Chapter 1 - Introduction to
Operations Management
Operations Management
by
R. Dan Reid & Nada R. Sanders
2nd Edition © Wiley 2005
PowerPoint Presentation by R.B. Clough - UNH
© Wiley 2005
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Introduction to Operations Management
Outline
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What is operations management?
Value added, efficiency, and effectiveness
The transformation process, measurement, feedback
Why do we study operations management?
Differences and similarities between manufacturing and
services
Operations management decisions (Table 1-1)
Diagram of the course
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What is Operations Management?
The business function responsible
for planning, coordinating, and
controlling the resources (inputs)
needed to make a company’s
products (goods and services)
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Typical Organization Chart
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Value Added, Efficiency, Effectiveness
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Value added: value of outputs – cost of inputs
Efficiency: performing activities at the lowest
possible costs
Effectiveness: doing what the company must do
to serve customers and compete
© Wiley 2005 - Effectiveness
added by EJR
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Transformation Process
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Measurement and Feedback
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Measurement systems in operations collect data
about the transformation process, the inputs, and the
outputs
Feedback is the use of data to improve the
transformation process and the inputs, thereby
improving the outputs.
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Data from operations measurements systems
Cost data from accounting systems
Customer information: returned products, complaints,
customer surveys, focus groups
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Typical Measures Used to Improve
Operations Management
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Costs
Quality
Quantity produced or number of customers
served
Timeliness (on-time delivery, service time,
fast delivery)
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Why do we study Operations? (1)
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In most organizations, Operations
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Uses most of the fixed assets
Manages most of the employees
Uses most of the materials
Incurs most of the fixed and variable costs
Improving operations management is often
the fastest way to reduce costs and increase
profits.
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Why do we study Operations? (2)
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Operations helps attract and retain customers
by
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Introducing new technology that allows the firm to
offer new or better goods and services
Participating in product design teams
Providing the quality and timeliness that
customers want
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Why do we study Operations? (3)
To learn tasks that professionals do
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Quality management
Project management
Job design
Scheduling work
Increasing productivity
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Differences between Manufacturers
and Service Organizations
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Services:
Intangible product
Product cannot be
inventoried
High customer contact
Short response time
Labor intensive
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Manufacturers:
Tangible product
Product can be
inventoried
Low customer contact
Longer response time
Capital intensive
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fig_01_03
Similarities between
Services and Manufacturers
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They have transformation processes
They use technology
They have quality, productivity, & response issues
They must forecast demand and try to meet it
They have capacity, layout, and location issues
They have customers and suppliers (also called
vendors)
They have scheduling and staffing issues
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Decisions in Operations Management
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Operations Management Decisions
for Gourmet Wafers
Table 1-1, page 8
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Operations Management Decisions
for Gourmet Wafers (2)
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Operations Management Decisions
for Gourmet Wafers (3)
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MGMT 326
Foundations
of Operations
Introduction
Strategy
Products &
Processes
Quality
Assurance
Capacity,
Facilities,
and Work
Design
Planning
& Control