BUMA-011 Lesson 1 PDF

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Class orientation Syllabus Discussion OPERATIONS MANAGEMENT (TQM) ENGR. R. G. ILAGAN ( LECTURER) SEPTEMBER 10 ,2024  POLYTECHN...

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Class orientation Syllabus Discussion OPERATIONS MANAGEMENT (TQM) ENGR. R. G. ILAGAN ( LECTURER) SEPTEMBER 10 ,2024  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Course syllabus COURSE CODE : BUMA 011 COURSE TITLE : OPERATIONS MANAGEMENT (TQM) COURSE CREDIT : 3 UNITS PRE-REQUISITE : NONE POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Course syllabus COURSE DESCRIPTION: Operations Management is a critical field within business management that focuses on effectively managing the processes and systems that produce goods and deliver services. This course provides a comprehensive understanding of the principles, strategies, and techniques used to optimize operations within various organizations. Students will explore key concepts such as process design, quality management, supply chain management, capacity planning, inventory control, and operations strategy. In this course, each student must expect to be oriented through lectures and to gain knowledge thru practical problems and analysis.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Course Syllabus GOALS OF THE BRANCH The PUP Sto. Tomas Branch commits to accomplish the following goals: ❑ Sustain a culture of quality among the branch stakeholders by providing opportunities for student, faculty and staff development at the local, regional, national and international levels. ❑Develop and nurture collaborative research culture. ❑Champion knowledge and technology transfer through responsive sustainable and development-oriented community extension programs. ❑Provide a learning-conducive campus environment where technology driven resources are available to students, faculty member are available to students, faculty members and staff in enlarging their skills and competencies to meet the demands of the changing times. ❑Ensure continuous improvement in the various areas of its operations through productive partnership and engagements with public, private and civil society acquire time.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch course outline 1. Introduction to Operations Management 2. Demand Forecasting 3. Product and Service Design 4. Capacity Planning 5. Inventory Management 6. Supply Chain Management 7. Quality Management 8. Scheduling and Sequencing  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Course requirements Sto. Tomas Branch ❑Attendance ❑Homeworks ( individual/Group) ❑Case studies ( Group) ❑Quizzes ❑Midterm Exam and Final Exam  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sample COURSE GRADING SYSTEM Sto. Tomas Branch *First Grading / Second Grading period : 1.Class Standing = 70% Quizzes = 60% Exercises/CS Assignment = 30% Attendance = 10% 2. Midterm /Final Examination = 30% Final Grade : ( First Grading + Second Grading ) 2 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch CLASSROOM POLICIES: Students are required to attend classes regularly and punctually starting from the first day of school. ❖A 15-minute grace period will be given for the student before it will be considered late. Three (3) times late is equivalent to 1 absence. The students will be considered absent if the student does not arrive 30 minutes after the class starts. ❖The maximum allowable number of absences per semester is not more than 20% of the school days except for valid reasons. A student incurring absences beyond 20% of the number of school days is considered dropped from the subject unless otherwise decided by the Academic Head. ❖Cheating is not only unethical; it is also against the Colegio’s rules and is not tolerated. Any form of cheating in programming assignments, homework problems, quizzes, and exams will result in an action according to the School rules.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Suggested references ▪ Stevenson , William,et al.( 2014), Operations Management ( 2nd ed) , New York : Mc Graw Hill. Heizer, Jay et al. ( 2011). Principles of Operations Management. (10th ed). Prentice Hall International, Inc. Subburaj, Ramsamy ( 2012). Total Quality Management ( International ed). New Delhi:Tata Mc Graw- Hill Chase, Richard B., Jacobs, F. Robert, Aquilano, Nicholas J., OPERATIONS MANAGEMENT FOR COMPETITIVE ADVANTAGE, 2005 International Edition,McGraw Hill e-book On-line references POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Lesson 1 Introduction to Operations Management  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Learning Outcomes 1 Define the term operations management. 2 Identify the three major functional areas of organizations and describe how they interrelate. 3 Describe the operations function and the nature of the operations manager's job. 4 Differentiate between design and operation of production systems. 5 Provide a general description of the different types of operations. 6 Compare and contrast service and manufacturing operations. 7 Briefly describe the historical evolution of operations management. 8 Describe the key aspects of operations management decision making. 9 Identify some of the current trends in business that impact operations management.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Introduction Operations 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 cell phones and automobiles. Services are activities that provide some combination of time, location, form, or psychological value. POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch What is Operations Management? Operations Management is the management of processes or systems that create goods and/or provide services. It encompasses forecasting, capacity Planning, scheduling, managing inventories, assuring quality, motivation employees, decide where to locate facilities and more.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Ten Strategic OM Decisions 1. Goods and Service Design 10. Maintenance 2. Quality 3. Process and Capacity Design 4. Location Selection 5. Layout Decision 6. Human Resources and Job Design 7. Supply Chain Management 8. Inventory 9. Scheduling  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Supply chain A sequence of activities and organizations involved in producing and delivering a good or service. POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labor, and information are used to create goods or services using one or more transformation processes (e.g., storing, transporting, repairing). To ensure that the desired outputs are obtained, an organization takes measurements at various points in the transformation process ( feedback) and then compares them with previously established standards to determine whether corrective action is needed (control). POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The goods–service combination is a continuum It can range from primarily goods, with little service, to primarily service, with few goods. POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Value Added The essence of the operations function is to add value during the transformation process: Value-added is the term used to describe the difference between the cost of inputs and the value or price of outputs. Value can also be psychological, as in branding.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch PRODUCTION OF GOODS VERSUS PROVIDING SERVICES Although goods and services often go hand in hand, there are some very basic differences between the two, differences that impact the management of the goods portion versus management of the service portion. There are also many similarities between the two. Production of goods results in a tangible output, such as an automobile, eyeglasses, a golf ball, a refrigerator—anything that we can see or touch. It may take place in a factory, but it can occur elsewhere. For example, farming and restaurants produce nonmanufactured goods. Delivery of service, on the other hand, generally implies an act. A physician’s examination, TV and auto repair, lawn care, and the projection of a film in a theater are examples of services.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The majority of service jobs fall into these categories: Professional services (e.g., financial, health care, legal). Mass services (e.g., utilities, Internet, communications). Service shops (e.g., tailoring, appliance repair, car wash, auto repair/maintenance). Personal care (e.g., beauty salon, spa, barbershop). Government (e.g., Medicare, mail, social services, police, fire). Education (e.g., schools, universities). Food service (e.g., catering).  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The majority of service jobs fall into these categories: Services within organizations (e.g., payroll, accounting, maintenance, IT, HR, janitorial). Retailing and wholesaling. Shipping and delivery (e.g., truck, railroad, boat, air). Residential services (e.g., lawn care, painting, general repair, remodeling, interior design). Transportation (e.g., mass transit, taxi, airlines, ambulance). Travel and hospitality (e.g., travel bureaus, hotels, resorts). Miscellaneous services (e.g., copy service, temporary help).  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Degree of customer contact. Many services involve a high degree of customer contact, although services such as Internet providers, utilities, and mail service do not. When there is a high degree of contact, the interaction between server and customer becomes a “moment of truth” that will be judged by the customer every time the service occurs  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Labor content of jobs Services often have a higher degree of labor content than manufacturing jobs do, although automated services are an exception.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Uniformity of inputs. Service operations are often subject to a higher degree of variability of inputs. Each client, patient, customer, repair job, and so on presents a some- what unique situation that requires assessment and flexibility. Conversely, manufacturing operations often have a greater ability to control the variability of inputs, which leads to more-uniform job requirements.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Measurement of productivity Measurement of productivity can be more difficult for service jobs due largely to the high variations of inputs. Thus, one doctor might have a higher level of routine cases to deal with, while another might have more-difficult cases. Unless a careful analysis is conducted, it may appear that the doctor with the difficult cases has a much lower productivity than the one with the routine cases.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Quality assurance. Quality assurance is usually more challenging for services due to the higher variation in input, and because delivery and consumption occur at the same time. Unlike manufacturing, which typically occurs away from the customer and allows mistakes that are identified to be corrected, services have less opportunity to avoid exposing the customer to mistakes.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Inventory. Many services tend to involve less use of inventory than manufacturing operations, so the costs of having inventory on hand are lower than they are for manufacturing. However, unlike manufactured goods, services cannot be stored. Instead, they must be provided “on demand.”  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Wages. Manufacturing jobs are often well paid, and have less wage variation than service jobs, which can range from highly paid professional services to minimum-wage workers.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services Ability to patent. Product designs are often easier to patent than service designs, and some services cannot be patented, making them easier for competitors to copy.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Comparison of Manufacturing and Services  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Primary Factors for Both a. Forecasting and capacity planning to match supply and demand. b. Process management. c. Managing variations. d. Monitoring and controlling costs and productivity. e. Supply chain management. f. Location planning, inventory management, quality control, and scheduling.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch WHY LEARN ABOUT OPERATIONS MANAGEMENT? Whether operations management is your major or not, the skill set you gain studying operations management will serve you well in your career. There are many career-related reasons for wanting to learn about operations management, whether you plan to work in the field of operations or not. This is because every aspect of business affects or is affected by operations. Operations and sales are the two line functions in a business organization. All other functions—accounting, finance, marketing, IT, and so on— support the two line functions.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch WHY LEARN ABOUT OPERATIONS MANAGEMENT? Among the service jobs that are closely related to operations are financial services (e.g., stock market analyst, broker, investment banker, and loan officer), marketing services (e.g., market analyst, marketing researcher, advertising manager, and product manager), accounting services (e.g., corporate accountant, public accountant, and budget analyst), and information services (e.g., corporate intelligence, library services, management information systems design services).  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch WHY LEARN ABOUT OPERATIONS MANAGEMENT? Working together successfully means that all members of the organization understand not only their own role, but they also understand the roles of others. In practice, there is significant interfacing and collaboration among the various functional areas, involving exchange of information and cooperative decision making. For example, although the three primary functions in business organizations perform different activities, many of their decisions impact the other areas of the organization.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch WHY LEARN ABOUT OPERATIONS MANAGEMENT?  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch WHY LEARN ABOUT OPERATIONS MANAGEMENT? Finance and operations management personnel cooperate by exchanging information and expertise in such activities as the following: 1. Budgeting. Budgets must be periodically prepared to plan financial requirements. Budgets must sometimes be adjusted, and performance relative to a budget must be evaluated. 2. Economic analysis of investment proposals. Evaluation of alternative investments in plant and equipment requires inputs from both operations and finance people. 3. Provision of funds. The necessary funding of operations and the amount and timing of funding can be important and even critical when funds are tight. Careful planning can help avoid cash-flow problems.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Operations also interacts with other functional areas of the organization, including legal, management information systems (MIS), accounting, personnel/human resources, and public relations, POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The legal department must be consulted on contracts with employees, customers, suppliers, and transporters, as well as on liability and environmental issues.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Accounting supplies information to management on costs of labor, materials, and overhead, and may provide reports on items such as scrap, downtime, and inventories.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Management information systems (MIS) is concerned with providing management with the information it needs to effectively manage. This occurs mainly through designing systems to capture relevant information and designing reports. MIS is also important for managing the control and decision-making tools used in operations management.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The personnel or human resources department is concerned with recruitment and training of personnel, labor relations, contract negotiations, wage and salary administration, assisting in manpower projections, and ensuring the health and safety of employees.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Public relations has responsibility for building and maintaining a positive public image of the organization. Good public relations provides many potential benefits. An obvious one is in the marketplace. Other potential benefits include public awareness of the organization as a good place to work (labor supply), improved chances of approval of zoning change requests, community acceptance of expansion plans, and instilling a positive attitude among employees.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch CAREER OPPORTUNITIES AND PROFESSIONAL SOCIETIES  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch PROCESS MANAGEMENT A key aspect of operations management is process management. A process consists of one or more actions that transform inputs into outputs. In essence, the central role of all management is process management. Businesses are composed of many interrelated processes. Generally speaking, there are three categories of business processes: 1. Upper-management processes. These govern the operation of the entire organization. Examples include organizational governance and organizational strategy. 2. Operational processes. These are the core processes that make up the value stream. Examples include purchasing, production and/or service, marketing, and sales. 3. Supporting processes. These support the core processes. Examples include accounting, human resources, and IT (information technology).  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch A major process can consist of many subprocesses, each having its own goals that con- tribute to the goals of the overall process. Business organizations and supply chains have many such processes and subprocesses, and they benefit greatly when management is using a process perspective. Business process management (BPM) activities include process design, process execution, and process monitoring. Two basic aspects of this for operations and sup- ply chain management are managing processes to meet demand and dealing with process variability.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Major aspects of process management Managing a Process to Meet Demand Process Variation  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Major aspects of process management Ideally, the capacity of a process will be such that its output just matches demand. Excess capacity is wasteful and costly; too little capacity means dissatisfied customers and lost revenue. Having the right capacity requires having accurate forecasts of demand, the ability to translate forecasts into capacity requirements, and a process in place capable of meeting expected demand. Even so, process variation and demand variability can make the achievement of a match between process output and demand difficult. Therefore, to be effective, it is also necessary for managers to be able to deal with variation. Managing a Process to Meet Demand  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Major aspects of process management Process Variation Variation occurs in all business processes. It can be due to variety or variability. For example, random variability is inherent in every process; it is always present. In addition, variation can occur as the result of deliberate management choices to offer customers variety.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch There are 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 to 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.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch THE SCOPE OF OPERATIONS MANAGEMENT 1. Forecasting such things as 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. (Too few or too many planes, or even the right number of planes but in the wrong places, will hurt profits.) 3. Locating facilities according to managers’ decisions on which cities to provide ser- vice 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.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch THE SCOPE OF OPERATIONS MANAGEMENT 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, essential in flying and maintenance operations, 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.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch ❑A primary function of an operations manager is to guide the system by decision making. ❑Certain decisions affect the design of the system, and others affect the operation of the system.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch System design involves decisions that relate to system capacity, the geographic location of facilities, arrangement of departments and placement of equipment within physical structures, product and service planning, and acquisition of equipment. These decisions usually, but not always, require long-term commitments. Moreover, they are typically strategic decisions.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch System operation involves management of personnel, inventory planning and control, scheduling, project management, and quality assurance. These are generally tactical and operational decisions. Feedback on these decisions involves measurement and control. In many instances, the operations manager is more involved in day-to- day operating decisions than with decisions relating to system design. However, the operations manager has a vital stake in system design because system design essentially determines many of the parameters of system operation.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch A number of other areas are part of, or support, the operations function. They include purchasing, industrial engineering, distribution, and maintenance. Purchasing has responsibility for procurement of materials, supplies, and equipment. Close contact with operations is necessary to ensure correct quantities and timing of purchases. The purchasing department is often called on to evaluate vendors for quality, reliability, service, price, and ability to adjust to changing demand. Purchasing is also involved in receiving and inspecting the purchased goods. Industrial engineering is often concerned with scheduling, performance standards, work methods, quality control, and material handling. Distribution involves the shipping of goods to warehouses, retail outlets, or final customers. Maintenance is responsible for general upkeep and repair of equipment, buildings and grounds, heating and air- conditioning; removing toxic wastes; parking; and perhaps security.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS MANAGEMENT AND DECISION MAKING The chief role of an operations manager is that of planner/decision maker. In this capacity, the operations manager exerts considerable influence over the degree to which the goals and objectives of the organization are realized. Most decisions involve many possible alternatives that can have quite different impacts on costs or profits. Consequently, it is important to make informed decisions  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS MANAGEMENT AND DECISION MAKING Operations management professionals make a number of key decisions that affect the entire organization. These include the following: What: What resources will be needed, and in what amounts? When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? When is corrective action needed? Where: Where will the work be done? How: How will the product or service be designed? How will the work be done (organization, methods, equipment)? How will resources be allocated? Who: Who will do the work?  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Models A model is an abstraction of reality, a simplified representation of something. For example, a child’s toy car is a model of a real automobile. It has many of the same visual features (shape, relative proportions, wheels) that make it suitable for the child’s learning and playing. But the toy does not have a real engine, it cannot transport people, and it does not weigh 2,000 pounds.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Models are sometimes classified as physical, schematic, or mathematical: Physical models look like their real-life counterparts. Examples include miniature cars, trucks, airplanes, toy animals and trains, and scale-model buildings. The advantage of these models is their visual correspondence with reality. Schematic models are more abstract than their physical counterparts; that is, they have less resemblance to the physical reality. Examples include graphs and charts, blueprints, pictures, and drawings. The advantage of schematic models is that they are often relatively simple to construct and change. Moreover, they have some degree of visual correspondence. Mathematical models are the most abstract: They do not look at all like their real-life counterparts. Examples include numbers, formulas, and symbols. These models are usually the easiest to manipulate, and they are important forms of inputs for computers and calculators.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Managers use models in a variety of ways and for a variety of reasons. Models are beneficial because they: 1. Are generally easy to use and less expensive than dealing directly with the actual situation. 2. Require users to organize and sometimes quantify information and, in the process, often indicate areas where additional information is needed. 3. Increase understanding of the problem. 4. Enable managers to analyze what-if questions. 5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem. 6. Enable users to bring the power of mathematics to bear on a problem.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making This impressive list of benefits notwithstanding, models have certain limitations of which you should be aware. The following are three of the more important limitations: 1. Quantitative information may be emphasized at the expense of qualitative information. 2. Models may be incorrectly applied and the results misinterpreted. The widespread use of computerized models adds to this risk because highly sophisticated models may be placed in the hands of users who are not sufficiently knowledgeable to appreciate the subtleties of a particular model; thus, they are unable to fully comprehend the circumstances under which the model can be successfully employed. 3. The use of models does not guarantee good decisions.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Quantitative Approaches Quantitative approaches to problem solving often embody an attempt to obtain mathematically optimal solutions to managerial problems. 1. Linear Programming 2. Queuing Techniques 3. Project Models (PERT CPM) 4. Forecasting Techniques 5. Statistical Models  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Performance Metrics All managers use metrics to manage and control operations. There are many metrics in use, including those related to profits, costs, quality, productivity, flexibility, assets, inventories, schedules, and forecast accuracy. As you read each chapter, note the metrics being used and how they are applied to manage operations.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Analysis of Trade-Offs Operations personnel frequently encounter decisions that can be described as trade- off decisions. For example, in deciding on the amount of inventory to stock, the decision maker must take into account the trade-off between the increased level of customer service that the additional inventory would yield and the increased costs required to stock that inventory.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Degree of Customization ▪ A major influence on the entire organization is the degree of customization of products or services being offered to its customers. ▪ Providing highly customized products or services such as home remodeling, plastic surgery, and legal counseling tends to be more labor intensive than providing standardized products such as those you would buy “off the shelf” at a mall store or a supermarket or standardized services such as public utilities and Internet services.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Degree of Customization Furthermore, production of customized products or provision of customized services is generally more time consuming, requires more highly skilled people, and involves more flexible equipment than what is needed for standardized products or services.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making A Systems Approach A systems viewpoint is almost always beneficial in decision making. Think of it as a “big picture” view. A system can be defined as a set of interrelated parts that must work together. In a business organization, the organization can be thought of as a system composed of subsystems (e.g., marketing subsystem, operations subsystem, finance subsystem), which in turn are composed of lower subsystems. The systems approach emphasizes interrelationships among sub systems, but its main theme is that the whole is greater than the sum of its individual parts.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Aspects of Operations Management Decision Making Establishing Priorities In virtually every situation, managers discover that certain issues or items are more important than others. Recognizing this enables the managers to direct their efforts to where they will do the most good. Typically, a relatively few issues or items are very important, so that dealing with those factors will generally have a disproportionately large impact on the results achieved. This well-known effect is referred to as the Pareto phenomenon. This is one of the most important and pervasive concepts in operations management. In fact, this concept can be applied at all levels of management and to every aspect of decision making, both professional and personal.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch THE HISTORICAL EVOLUTION OF OPERATIONS MANAGEMENT 1. Industrial Revolution 2. Scientific Management 3. The Human Relations Management 4. Decision Models and Management Science 5. The Influence of Japanese Manufacturers  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Industrial Revolution ▪ The Industrial Revolution began in the 1770s in England and spread to the rest of Europe and ▪ to the United States during the 19th century. ▪ Prior to that time, goods were produced in small shops by craftsmen and their apprentices. ▪ Under that system, it was common for one person to be responsible for making a product, such as a horse-drawn wagon or a piece of furniture, from start to finish. ▪ Only simple tools were available; the machines in use today had not ▪ been invented.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Industrial Revolution Then, a number of innovations in the 18th century changed the face of production forever by substituting machine power for human power. Perhaps the most significant of these was the steam engine, because it provided a source of power to operate machines in factories. Ample supplies of coal and iron ore provided materials for generating power and making machinery. The new machines, made of iron, were much stronger and more durable than the simple wooden machines they replaced.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Industrial Revolution In the earliest days of manufacturing, goods were produced using craft production: highly skilled workers using simple, flexible tools produced goods according to customer specifications. Craft production had major shortcomings. Because products were made by skilled craftsmen who custom-fitted parts, production was slow and costly. And when parts failed, the replacements also had to be custom made, which was also slow and costly. Another shortcoming was that production costs did not decrease as volume increased; there were no economies of scale, which would have provided a major incentive for companies to expand. Instead, many small companies emerged, each with its own set of standards.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Industrial Revolution A major change occurred that gave the Industrial Revolution a boost: the development of standard gauging systems. This greatly reduced the need for custom-made goods. Factories began to spring up and grow rapidly, providing jobs for countless people who were attracted in large numbers from rural areas. Despite the major changes that were taking place, management theory and practice had not progressed much from early days. What was needed was an enlightened and more systematic approach to management.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Scientific Management The scientific management era brought widespread changes to the management of factories. The movement was spearheaded by the efficiency engineer and inventor Frederick Winslow Taylor, who is often referred to as the father of scientific management. Taylor believed in a “science of management” based on observation, measurement, analysis and improvement of work methods, and economic incentives. He studied work methods in great detail to identify the best method for doing each job. Taylor also believed that management should be responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperation between management and workers, and separating management activities from work activities.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Scientific Management Taylor’s methods emphasized maximizing output. They were not always popular with workers, who sometimes thought the methods were used to unfairly increase output without a corresponding increase in compensation. Certainly some companies did abuse workers in their quest for efficiency. Eventually, the public outcry reached the halls of Congress, and hearings were held on the matter. Taylor himself was called to testify in 1911, the same year in which his classic book, The Principles of Scientific Management, was published.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Scientific Management A number of other pioneers also contributed heavily to this movement, including the following: Frank Gilbreth was an industrial engineer who is often referred to as the father of motion study. He developed principles of motion economy that could be applied to incredibly small portions of a task. Henry Gantt recognized the value of nonmonetary rewards to motivate workers, and developed a widely used system for scheduling, called Gantt charts. Harrington Emerson applied Taylor’s ideas to organization structure and encouraged the use of experts to improve organizational efficiency. He testified in a congressional hearing that railroads could save a million dollars a day by applying principles of scientific management. Henry Ford, the great industrialist, employed scientific management techniques in his factories.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Scientific Management Among Ford’s many contributions was the introduction of mass production to the automotive industry, a system of production in which large volumes of standardized goods are produced by low-skilled or semiskilled workers using highly specialized, and often costly, equipment. Ford was able to do this by taking advantage of a number of important concepts. Perhaps the key concept that launched mass production was interchangeable parts, sometimes attributed to Eli Whitney, an American inventor who applied the concept to assembling muskets in the late 1700s.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Scientific Management A second concept used by Ford was the division of labor, which Adam Smith wrote about in The Wealth of Nations (1776). Division of labor means that an operation, such as assembling an automobile, is divided up into a series of many small tasks, and individual workers are assigned to one of those tasks. Unlike craft production, where each worker was responsible for doing many tasks, and thus required skill, with division of labor the tasks were so narrow that virtually no skill was required.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Human Relations Movement Whereas the scientific management movement heavily emphasized the technical aspects of work design, the human relations movement emphasized the importance of the human element in job design. Lillian Gilbreth, a psychologist and the wife of Frank Gilbreth, worked with her husband, focusing on the human factor in work. (The Gilbreths were the subject of a classic film, Cheaper by the Dozen.) Many of her studies dealt with worker fatigue. In the following decades, there was much emphasis on motivation. Elton Mayo conducted studies at the Hawthorne division of Western Electric. His studies revealed that in addition to the physical and technical aspects of work, worker motivation is critical for improving productivity.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Human Relations Movement Abraham Maslow developed motivational theories, which Frederick Hertzberg refined. Douglas McGregor added Theory X and Theory Y. These theories represented the two ends of the spectrum of how employees view work. William Ouchi added Theory Z, which combined the Japanese approach with such features as lifetime employment, employee problem solving, and consensus building, and the traditional Western approach that features short- term employment, specialists, and individual decision making and responsibility.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Decision Models and Management Science The factory movement was accompanied by the development of several quantitative techniques. F. W. Harris developed one of the first models in 1915: a mathematical model for inventory order size. In the 1930s, three coworkers at Bell Telephone Labs, H. F. Dodge, H. G. Romig, and W. Shewhart, developed statistical procedures for sampling and quality control. In 1935, L.H.C. Tippett conducted studies that provided the groundwork for statistical sampling theory.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Decision Models and Management Science At first, these quantitative models were not widely used in industry. However, the onset of World War II changed that. The war generated tremendous pressures on manufacturing output, and specialists from many disciplines combined efforts to achieve advancements in the military and in manufacturing. After the war, efforts to develop and refine quantitative tools for decision making continued, resulting in decision models for forecasting, inventory management, project management, and other areas of operations management.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Influence of Japanese Manufacturers A number of Japanese manufacturers developed or refined management practices that increased the productivity of their operations and the quality of their products, due in part to the influence of Americans W. Edwards Deming and Joseph Juran. This made them very competitive, sparking interest in their approaches by companies outside Japan. Their approaches emphasized quality and continual improvement, worker teams and empowerment, and achieving customer satisfaction. The Japanese can be credited with spawning the “quality revolution” that occurred in industrialized countries, and with generating widespread interest in lean production. The influence of the Japanese on U.S. manufacturing and service companies has been enormous and promises to continue for the foreseeable future. Because of that influence, this book will provide considerable information about Japanese methods and successes. POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY Advances in information technology and global competition have had a major influence on operations management. While the Internet offers great potential for business organizations, the potential as well as the risks must be clearly understood in order to determine if and how to exploit this potential. In many cases, the Internet has altered the way companies compete in the marketplace.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY Electronic business, or e-business, involves the use of the Internet to transact business. E-business is changing the way business organizations interact with their customers and their suppliers. Most familiar to the general public is e-commerce, consumer–business transactions such as buying online or requesting information. However, business-to-business transactions such as e-procurement represent an increasing share of e-business. E-business is receiving increased attention from business owners and managers in developing strategies, planning, and decision making.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY All three can have a major impact on costs, productivity, and competitiveness. Product and service technology refers to the discovery and development of new products and services. This is done mainly by researchers and engineers, who use the scientific approach to develop new knowledge and translate that into commercial applications. Process technology refers to methods, procedures, and equipment used to produce goods and provide services. They include not only processes within an organization but also supply chain processes. Information technology (IT) refers to the science and use of computers and other electronic equipment to store, process, and send information. Information technology is heavily ingrained in today’s business operations. This includes electronic data processing, the use of bar codes to identify and track goods, obtaining point-of-sale information, data transmission, the Internet, e-commerce, e-mail, and more.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY Competitive pressures and changing economic conditions have caused business organizations to put more emphasis on 1. During the latter part of the 1900s, many companies neglected to include operations strategy in their corporate strategy. Some of them paid dearly for that neglect. Now more and more companies are recognizing the importance of operations strategy on the overall success of their business as well as the necessity for relating it to their overall business strategy. 2. Working with fewer resources due to layoffs, corporate downsizing, and general cost cutting is forcing managers to make trade-off decisions on resource allocation, and to place increased emphasis on cost control and productivity improvement. 3. Revenue management is a method used by some companies to maximize the revenue they receive from fixed operating capacity by influencing demand through price manipulation. Also known as yield management, it has been successfully used in the travel and tourism industries by airlines, cruise lines, hotels, amusement parks, and rental car companies, and in other industries such as trucking and public utilities.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY Competitive pressures and changing economic conditions have caused business organizations to put more emphasis on 4. Process analysis and improvement includes cost and time reduction, productivity improvement, process yield improvement, and quality improvement and increasing customer satisfaction. This is sometimes referred to as a six sigma process. Process improvement can result in improved quality, cost reduction, and time reduction. Time relates to costs and to competitive advantage, and businesses seek ways to reduce the time to bring new products and services to the marketplace to gain a competitive edge. If two companies can provide the same product at the same price and quality, but one can deliver it four weeks earlier than the other, the quicker company will invariably get the sale.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY Competitive pressures and changing economic conditions have caused business organizations to put more emphasis on 5. Agility refers to the ability of an organization to respond quickly to demands or opportunities. It is a strategy that involves maintaining a flexible system that can quickly respond to changes in either the volume of demand or changes in product/service offerings. This is particularly important as organizations scramble to remain competitive and cope with increasingly shorter product life cycles and strive to achieve shorter development times for new or improved products and services.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch OPERATIONS TODAY Competitive pressures and changing economic conditions have caused business organizations to put more emphasis on 6. Lean production, a new approach to production, emerged in the 1990s. It incorporates a number of the recent trends listed here, with an emphasis on quality, flexibility, time reduction, and teamwork. This has led to a flattening of the organizational structure, with fewer levels of management. Lean systems are so named because they use much less of certain resources than typical mass production systems use—space, inventory, and workers—to produce a comparable amount of output. Lean systems use a highly skilled workforce and flexible equipment. In effect, they incorporate advantages of both mass production (high volume, low unit cost) and craft production (variety and flexibility). And quality is higher than in mass production. This approach has now spread to services, including health care, offices, and shipping and delivery.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch KEY ISSUES FOR TODAY BUSINESS OPERATIONS Economic conditions. The lingering recession and slow recovery in various sectors of the economy has made managers cautious about investment and rehiring workers who had been laid off during the recession. Innovating. Finding new or improved products or services are only two of the many possibilities that can provide value to an organization. Innovations can be made in processes, the use of the Internet, or the supply chain that reduce costs, increase productivity, expand markets, or improve customer service. Quality problems. The numerous operations failures mentioned at the beginning of the chapter underscore the need to improve the way operations are managed. That relates to product design and testing, oversight of suppliers, risk assessment, and timely response to potential problems.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch KEY ISSUES FOR TODAY BUSINESS OPERATIONS Risk management. The need for managing risk is underscored by recent events that include the crisis in housing, product recalls, oil spills, and natural and man-made disasters, and economic ups and downs. Managing risks starts with identifying risks, assessing vulnerability and potential damage (liability costs, reputation, demand), and taking steps to reduce or share risks. Competing in a global economy. Low labor costs in third-world countries have increased pressure to reduce labor costs. 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.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Environmental Concerns Stricter environmental regulations, particularly in developed nations, are being imposed. Furthermore, business organizations are coming under increasing pressure to reduce their carbon footprint (the amount of carbon dioxide generated by their operations and their supply chains) and to generally operate sustainable processes. Sustainability refers to service and production processes that use resources in ways that do not harm ecological systems that support both current and future human existence. Sustainability measures often go beyond traditional environmental and economic measures to include measures that incorporate social criteria in decision making.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Ethical Conduct Many organizations have developed codes of ethics to guide employees’ or members’ conduct. Ethics is a standard of behavior that guides how one should act in various situations. The Markula Center for Applied Ethics at Santa Clara University identifies five principles for thinking ethically: 1. The Utilitarian Principle is that 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. The Rights Principle is that actions should respect and protect the moral rights of others. An example is not taking advantage of a vulnerable person. 3. The Fairness Principle is that equals should be held to, or evaluated by, the same standards. An example is equal pay for equal work. 4. The Common Good Principle is that actions should contribute to the common good of the community. An example is an ordinance on noise abatement. 5. The Virtue Principle is that actions should be consistent with certain ideal virtues. Examples include honesty, compassion, generosity, tolerance, fidelity, integrity, and self-control  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Ethical Conduct The center expands these principles to create a framework for ethical conduct. An ethical framework is a sequence of steps intended to guide thinking and subsequent decisions or actions. Here is the one developed by the Markula Center for Applied Ethics: 1. Recognize an ethical issue by asking if an action could be damaging to a group or an individual. Is there more to it than just what is legal? 2. Make sure the pertinent facts are known, such as who will be impacted, and what options are available. 3. Evaluate the options by referring to the appropriate preceding ethical principle. 4. Identify the “best” option and then further examine it by asking how someone you respect would view it. 5. In retrospect, consider the effect your decision had and what you can learn from it.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Ethical Conduct Operations managers, like all managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects of operations management, including Financial statements: accurately representing the organization’s financial condition. Worker safety: providing adequate training, maintaining equipment in good working condition, maintaining a safe working environment. Product safety: providing products that minimize the risk of injury to users or damage to property or the environment. Quality: honoring warranties, avoiding hidden defects.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Ethical Conduct Operations managers, like all managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects of operations management, including The environment: not doing things that will harm the environment. The community: being a good neighbor. Hiring and firing workers: avoiding false pretenses (e.g., promising a long-term job when that is not what is intended). Closing facilities: taking into account the impact on a community, and honoring commitments that have been made. Workers’ rights: respecting workers’ rights, dealing with workers’ problems quickly and fairly.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Need to Manage the Supply Chain Supply chain management is being given increasing attention as business organizations face mounting pressure to improve management of their supply chains. In the past, most organizations did little to manage their supply chains. Instead, they tended to concentrate on their own operations and on their immediate suppliers. 1. The need to improve operations. Efforts on cost and time reduction, and productivity and quality improvement, have expanded in recent years to include the supply chain. Opportunity now lies largely with procurement, distribution, and logistics—the supply chain.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Need to Manage the Supply Chain 2. Increasing levels of outsourcing. Organizations are increasing their levels of outsourcing, buying goods or services instead of producing or providing them themselves. As producing or sourcing increases, organizations are spending increasing amounts on supply-related activities (wrapping, packaging, moving, loading and unloading, and sorting). A significant amount of the cost and time spent on these and other related activities may be unnecessary. Issues with imported products, including tainted food products, toothpaste, and pet foods, as well as unsafe tires and toys, have led to questions of liability and the need for companies to take responsibility for monitoring the safety of outsourced goods.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Need to Manage the Supply Chain 3. Increasing transportation costs. Transportation costs are increasing, and they need to be more carefully managed. 4. Competitive pressures. Competitive pressures have led to an increasing number of new products, shorter product development cycles, and increased demand for customization. And in some industries, most notably consumer electronics, product life cycles are relatively short. Added to this are adoption of quick-response strategies and efforts to reduce lead times.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Need to Manage the Supply Chain 5. Increasing globalization. Increasing globalization has expanded the physical length of supply chains. A global supply chain increases the challenges of managing a supply chain. Having far-flung customers and/or suppliers means longer lead times and greater opportunities for disruption of deliveries. 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.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch The Need to Manage the Supply Chain 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, substandard quality, equipment breakdowns, and canceled or changed orders. 8. The need to manage inventories. Inventories play a major role in the success or failure of a supply chain, so it is important to coordinate inventory levels throughout a supply chain. Shortages can severely disrupt the timely flow of work and have far-reaching impacts, while excess inventories add unnecessary costs. It would not be unusual to find inventory shortages in some parts of a supply chain and excess inventories in other parts of the same supply chain.  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Elements of Supply Chain Management  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Ten Strategic OM Decisions 1. Goods and Service Design 10. Maintenance 2. Quality 3. Process and Capacity Design 4. Location Selection 5. Layout Decision 6. Human Resources and Job Design 7. Supply Chain Management 8. Inventory 9. Scheduling  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch Difference between goods and services Influence How the 10 Operations Management Decision are Applied  POLYTECHNIC UNIVERSITY OF THE PHILIPPINES Sto. Tomas Branch SUMMARY The operations function in business organizations is responsible for producing goods and providing services. It is a core function of every business. Supply chains are the sequential system of suppliers and customers that begins with basic sources of inputs and ends with final customers of the system. Operations and supply chains are interdependent—one couldn’t exist without the other, and no business organization could exist without both. Operations management involves system design and operating decisions related to product and ser vice design, capacity planning, process selection, location selection, work management, inventory and supply management, production planning, quality assurance, scheduling, and project management. The historical evolution of operations management provides interesting background information on the continuing evolution of this core business function.