Why Study Operations Management?

• Every aspect of business affects or is affected by operations.
• Many service jobs are related to operations.
• Operations and supply chains provide a better understanding of the world, company success/failure, and the importance of working with others.

Function Overlap

• Roles of different functions (Operations, Finance, and Marketing) overlap significantly.
• Functions require significant interfacing and collaboration.
• Interfacing includes exchanging information and cooperating in decision-making.

OM and Supply Chain Career Opportunities

• Lists various career opportunities related to Operations and Supply Chains (e.g., Operations manager, Supply chain manager, Production analyst).

Process Management

• Process is one or more actions that transform inputs into outputs.
• Three categories of business process: Upper-management, Operational, and Supporting.

Supply & Demand

• The ideal situation in operations is "supply equals demand."
• "Supply less than demand" leads to opportunity losses and customer dissatisfaction.
• "Supply more than demand" leads to wasteful costs.

Scope of Operations Management

• Operations function includes interrelated activities like forecasting, capacity planning, locating and laying out facilities, scheduling, managing inventory, insuring quality, motivating employees.

Role of the Operations Manager

• The Operations function consists of activities related to producing goods/services.
• Operations Managers primarily guide the system through decision making (system design, system operation).

System Design Decisions

• These decisions involve Capacity, Facility location, Facility layout, Product and service planning, Acquisition and placement of equipment,Long-term commitment of resources, Determining parameters for system operation.

System Operation Decisions

• Tactical and operational decisions.
• Management of personnel & Inventory, Scheduling and Project management, Quality assurance, Operations Managers more involved in system operation decisions, but are relevant to system design still.

OM Decision Making

• Decision making involves multiple resources and alternatives.
• Questions for consideration include: What resources, In what amounts, When will resources be needed, Where will work be done, How will the product/service be designed, How will the work be done/resources be allocated, Who will do the work.

General Approach to Decision Making

• Modeling is important for all decision-makers. Models abstract real-world scenarios, making them manageable.
• Common Model features: Simplify real-life phenomena,omit unimportant info focus on crucial aspects, and illustrate real-world systems.
• Model types include physical (like a miniature airplane), schematic (like a city map), and mathematical (like optimization calculations).

Benefits of Models

• Models are easier and less costly than working with the real system.
• Organize and quantify information.
• Increase understanding of problems.
• Enable "What if" questions
• Serve as a consistent format for analyzing problems and help apply math to handle complex issues.

Metrics and Trade-offs

• Performance metrics
• Trade-offs: Giving up one thing to gain something else.
• Examples of performance metrics: profits, costs, quality, productivity, flexibility, inventories, schedules, forecast accuracy.
• Example of a trade-off: carrying more inventory (cost) to achieve better customer service.

Establishing Priorities

• In most situations, some issues are more important than others.
• Pareto Principle: A small number of factors often account for a substantial percentage of problems or successes.
• Critical few: These important issues/factors should have top priority, which applies across all management levels and sectors.

Historical Evolution of OM

• OM history encompasses the Industrial Revolution, scientific management, human relations movement, decision models and management science, and the influence of Japanese manufacturers.

Industrial Revolution

• Craft production: highly skilled workers use simple tools, produce customized goods.
• Key elements: Division of Labor (Adam Smith), interchangeable parts and machinery advancements(Eli Whitney).

Scientific Management

• Frederick Winslow Taylor's approach emphasized efficiency via observation, measurement, and improvement of work methods, along with incentives for economic growth.

Human Relations Movement

• Important contributors to this movement include Lillian Gilbreth (Psychology applications), Elton Mayo (Hawthorne studies), Abraham Maslow (hierarchy of needs), Frederick Herzberg (Two Factor Theory), Douglas McGregor (Theory X and Y), and William Ouchi (Theory Z).

Decision Models & Management Science

• Key figures include F.W. Harris (Inventory Models), Dodge, Romig, Shewhart (sampling and quality control), Tippett (statistical sampling), and George Dantzig (linear programming).

Influence of Japanese Manufacturers

• Japanese practices focused on increased productivity and quality, including Just-in-Time (JIT) production

Operations Today

• Current trends in operations management include effective utilization of technology, managing global competition, adapting to changing resources, managing revenue, and increasing agility.

Key Issues for Operations Managers Today

• Operations managers face issues like economic conditions, innovation challenges, quality concerns, risk management, cybersecurity, and the need to compete effectively in a global marketplace.

Environmental Concerns

• Sustainability involves conserving resources, reducing ecological impact and incorporating social criteria in decisions.

Ethical Decision Making

• Ethics are standards that guide behavior, often codified in company policies. Ethical frameworks provide structured procedures for ethical decision making.

Ethical Issues in Operations

• Operations managers face ethical challenges related to financials, workers' safety, product safety, quality, environmental impact, community concerns, hiring/firing practices, facility usage, and worker rights.

The Need for Supply Chain Management

• Past approaches to supply chain management lacked a holistic perspective.
• Results included instability in inventory levels, inventory stockouts, late deliveries, and quality problems.

Supply Chain Issues

• Current supply chain challenges include improving operations, managing outsourcing, transportation costs, pressures of global competition, increased importance of e-business, and navigating complex supply chains. Inventory management is also a critical concern.

This quiz covers the fundamental concepts of operations management and its role in business. You'll explore key terms like supply chain, production, and service operations, along with the interrelationships between different functional areas. Test your knowledge on the importance of operations management and decision-making processes.