BU385 Lecture Notes - Lecture 1: Operations Management, E-Commerce, Total Quality Management
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Chapter One: Introduction to Operations Management
Operations Management – the management of processes or systems that create goods and/or provide
Process – a series of linked actions, changes, or functions bringing about a result
Three types of processes:
1) Core - directly create goods/services
2) Support - support core processes
3) Managerial - govern the system
Using example of an airline:
a) Core Processes: reservations, boarding and flying the planes, handling luggage
b) Support Processes: forecasting, scheduling, managing inventories
c) Managerial Processes: capacity planning, locating facilities, employee motivation
Efficiency – operating at minimum cost and time
Effectiveness – achieving the intended goals (quality and responsiveness)
Value Added – the difference between the cost of inputs and the value or price of outputs
In non-profit organizations, the value of outputs (police, fire protection) is their value to society.
In for profit organizations , the value of outputs is measured by the prices customers are willing to pay.
A company may find that it is producing an item much earlier than the scheduled delivery. This causes
the item to sit in storage longer than necessary which adds no value. Reducing storage time would
reduce the transformation cost and increase the value added.
Lead Time – the time between ordering a good/service and receiving it