Mngt8 prelim q1.docx

**MNGT8** **LESSON 1: INTRODUCTION TO OPERATIONS MANAGEMENT** **OPERATIONS MANAGEMENT** is the management of processes that transform inputs into goods and services that add value for the customer. **OPERATION** is that part of a business organization that is responsible for producing goods and/o...

**MNGT8** **LESSON 1: INTRODUCTION TO OPERATIONS MANAGEMENT** **OPERATIONS MANAGEMENT** is the management of processes that transform inputs into goods and services that add value for the customer. **OPERATION** is that part of a business organization that is responsible for producing goods and/or services. **GOODS** are physical items that include raw materials, parts, subassemblies such as motherboards that go into computers, and final products such as cellphones and automobiles. Services are activities that provide some combination of time, location, form, or physical. **3 BASIC FUNCTIONS OF BUSINESS ORGANIZATION** 1. **Finance - is responsible for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations.** 2. **Marketing - is responsible for assessing consumer wants and needs, and selling and promoting the organizations goods or services.** 3. **Operations - is responsible for producing the goods or providing the services offered by the organizations.** **SUPPLY CHAIN - Is the sequence of organizations -- their facilities, functions, and activities -- that involved in producing and delivering a product or service. The sequence begins with basic suppliers of raw materials and extends all the way to the final customer.** **FOUR MAJOR ELEMENTS OF SUPPLY CHAIN** 1. **Integration** - Part of good planning is setting up integration, which means that everyone involved in the manufacturing process communicates and collaborates. This improved communication reduces errors that cost time and money. 2. **Operations** - As important as strategy is to keeping a strong supply chain, day-to-day operations are the backbone of the work manufacturers do. Managers monitor the work being performed and make sure everything remains on track. 3. **Purchasing** - This means often staying ahead of the process so that you have everything you need on hand well before you actually need it. Without the right purchasing personnel, you could find that you end up running out of the materials you need, delaying production, or that you overbuy and strain the company's budget. 4. **Distribution** - The supply chain ends when the product lands on store shelves where customers can buy them or their front door. **VALUE ADDED** is the term used to describe the difference between the cost of inputs and the value or price of outputs. **NONPROFIT ORGANIZATIONS** - the value of is their value to society; the greater the value- added, the greater the effectiveness of these operations. **PROFIT ORGANIZATIONS** - the value of outputs is measured by the prices that customers are willing to pay for those goods or services. **THE GOAL OF OPERATIONS MANAGEMENT** is to maximize efficiency while producing goods and services that effectively fulfill customer needs. **3 CATEGORIES OF BUSINESS PROCESSES** 1. **Upper-management processes. These given the operation of the entire organization. Examples include organizational governance and organizational strategy. (top-level and strategic)** 2. **Operational processes. These are the core processes that make up the value stream. Examples include purchasing, production and/or service, marketing, and sales. (directly involved in operations)** 3. **Supporting processes. These support the core processes. Examples include accounting, human resources, and IT (information technology)** **MANAGING A PROCESS TO MEET DEMAND** **The capacity of a process will be such that its output just matches demand.** **Process Variation - Variation occurs in all business processes. It can be due to variety or variability.** **FOUR BASIC SOURCES OF VARIATION** 1. **The variety of goods or services being offered. The greater the variety of goods and services, the greater the variation in production or service requirements.** 2. **Structural variation in demand. These variations, which include trends and seasonal variations, are generally predictable. They are particularly important for capacity planning.** 3. **Random variation. This natural variability is present some extent in all processes, as well as in demand for services and products, and it cannot generally be influenced by managers.** 4. **Assignable variation. These variations are caused by defective inputs, incorrect work methods, out-of-adjustment equipment, and so on. This type of variation can be reduced or eliminated by analysis and corrective action.** **THE SCOPE OF OPERATIONS MANAGEMENT ranges across the organization.** **Operations management people are involved in product and service design, process selection, selection and management of technology, design of work systems, location planning facilities planning, and quality improvement of the organization's product or services.** **SERVICE ORGANIZATION\'S OPERATIONS SYSTEM** The activities include: 1. **Forecasting** - weather and landing conditions, seat demand for flights, and the growth in air travel. 2. **Capacity planning** - essential for the airline to maintain cash flow and make a reasonable profit 3. **Locating facilities** - according to managers\' decisions on which cities to provide service for, where to locate maintenance facilities, and where to locate major and minor hubs. 4. **Facilities and layout** - important in achieving effective use of workers and equipment. 5. **Scheduling** of planes for flights and for routine maintenance; scheduling of pilots and flight attendants; and scheduling of ground crews, counter staff, and baggage handlers. 6. **Managing inventories** of such items as foods and beverages, first-aid equipment, in-flight magazines, pillows and blankets, and life preservers. 7. **Assuring quality**, where the emphasis is on safety, and important in dealing with customers at ticket counters, check-in, telephone and electronic reservations, and curb service, where the emphasis is on efficiency and courtesy. 8. **Motivating and training employees** in all phases of operations. **Operations Management and Decision Making** The chief role of an operations manager is that of planner and decision maker. **KEY ISSUES FOR TODAY'S BUSINESS OPERATIONS** 1. **Economic conditions** - The lingering recession and slow recovery in various sectors of the economy has made managers cautions. 2. **Innovating** - Finding new improved products or services are only two of the many possibilities that can provide value to an organization. 3. **Quality problems** - The numerous operations failures underscore the need to improve the way operations are managed. 4. **Risk management** - Managing risks starts with identifying risks, assessing vulnerability and potential damage (liability costs, reputation, demand),and taking steps to reduce or share risks. 5. **Cyber security** - The need to guard against intrusions from hackers whose goal is to steal personal information of employees and customers is becoming increasingly necessary. 6. **Competing in a global economy** - Companies must carefully weigh their options, which include outsourcing some or all of their operations to low-wage areas, reducing costs internally, changing designs, and working to improve productivity. **ETHICAL CONDUCT** (Five principles for thinking ethically) 1. **Utilitarian Principle** -- The good done by an action or inaction should outweigh any harm it causes or might cause. An example is not allowing a person who has had too much to drink to drive. 2. **Rights Principle** -- Actions should respect and protect the moral rights of others. An example is not taking advantage of a vulnerable person. 3. **Fairness Principle** -- Equals should be held to, or evaluated by, the same standards. An example is equal pay for equal work. 4. **Common Good Principle** -- Actions should contribute to the common good of the community. An example is an ordinance on noise abatement. 5. **The Virtue Principle** -- Actions should be consistent with certain ideal virtues. Examples include honesty, compassion, generosity, tolerance, fidelity, integrity, and self-control. **ETHICAL FRAMEWORK -** A sequence of steps intended to guide thinking and subsequent decisions or actions. **The Need to Manage the Supply Chain -** Supply chain management is being given in increasing attention as business organizations face mounting pressure to improve management of their supply chains. The other issues include the following: 1. **The need to improve operations** -- efforts on cost and time reduction and productivity and quality improvement. 2. **Increasing levels of outsourcing** -- organizations are increasing their levels of outsourcing, buying goods or services instead of producing or providing them themselves. As outsourcing increases, organizations are spending increasing amounts on supply-related activities. 3. **Increasing transportation costs** -- transportation costs are increasing, and they need to be more carefully managed. 4. **Competitive pressures** -- have led to an increasing number of new products, shorter product development cycles, and increased demand for customization. 5. **Increasing globalization** -- has expanded the physical length of supply chains. A global supply chain increases the challenges of managing a supply chain. 6. **Increasing importance of e- business** -- the increasing importance of e-business has added new dimensions to business buying and selling and has presented new challenges. 7. **The complexity of supply chains** -- supply chains are complex; they are dynamic and they have many inherent uncertainties that can adversely affect them, such as inaccurate forecasts, late deliveries, sub-standard quality, equipment breakdowns, and canceled or changed orders. 8. **The need to manage inventories** -- inventories plays a major role in the success or failure of a supply chain, so it is important to coordinate inventory levels throughout a supply chain.