Operations Management 3QC3 Jan 18, 2014
Chapter 1: Operations and Productivity
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Ultimately, operations managers determine how well we live.
What is Operations Management?
Production: The creation of goods and services
Operations Management (OM): The set of activities that creates value in the form of goods
and services by transforming inputs into outputs.
Organizing to Produce Goods and Services
All organizations perform 3 functions:
1. Marketing – generates demand
2. Production/operations – creates product
3. Finance/accounting – tracks organization
Why Study OM?
1. OM is one of the three major functions of any organization.
2. We want to know how goods and services are produced
3. To understand what operations managers do
4. It is such a costly part of an organization
What Operations Managers Do
Management process: Consists of planning, organizing, staffing, leading, and controlling.
10 critical decisions of operations management:
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supplychain management
8. Inventory, material requirements planning and JIT
9. Intermediate and ST scheduling
The Heritage of Operations Management
Eli Whitney – early popularization of interchangeable parts, through standardization and quality
Frederick W. Taylor – father of scientific management
Taylor believed management should assume more responsibility for:
• Matching employees to the right job
• Providing the proper training
• Providing proper work methods and tools
• Establishing legitimate incentives for work to be accomplished [Type text] [Type text] [Type text]
Moved from: cost focus ▯quality focus ▯customization focus
Henry Ford and Charles Sorensen added the revolutionary concept of the assembly line.
OM will continue to profess, including industrial engineering and management science.
Innovations from the physical sciences have also contributed to advances in OM.
Important contributions to OM have come from IT. IT: the systematic processing of data to yield
Operations in the Service Sector
Services: Economic activities that typically produce an intangible product (such as education,
entertainment, lodging, government, financial and health services). Also includes repair and
maintenance, government, food, transportation, insurance, trade, financial, real estate, law,
Differences between goods and services
• Services = intangible
• Services = often produced and consumed simultaneously
• Services = often unique
• Services = high customer interaction
• Services = inconsistent product definition
• Services = often knowledge based
• Services = frequently dispersed
The activities of the operations function are often very similar for both goods and services. Both
must have quality standards e