Introduction to Functional Areas of Management Unit 7

Introduction to Operations Management

• Production is the creation of goods and services, and Operations Management (OM) is the set of activities that creates goods and services through the transformation of inputs into outputs.
• OM activities take place in all organizations, including manufacturing firms and service providers like banks, hospitals, and airlines.

History of Operations Management

• The field of OM is relatively young, but its history is rich and interesting.
• Key contributors to OM include:
  • Eli Whitney (1800): popularized interchangeable parts, standardization, and quality control in manufacturing.
  • Frederick W. Taylor (1881): father of scientific management, contributed to personnel selection, planning, and scheduling, motion study, and ergonomics.
  • Henry Ford and Charles Sorensen (1913): developed the assembly line concept.
  • Walter Shewhart (1924): combined statistics with quality control, providing the foundation for statistical sampling.
  • W. Edwards Deming (1950): believed management must do more to improve the work environment and processes to improve quality.

Reasons to Study Operations Management

• OM is one of the three major functions of any organization, along with marketing and finance.
• Understanding OM helps us know how goods and services are produced.
• Studying OM prepares students for careers in operations management.
• OM is a costly part of an organization, and improving it can increase profitability and enhance service to society.

Functions and Duties of Operations Managers

• Operations managers perform the basic functions of the management process: planning, staffing, leading, organizing, and controlling.
• Key decisions made by operations managers include:
  • Design of goods and services
  • Managing quality
  • Process and capacity design
  • Location strategy
  • Layout strategy
  • Human resources and job design
  • Supply chain management
  • Inventory management
  • Scheduling
  • Maintenance and reliability

Operations and Productivity

• There is a strong inter-relationship between the four major functions within an organization: marketing, production/operations, finance/accounting, and human resource management.
• Productivity is a ratio of output to input, and can be affected by factors such as methods, capital, quality, technology, and management.

Exciting New Trends in Operations Management

• Global focus: rapid decline in communication and transportation costs has made global markets more accessible.
• Just-in-time performance: reducing inventory at every level to improve response to dynamic changes in the marketplace.
• Supply-chain partnering: building long-term partnerships with suppliers to improve supply chain management.
• Rapid product development: using design technology to respond to rapid changes in material and process technology.
• Mass customization: producing individual products to cater to individual customer whims.
• Empowered employees: moving decision making to individual workers to improve competence and motivation.

Operations in the Service Sector

• The service sector is defined as including repair and maintenance, government, food and lodging, transportation, insurance, trade, finance, real estate, education, legal, medical, entertainment, and other professional occupations.
• Differences between goods and services include:
  • Intangibility
  • Simultaneous production and consumption
  • Uniqueness
  • High customer interaction
  • Knowledge-based products
  • Dispersion
• Operations management in the service sector involves transforming resources into products, establishing quality standards, designing and processing products on a schedule, and employing human resources.

Productivity

• Production is the conversion of raw materials into finished goods, while productivity is a ratio of output to input.
• Productivity can be improved by:
  • Developing methods for achieving productivity improvements
  • Studying how other companies have improved productivity
  • Re-examining the way work is done
  • Establishing reasonable goals for improvement
  • Obtaining support of top management
  • Measuring improvements and publicizing them

Factors that Affect Productivity

• Methods
• Capital
• Quality
• Technology
• Management
• Improving productivity can be achieved by:
  • Developing productivity measures for all operations
  • Finding bottleneck operations and improving them
  • Getting ideas from workers
  • Improving typing skills, replacing typewriters with computers, or outsourcing typing work.

Learn about the basics of Operations Management, including the creation of goods and services through the transformation of inputs into outputs.