1-1
Introduction to Operations Management
Operations Management
William J. Stevenson
8th edition
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Introduction to Operations Management
CHAPTER
1
Introduction to
Operations Management
McGraw-Hill/Irwin
Operations Management, Eighth Edition, by William J. Stevenson
Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
1-3
Introduction to Operations Management
Operations Management
Figure 1.1
The management of systems or processes
that create goods and/or provide services
Organization
Finance
Operations
Marketing
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Introduction to Operations Management
Value-Added
Figure 1.2
The difference between the cost of inputs
and the value or price of outputs.
Value added
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Feedback
Control
Feedback
Feedback
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Introduction to Operations Management
Goods-service Continuum
Figure 1.3
Steel production
Home remodeling
Auto Repair
Maid Service
Teaching
Automobile fabrication
Retail sales
Appliance repair Manual car wash Lawn mowing
High percentage goods
Low percentage service
Low percentage goods
High percentage service
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Introduction to Operations Management
Food Processor
Table 1.2
Inputs
Processing
Outputs
Raw Vegetables
Metal Sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned
vegetables
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Introduction to Operations Management
Hospital Process
Table 1.2
Inputs
Doctors, nurses
Hospital
Medical Supplies
Equipment
Laboratories
Processing
Outputs
Examination
Surgery
Monitoring
Medication
Therapy
Healthy
patients
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Introduction to Operations Management
Production of Goods vs. Delivery of Services
Production of goods – tangible output
 Delivery of services – an act
 Service job categories


Government
 Wholesale/retail
 Financial services
 Healthcare
 Personal services
 Business services
 Education
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Introduction to Operations Management
Key Differences
1.
2.
3.
4.
5.
6.
7.
8.
Customer contact
Uniformity of input
Labor content of jobs
Uniformity of output
Measurement of productivity
Production and delivery
Quality assurance
Amount of inventory
1-10 Introduction to Operations Management
Scope of Operations Management

Operations Management includes:

Forecasting
 Capacity planning
 Scheduling
 Managing inventories
 Assuring quality
 Motivating employees
 Deciding where to locate facilities
 And more . . .
1-11 Introduction to Operations Management

The operations function

Consists of all activities directly related to
producing goods or providing services
1-12 Introduction to Operations Management
Figure 1.4
U.S. Manufacturing vs. Service Employment
100
80
Percent
Year Mfg. Service
45
79
21
50
72
28
55
72
28
60
68
32
65
64
36
70
64
36
75
58
42
80
44
46
85
43
57
90
35
65
95
32
68
00
30
70
60
40
20
0
45
50 55
60
65 70
75
Year
80 85
90
95 00
1-13 Introduction to Operations Management
Responsibilities of Operations Management
Table 1.6
Planning
–
–
–
–
–
–
–
Capacity
Location
Products & services
Make or buy
Layout
Projects
Scheduling
Controlling/Improving
–
–
–
–
Inventory
Quality
Costs
Productivity
Organizing
– Degree of centralization
– Process selection
Staffing
– Hiring/laying off
– Use of Overtime
Directing
– Incentive plans
– Issuance of work orders
– Job assignments
1-14 Introduction to Operations Management
Key Decisions of Operations Managers

What
What resources/what amounts

When
Needed/scheduled/ordered

Where
Work to be done

How
Designed

Who
To do the work
1-15 Introduction to Operations Management
Business Operations Overlap
Figure 1.5
Operations
Marketing
Finance
1-16 Introduction to Operations Management
Operations Interfaces
Industrial
Engineering
Maintenance
Distribution
Purchasing
Operations
Public
Relations
Legal
Personnel
Accounting
MIS
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Trends in Business

Major trends

The Internet, e-commerce, e-business
 Management technology
 Globalization
 Management of supply chains
 Agility