bu385 Chapter 1- Intro

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20 Dec 2013
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Department
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B385 Op. Mgmt.
1 | Natasha Park
Chapter 1: Intro to Operations Management (OPM)
Operations mgmt.: the mgmt. of processes or systems that create goods and/or provide services
Process: series of linked actions, changes, or functions bringing about a result
o The three types: core, support, and managerial
o Core/operational processes directly create goods/services; support processes support core
processes, and managerial processes govern the system
Operations mgmt. includes productivity, quality, ecommerce, global competition, supply chain
mgmt., and customer service forecasting, capacity planning, scheduling, managing inventories,
assuring quality, employee motivation and training, location of facilities, buying materials
Example: for an airline
1) Core process = reservations, boarding and flying the planes, handling luggage, maintenance
2) Support processes = forecasting, scheduling, managing inventories, quality, buying material
3) Managerial processes = capacity planning, locating facilities, employee motivation
There are differences and similarities between service operations and producers of goods
Efficiency: operating at minimum cost and time
Effectiveness: achieving quality and responsiveness
OPM is important because a large % of company expenses occur in operations, such as buying
materials and workforce salaries efficiency can mean profits
OPM important since many mgmt. jobs are in operations. Moreover, activities in all other areas of
business organizations (finance, HR, etc.) are interrelated with OPM activities.
FUNCTIONS WITHIN ORGANIZATIONS
Organizations are formed to pursue goals that are achieved more efficiently & effectively by the
concerted efforts of a group (vs. working alone). Although organizations’ goals, products, and
services may differ, their functions and the way they operate are similar.
Typical organization has 3 functions that interact to achieve goals: operations, marketing, finance
These functions must work together if operations and marketing don’t work together, marketing
may promote goods that operations cannot deliver (for example).
Operations
performs all activities directly related to producing goods/services (ex: fabrication/assembly
operations because they are both goods oriented, and health care is service oriented)
core of most organizations; inputs are used to obtain finished goods/services using
transformation/conversion processes (storing, transporting, cutting)
To ensure desired outputs, measurements are taken at various points (feedback) and compared
with previously established standards to determine whether corrective action (control) is needed.
Goods and services often occur jointly. (ex: having oil changed in your car = service, but oil=good)
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B385 Op. Mgmt.
2 | Natasha Park
Goods-service package is a continuum that can range from mainly service & few goods, or vice versa
Goods and services often occur jointly. (ex: having oil changed in your car = service, but oil=good)
Goods-service package is a continuum that can range from mainly service & few goods, or vice versa
Essence of operations is to add value during transformation process
Value added: difference between cost of inputs and value/price of outputs
The value for NFP organizations us the value to society, and for profit organizations the value of
outputs its measured by the prices that customers are willing to pay for those goods/services
Greater value added = greater amount of funds available for wages, profit, R&D, etc.
Examine whether the operations add value. Eliminating or improving operations decreases the cost
of inputs/processing, thus increasing value added.
Ex: if you produce item must earlier than scheduled delivery date, you’re storing the item too long
so you can reduce storage time/costs relates to supply chain mgmt.
Finance
securing resources at favourable prices and allocating those resources throughout the organization
works with OPM personnel to exchange info and expertise in activities such as
1) Provision of funds: necessary funding of operations and the amount/timing of funding is important.
Careful planning avoids cash flow problems, and most funds are generated by goods/services
2) economic analysis of investment proposals: evaluation of alternative investment sin
plant/equipment requires inputs from both operations/finance people
Marketing
Assess customer wants and needs communicate this to operations/to product design people
(engineers, manufacturing) operations needs info about demand so it can plan materials and
work scheduling. Product design needs this info to improve current products/services
work closely with design and production to implement design changes and produce new products
lead time: time between ordering a goods/service and receiving it
Other Functions
Accounting: supplies info to mgmt. on costs of labour, materials, overhead. Provides reports on
items (scrap, downtime, inventory). Includes AP and AR, info needed for financial statements.
Mgmt. info systems (MIS): provides mgmt. with info to effectively manage. Use designing systems
(hardware/software) to capture relevant info and preparing reports
Purchasing: responsibility for procurement of materials, supplies, equipment, services. Close contact
with operations to ensure correct quantities/timing. Purchasing department is often called on to
evaluate vendors for quality, delivery-time reliability, service, arranging transportation, etc.
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