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Chapter 1

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Ryerson University
Global Management Studies
GMS 401
Ron Babin

Chapter 1 – Introduction to Operations Management GMS401 Introduction - Operations Management: the management processes or systems that create goods and/or provide services. - A system is a set of interrelated parts that must work together. - Process: a series of linked actions, changes, or functions bringing in a result. - Types of processes: o Core (or operational): directly create goods and/or services. o Support: support core processes. o Managerial: govern the system. - Some activities performed that fall into the realm of operations mgmt: forecasting, capacity planning, scheduling, managing inventories, assuring quality, employee motivation and training, location of facilities, buying materials. Example, PG.2 - Many companies use operations mgmt strategies and actions to improve efficiency and effectiveness. - Efficiency: operating at minimum cost and time. - Effectiveness: achieving quality and responsiveness. Functions within Organizations - Organizations are formed to pursue goals by the efforts of a group of people; they are devoted to producing goods and/or providing services. - Three basic functions: operations, finance, and marketing; they each perform different but related activities necessary for the operation of the organization. Fig.1-1, pg.5 OPERATIONS - This function performs all the activities directly related to producing goods, or providing services; goods-oriented and service-oriented. - Responsible for the creation of an organizations good or services. - Inputs are used to obtain finished goods/services using transformation/conversion processes; feedback is taken to determine if corrective action is needed. - Value added: the difference between the cost of inputs and the value or price of outputs. FINANCE - Activities related to securing resources at favourable prices and allocating those resources throughout the organization. - Finance and operations cooperate by exchanging information in activities such as: o Provision of funds: the necessary funding of operations and the amount and timing of funding can be important and even critical when funds are tight; needs careful planning. o Economic analysis of investment proposals: evaluation of alternative investments. MARKETING - Responsible for assessing customer wants and needs, and for communication those needs and feedback to operations people and to product design people. - Lead Time: the time between ordering a good or service and receiving it; this is important info from the operations in order to give customers estimates on order time. 1 Chapter 1 – Introduction to Operations Management GMS401 OTHER FUNCTIONS - Accounting: costs of labour and materials; provide reports on inventories, etc. - Management information systems (MIS): provides management with information is needs to effectively manage. - Purchasing: procurement of materials, supplies, equipment, and services. - Personnel/Human resources: recruitment and training of personnel, labour relations, contract negotiations, wage and salary administration, and ensuring the health and safety of employees. - Manufacturing engineering: design or purchase of the machines and equipment needed in the production process. - Product design: create goods/services from information given to them on markets by marketing people and provide product specifications to operations to make the products. - Logistics: transportation of raw material to the plant; storage; and transportation of goods to warehouses, retail outlets, or final customers. The Scope of Operations Management - Responsible for creation of goods/services; this involves designing, planning, executing, and controlling the elements that make up the processes. - A primary function is to guide the system by decision making: o Design decisions are usually strategic and long term(1-5yrs ahead), planning decisions are tactical and medium term(1-12mths ahead), and scheduling, execution and control decisions are short term(1-12weeks ahead). - System design involves decisions that relate to product and service design, geographic location, arrangement of departments, placement of equipment. - Operational activities involve management of personnel, inventory planning and control, production planning, scheduling, project management, quality assurance; day-to-day operating decisions. Differentiating Production of Goods Vs. Performance of Services - Production of goods results in a tangible output; anything we can see or touch. Production of goods can be categorized as follows: o Manufacturing, construction, agriculture, forestry, fisheries, mining, oil, gas. - Among these manufacturing is the largest sector: o Food & beverage, textile & clothing, wood products & furniture, paper & printing, chemicals & plastics, metals & non-metals, machinery, computer 7 electronics, electrical equipment & appliances, transportation equipment. - Service, on the other hand, generally implies an act. o Government, wholesale/retail, finance & insurance, real estate, health care, personal services, business support, education, hotels & restaurants, transportation and warehousing, utilities. - Production of goods and performance of services are similar in terms of what is done, but different in terms on how it is done. - They differ in: o Customer contract, use of inventories, and demand variability. o Uniformity of input. o Labour content jobs. 2 Chapter 1 – Introduction to Operations Management GMS401 o Uniformity of output. o Measurement of productivity. o Quality assurance. o EACH DESCRIBED IN TEXTBOOK, PG.11 The Operations Manager’s Job - The operations manager is the key figure in the system; he/she has the ultimate responsibility for the creation of goods or performance of services. - Operations manager must coordinate the use of resources through the management activities or planning, organizing, directing, and controlling. Operations Managers and Decision Making - The chief role is that of a decision maker. - Manager exerts considerable influence over the degree to which the goals and objectives of the organization are realized. MODELS - Model: 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 solution. 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: used for optimum allocation of scarce resources. - Queuing techniques: useful for analyzing situations in which waiting lines form. - Inventory techniques: control inventories. - Project scheduling techniques: such as PERT, are useful for planning, coordinating, and controlling large-scale projects. - Forecasting techniques: forecasting demand. - Statistical techniques: used in areas of decision making, including quality control. ANALYSIS OF TRADE-OFFS - Managers sometimes deal with
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