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Chapter 1

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Ryerson University
Global Management Studies
GMS 401
Sam Lampropoulos

C HAPTER 1: NTRODUCTION TO OPERATIONS M ANAGEMENT Operations Management management of processes and the systems that create goods / provide services Process is a series of linked actions, changes or functions bringing about a result 1. Core / operational processes directly create the goods / services 2. Support process supports the core process 3. Managerial process governs the system Most activities performed by management / admin. employees fall under:  Forecasting (Support) things supply/demand, growth and future conditions  Capacity Planning (Managerial) such as deciding the number of units and where to distribute them  Scheduling routine maintenance, staff shifts  Managing inventories (Support) of items used by the organization both for sale and operational purposes  Assuring Quality (Support) Dealing with customers, efficiency and courtesy  Location of Facilities According to managers’ decisions on which cities to provide service for, where to locate maintenance facilities and where to locate major and minor hubs  Buying Materials Efficiency operating at minimum cost and time Effectiveness achieving the intended goals (quality and responsiveness) Functions Within Organizations Organizations are formed to pursue goals that are achieved more efficiently and effectively by the concerted efforts of a group of people rather than by individuals Most organizations have three functions 1. Operations  Perform activities that directly relate to producing goods/services  Inputs used to obtain finished goods or services using Transformation/conversion processes  Feedback measures to ensure desired outputs are obtained  Compared with previously established standards to determine whether corrective Control needs to be taken  Goods and services can occur jointly  Value Added is the essences of the operations function during transformation process. The difference between the cost of inputs and the value or price of outputs 2. Finance C HAPTER 1: INTRODUCTION TO O PERATIONS M ANAGEMENT  Securing resources at favorable prices and allocating those resources throughout the organization  Provision of Funds the necessary funding of operations and the amount and timing of funding. Careful planning.  Economic Analysis of Investment Proposals Evaluation of alternative investments in plant and equipment requires input from both operations and finance 3. Marketing  Assessing customers wants / needs and communicating those needs and feedback to operations (engineers in manufacturing companies)  Marketing design and production work closely together to successfully implement design changes and develop products  Lead Time the time between ordering a good/service and receiving it. Giving customers realistic estimates of how long it will take to fill orders. Other Functions that interface with Operations  Accounting supplies info to management on cost of labor, materials, overhead. Gathers the info needed for financial statements  Management Information Systems (MIS) Concerned with providing management with info it needs to effectively manage. Designing systems to capture info and prepare reports  Purchasing Responsibility for procurement of materials, supplies and services. Close contact with operations is necessary to ensure correct quantities and timing.  Human Resources concerned with recruitment and training of personnel, labor relations, wage + salary  Manufacturing Engineering responsible for design or purchase of machines needed.  Maintenance general upkeep and repair of equipment, building and grounds  Product Design manufacturing companies usually is done by engineers, but other companies it could be done by people such as architects, scientists, chemists and chefs  Logistics involves transportation of raw materials to plant, storage The Scope of Operations Management A primary function of operations management is to guide the system by decision-making. System design is the most important because many of the parameters of the system operation are decided by design  Design Decisions are usually strategic and long term (1-5 yrs.) o Capacity, location and equipment  Planning Decisions are tactical and medium term (1-12 months)  Scheduling, execution and control are short term (1-12 weeks)  System Design involves decisions that related to product and service design, system capacity, the geographic location of facilities, arrangement of departments and placement of equipment within physical structures CHAPTER 1: NTRODUCTION TO O PERATIONS M ANAGEMENT  Operational Decisions involve management of personnel inventory planning and control, production planning, scheduling, product management and quality assurance (more day-to-day) Differentiating Production of Goods vs. Performance of Services 1. Costumer contract, use of inventories and demand variability: Services involve higher degree of customer contact. Services are much more sensitive to demand variability 2. Uniformity of input: Good producers often have the ability to carefully control the amount of variability of input 3. Labor content of jobs: Services require a higher labor content whereas goods production typically can be more capital intensive 4. Uniformity of output: Good production tends to be smooth and efficient 5. Measurement of productivity: Productiv
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