BU385 Lecture Notes - Lecture 1: Operations Management, Supply Chain, Manufacturing Engineering

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9 Oct 2014
Chapter One: Introduction to Operations Management
Operations Management – the management of processes or systems that create goods and/or
provide services
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)
Transformation Process
Food Processor:
Inputs Processes Output
Raw vegetables
Metal sheets
Making cans
Canned vegetables
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.
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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
Other Functions Supporting Operations:
- Accounting – supplies info to management on costs of labour/materials
- Logistics – storage, transportation of raw material to the plant, warehouse, retail outlets,
- Product Design – create goods/services
- Maintenance – general upkeep and repair of equipment, buildings and grounds etc.
- Manufacturing engineering – design or purchase of the machines and equipment needed in
the production process
- MISprovides management with information it needs to effectively manage mainly through
design systems (hardware/software) to capture relevant information and prepare reports
- Purchasing – procurement of materials, supplies, equipment and services
- Personnel/HR – concerned with recruitment and training of personnel, labour relations etc.
Certain decisions affect the design of the system and others are operational. Costs, space,
capacities, and quality are directly affected by design decisions. Even though operations
management is not solely responsible for making all design decisions, it can provide a wide
range of information that will have an effect on the decisions.
Responsibilities of Operations Managers
1. Planning - capacity, location, layout
2. Organizing - departments, staffing, suppliers
3. Directing - scheduling, job assignments, purchasing
4. Controlling - quality control, motivation, inventory control
Decision Making
1) Models – an abstraction of reality; a simplified representation of something
- models ignore the unimportant details so that attention can be concentrated on the most
important aspects of a situation, thus increasing the opportunity to understand a problem and its
2) Quantitative Approaches
- an attempt to obtain optimum solutions to the mathematical models of managerial problems,
sometimes done by solving a set of equations (linear programming, queuing techniques etc.)
3) Analysis of Trade-offs
- ex. deciding on the amount of inventory to stock, the manager may take into account the trade-
off between the increased level of customer service that the additional inventory would yield and
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