Chapt 1 er Introduction to
Operations
Management updated by
Dr. M. Talla
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
LO 1

Define the term operations management and identify operations management jobs.
LO 2 Identify the three major functional areas of organizations and describe how they interrelate.
LO 3 Describe the scope of operations management, and differentiate between design and operations decisions. LO 4
Compare goods versus services.
LO 5
Discuss the operations manager’s job.
LO 6
Describe key aspects of operations mgmt decision
LO 7 making. LO 8
Briefly describe the historical evolution of operations mgmt Identify current trends that affect operations
2
Copyrightmanagement
© 2010 by The McGraw-Hill Companies, Inc. All

Chapter Outline
 What is Operations Management
(OM)?
 Three basic functions within organizations  The scope of Operations
Management
 Differentiating goods and services
 Operations Manager’s job
 Operations Manager and decision making Copyright © 2010 by The McGraw-Hill Companies, Inc. All

3

What is Operations
Management?
OM is the management of processes or systems that create goods and/or provide services.
Process =

Support

series of linked actions, changes or functions Managerial

Core
(operational)
 Companies use OM to improve:
 efficiency (minimize cost and time) and
 effectiveness (achieving intended goals)
Copyright © 2010 by The McGraw-Hill Companies, Inc. All

4

What is Operations
Management?

Detail the following OM activities for each company

OM Activities

Airline company
(services)

Bicycle factory (goods)

Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Where to locate facilities
Copyright © 2010 by The McGraw-Hill Companies, Inc. All

5

Why study Operations
Management?

Opportunity!
1. A large percentage of a company’s expenses occur in OM area (improvements = more profits)
2. A large number of all jobs are in OM area
(purchasing, quality, planning, scheduling, inventory, etc.)
3. Activities in all other areas( finance, marketing) are interrelated with OM activities

Copyright © 2010 by The McGraw-Hill Companies, Inc. All

6

Three Basic Functions
1.
2.
3.

Operations: create goods and services
Finance: provide funds and the economic analysis of investment proposals
Marketing: assess customer wants and needs and communicate them to others
Airline Company

Marketing

Flight
Operations

Operations

Ground
Support

Facility
Maintenance

Copyright © 2010 by The McGraw-Hill Companies, Inc. All

Finance/
Accounting

Catering

7

Three Basic Functions
 Is OM function adding value during the transformations process?
 Is there any overlapping between the main functions? Operations

Marketing

Finance

Copyright © 2010 by The McGraw-Hill Companies, Inc. All

8

Operations function
Value Added
Inputs:
Land
Labour
Capital

Transformation
Process

Outputs:
Goods
Services

Feedback

Control
Feedback

Copyright © 2010 by The McGraw-Hill Companies, Inc. All

Feedback

9

What is added value?
Stage of Production

Value
Added

Value of
Product

Farmer produces and harvests wheat

$0.15

$0.15

Wheat transported to mill

$0.08

$0.23

Mill produces flour

$0.15

$0.38

Flour transported to baker

$0.08

$0.46

Baker produces bread

$0.54

$1.00

Bread transported to grocery store

$0.08

$1.08

Grocery store displays and sells bread

$0.21

$1.29

Total Value-Added

$1.29

Copyright © 2010 by The McGraw-Hill Companies, Inc. All

10

Types of Operations
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
Copyright ©