CBA 390
CBA 390 Chapter 1 outline – Operations and Productivity
I. Operations and Productivity
II. What is Operations Management
A. Production –the creation of goods and services
B. Operations Management – a set of activities that create value in the form of goods and services
by transforming inputs into outputs.
C. Transformation can take many forms.
Key Points: The transformation process is based on adding value for the customer by transforming the inputs
into outputs.
III. Organizing to Produce Goods and Service
A. Requires 3 functions:
1. Marketing – generates the demand, or at least takes the order for a product or service.
2. Production/Operation – creates the products.
3. Finance/Accounting – tracks how well the organization is doing, pays the bills and collects
the money
B. These functions are also crucial for the organization’s survival.
Key Points: Operations is one of the basic functions of any business. Without operations, there is no reason to
be in business. Pressures come from many environments and managers must be aware of the
impact on all parties.
IV. Why Study Operations Management?
V. What Operations Managers Do
VI. The Heritage of Operations Management
A. Eli Whitney (1800)
B. Frederick Taylor (1881)
C. Henry Ford and Charles Sorenson (1913)
D. Walter Shewhart (1924)
E. W. Edwards Deming (1950)
VII. Operations
A. Service Sector
B. Differences between goods and services. Services are:
1. Usually intangible
2. Often produced and consumed simultaneously; there is no stored inventory
3. Often unique
4. Have high customer interaction
5. Have inconsistent product definition
6. Often knowledge based.
7. Frequently dispersed
VIII. Exciting new trends in Operations Management
A. Operations Management is facing an ever-changing world.
B. Some of the new challenges include:
1. Global focus
2. Just-in-time performance
3. Supply-chain partnering
4. Rapid product development
5. Mass customization
6. Empowered employees
7. Environmentally sensitive production.
IX. The Productivity Challenge
A. The creation of goods and services requires changing resources into goods and services.
B. The more efficient the conversion, the more productive we are and the more value is added
to the good or service provided.
C. Productivity – the ratio of outputs (goods and services) to the inputs (resources such as labor and
capital. Productivity = Output/Input
D. Improvements can be made by:
1. Reducing inputs while outputs remain constant
2. Increasing outputs while inputs remain constant
X. Ethics and Social Responsibility
A. Operations managers are subject to constant changes and challenges
B. Changes include physical and social environmental changes, laws and values
C. Conflicting perspectives of stakeholders such as customers, distributors, suppliers owners,
lenders, and employees.