BU 385 Lecture 1: Chapter 1 Introduction to Operations Management

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3 Dec 2015
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Chapter 1: Introduction to Operations Management
~What is Operations Management (OM)?~
Operations management
is the management of activities and
resources that create goods and/or provide services
oIts what operations managers do which includes: design,
planning, coordinate, direct, control and improve processes and
systems that transform inputs into outputs of products and
services for internal as well as external customers
oMost of the duties of managers fall into the realm of operations
management: forecasting demand, capacity planning,
scheduling, managing inventories, assuring quality, employee
motivation and training, location of facilities, buying materials
oOperations management strategies, tactics and actions are used
to improve e$ciency and e%ectiveness
o
Eciency
refers to operating at minimum cost and time,
whereas eectiveness refers to achieving the intended
goals (quality and timeliness)
oExample 1: Bread Manufacturing
oExample 2: Hospital
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~Di%erentiating Goods and Services~
Dierentiating Goods and Services
Similar in terms of what is done and di%erent in terms of how it is
done
Pure Goods:
tangible, can be stored, production precedes
consumption, low customer contact, can be transported, quality is
evident
Pure Services:
intangible, cannot be stored, production and
consumption are simultaneous, high customer contact, cannot be
transported, quality di$cult to judge
Goods and services often occur jointly-> for example having the oil
changed in your car is a service but the new oil is a good
Service industry has been growing faster and now accounts for
more than 78 percent of jobs in Canada
~Basic Functions Within Organizations~
Basic Functions Within Organizations
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Organizations are formed to pursue goals that are achieved more
e$ciently and e%ectively by the concerted e%orts of people rather
than by individuals working alone
A typical organization has three basic functions: Operations, Finance
and Marketing (Text book just names these three however slides
includes Human Resources)
oThese functions must interact to achieve the goals and
objectives of the organization and each makes an important
contribution
Operations:
ensures that transformation processes perform
optimally in light of constraints
oManages all the activity directly related to producing goods or
providing services-
>
it exists both in manufacturing
operations and in industries as health care, transportation etc.
which are service oriented
oInputs are used to obtain ;nished goods or services using one
or more transformation/conversion process(es) -> in chart
below it illustrates the transformation process
oAdd value” during the transportation process->
Value
added
is the di%erence between the cost of inputs and the
value or price of outputs
oNon-pro;t, the value of outputs is their value to society
oFor-pro;t, the value of outputs is measured by the prices that
customers are willing to pay for those goods or services
oIn an attempt to be more productive organizations can cut out
any activity that does not add value -> for example when you
have produced an item really early you have to ;nd a place to
store it if it cannot be sold till later-> as a result this costs
money for storage but does not add value to the product-> all
in all you are wasting money by storing the product that you
could have made if you were to produce the product at a later
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