2. 1-2
Learning ObjectivesLearning Objectives
Define the term operations management
Identify the three major functional areas of
organizations and describe how they
interrelate
Compare and contrast service and
manufacturing operations
Describe the operations function and the
nature of the operations manager’s job
3. 1-3
Learning ObjectivesLearning Objectives
Differentiate between design and operation
of production systems
Describe the key aspects of operations
management decision making
Briefly describe the historicalevolution of
operations management
Identify current trends that impact operations
management
4. 1-4
Operations ManagementOperations Management
Operations Management is:
The management of systems or processes
that create goods and/or provide services
Operations Management affects:
Companies’ ability to compete
Nation’s ability to compete internationally
6. 1-6
Value-Added ProcessValue-Added Process
The operations function involves the conversion of
inputs into outputs
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Control
Feedback
FeedbackFeedback
Value added
Figure 1.2
7. 1-7
Value-Added & ProductValue-Added & Product
PackagesPackages
Value-added is the difference between the
cost of inputs and the value or price of
outputs.
Product packages are a combination of
goods and services.
Product packages can make a company
more competitive.
8. 1-8
Automobile assembly, steel making
Home remodeling, retail sales
Automobile Repair, fast food
Goods-service ContinuumGoods-service Continuum
Figure 1.3
Computer repair, restaurant meal
Song writing, software development
Goods Service
Surgery, teaching
9. 1-9
Food ProcessorFood Processor
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
vegetablesMetal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
Table 1.2
10. 1-10
Hospital ProcessHospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patientsHospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Table 1.2
12. 1-12
Production of Goods vs. Delivery ofProduction of Goods vs. Delivery of
ServicesServices
Production of goods – tangible output
Delivery of services – an act
Service job categories
Government
Wholesale/retail
Financial services
Healthcare
Personal services
Business services
Education
13. 1-13
Key DifferencesKey Differences
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
14. 1-14
Key DifferencesKey Differences
6. Production and delivery
7. Quality assurance
8. Amount of inventory
9. Evaluation of work
10. Ability to patent design
15. 1-15
Goods vs ServiceGoods vs Service
Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
16. 1-16
Operations Management includes:
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Deciding where to locate facilities
Supply chain management
And more . . .
Scope of Operations ManagementScope of Operations Management
17. 1-17
Types of OperationsTypes of Operations
Table 1.4
Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
19. 1-19
Decline in Manufacturing JobsDecline in Manufacturing Jobs
Productivity
Increasing productivity allows companies to
maintain or increase their output using fewer
workers
Outsourcing
Some manufacturing work has been outsourced
to more productive companies
20. 1-20
Why Manufacturing MattersWhy Manufacturing Matters
Over 18 million workers in manufacturing
jobs
Accounts for over 70% of value of U.S.
exports
Average full-time compensation about 20%
higher than average of all workers
Manufacturing workers more likely to have
benefits
Productivity growth in manufacturing in the
last 5 years is more than double U.S.
economy
21. 1-21
Why Manufacturing MattersWhy Manufacturing Matters
More than half of the total R&D performed is
in the manufacturing industries
Manufacturing workers in California earn an
average of about $25,000 more a year than
service workers
When a California manufacturing job is lost,
an average of 2.5 service jobs are lost
22. 1-22
Challenges of ManagingChallenges of Managing
ServicesServices
Service jobs are often less structured than
manufacturing jobs
Customer contact is higher
Worker skill levels are lower
Services hire many low-skill, entry-level workers
Employee turnover is higher
Input variability is higher
Service performance can be affected by worker’s
personal factors
24. 1-24
Key Decisions of OperationsKey Decisions of Operations
ManagersManagers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
25. 1-25
Decision MakingDecision Making
System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment