GMS 401 Chapter 1 Notes
Introduction to Operations Management
Operations Management – the management of processes or systems that create goods and/or provides
Production of good – results in a tangible output such as a car, building, lumber, fish, etc.
Service – implies an act such as a physician’s examination, auto repair, lawn care, etc.
Process – a series of linked actions, changes or functions bringing about a result (Core processes directly create
goods/services, support processes support core processes, managerial processes govern the system)
This airline example is used to illustrate the system and processes involved.
Forecasting things such as seat demand for flights, the growth in air travel, and weather conditions (support
Capacity planning such as deciding the number of planes and where to use them (managerial process)
Scheduling of planes for flights and for routine maintenance; scheduling of pilots and flight attendants; and
scheduling of ground crews, counter staff and baggage handlers (support process)
Managing inventories of items such as food and beverages and spare parts (support process)
Assuring quality and emphasizing safety. (support process)
Employee motivation and training in all phases of operations. (managerial process)
Location of facilities according to top managers decisions on which cities to provide service for, where to locate
maintenance facilities and where to locate major and minor hubs (managerial process)
Buying materials such as fuel, food and spare parts. Buying aircraft and maintaining it. (support process)
Reservations, flying planes, handling luggage and maintaining performance (core processes)
Efficiency – operating at minimum cost and time
Effectiveness – achieving all of the intended goals (quality and responsiveness)
A typical organization has three basic functions: operations, finance and marketing. These three functions
perform different but related activities necessary for the operation of the organization.
1. Operation function – performs all the activities DIRECTLY related to producing goods or providing
services. It is responsible for the creation of an organization’s goods or services. To
ensure that the desired outputs are obtained, measurements are taken at various
points (feedback) and then compared with previously established standards to
determine whether corrective action is needed (control).
Value added – the difference between the cost of inputs and the value or price of outputs. One way that
businesses attempt to become more productive is to see if the operations performed by their
workers add value. 2. Finance function – performs activities related to securing resources at favourable prices and allocating those
resources throughout the organization. Finance and operations management personnel
co-operate by exchanging information and expertise in activities such as providing
funds (to fund operations and avoid cash flow problems) and analyzing investment
proposals (which is evaluating the cost of purchasing equipment, materials, etc.)
3. Marketing function – responsible for assessing customer wants and needs and for communicating those
needs and feedback to operations people and to product design people. Operations
needs demand information (which is provided by the marketing function) to plan
Lead time – the time between ordering a good or service and receiving it
Other functions include accounting, management information systems (MIS), purchasing, human resources
(HR), manufacturing engineering, maintenance, product design and logistics (involves the transportation of
raw materials to the plant).
Types of decisions
1. Design decisions (will affect the next 1-5 years)
2. Planning decisions (will affect the next 1-12 months)
3. Scheduling, execution and control decisions (will a