Chapter 1 - Introduction to
Operations Management
Operations Management
by
R. Dan Reid & Nada R. Sanders
3rd Edition © Wiley 2007
© Wiley 2007
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Learning Objectives
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Define OM
Role of OM in business
Decisions that operations managers make
OM differences between service and mfg.
Major historical developments in OM
Identify current trends in OM
Define information flow between OM and
other business functions
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What is Operations Management?
The business function responsible for
planning, coordinating, and controlling the
resources needed to produce a company’s
products and services.
 It is a management function.
 Organization’s core function.
 Every organization has the OM function
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Manufacturing or Service
For Profit or Not For Profit
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Typical Organization Chart
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Systems Concept
inputs
land
labor
capital
•facilities
•equipment
•tools
energy
materials
data
transformations
outputs
goods
services
mission
goals
objectives
SYSTEM
O
I
productivity
(See SINK,
figure 2.1, p. 24)
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Physical
Locational
Exchange
Storage
Physiological
Informational
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Why OM?
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“In business today, the emphasis is not so
much on what you make, but on how
you do business. Dell makes computers
just like every other PC manufacturer.”
Quote: KT CEO on CNBC 4/99
The resurgence of American business in
the 1990’s capitalized on improved
operations.
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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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Similarities-Service/Manufacturers
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All use technology
Both have quality, productivity, & response issues
All must forecast demand
Each will have capacity, layout, and location
issues
All have customers and suppliers
All have scheduling and staffing issues
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Trends in OM
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Service sector growing to
80% of non-farm jobsSee Figure 1-4
Global competitiveness
Demands for higher
quality
Huge technology changes
Time based competition
Work force diversity
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OM Decisions
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Plan of Book-Chapters link to Types
of OM Decisions
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Historical Development of OM
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Industrial revolution
Scientific management
Human relations movement
Management science
Computer age
Just-in-Time Systems (JIT)
Total quality management (TQM)
Reengineering
Flexibility
Time-Based Competition
Supply chain Management
Global Competition
Environmental Issues
Electronic Commerce
Late 1700’s
Early 1900’s
1930’s to 1960’s
Mid-1900’s
1970’s
1980’s
1980’s
1990’s
1990’s
1990’s
1990’s
1990’s
1990’s
Late 1990’s
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Today’s OM Environment
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Customers demand better quality, faster
deliveries, and lower costs
Increased cross-functional decision making
Recognized need to better manage
information using ERP and CRM systems
Global competition
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Business Information Flow
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Chapter 1 Highlights
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OM is the function that manages the resources that add value
Its role is to transform inputs into products or services
Decisions are many and vary from daily tactical to long-term
strategic
Key differences between mfg. and service companies are
tangibility of product and degree of customer contact
Historical milestones range from 1700s Industrial Revolution to
the modern Electronic Commerce age
OM must understand and implement major process changes like
JIT, TQM, supply chain management, and environmental
changes
OM works closely with all other business functions
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