Chapter 1: Introduction to OM
Assignments
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Hazel Case, Page 38
1-1
Learning Objectives
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Define the term operations management
Identify the three major functional areas of
organizations and describe how they
interrelate
Compare and contrast service and
manufacturing operations
Describe the operations function and the
nature of the operations manager’s job
1-2
Learning Objectives
 Differentiate between design and operation
of production systems
 Describe the key aspects of operations
management decision making
 Briefly describe the historical evolution of
operations management
 Identify current trends that impact operations
management
1-3
Operations Management
 Campus Club Cupcakes
 How long does a student wait?
 Number of orders in a 4.5 hr shift
 Risks
 Possible improvements
1-4
The Organization
Figure 1.1
The Three Basic Functions
Organization
Finance
Operations
Marketing
1-5
Value-Added & Product
Packages
 Value-added is the difference between the
cost of inputs and the value or price of
outputs.
 Product packages are a combination of
goods and services.
 Product packages can make a company
more competitive.
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Value-Added Process
Figure 1.4
The operations function involves the conversion of
inputs into outputs
Value added
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
M&F
Control
M&F
M&F
1-7
Goods-service Continuum
Figure 1.5
Goods
Service
Surgery, teaching
Song writing, software development
Computer repair, restaurant meal
Automobile Repair, fast food
Home remodeling, retail sales
Automobile assembly, steel making
1-8
Production of Goods vs. Providing
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
1-9
Key Differences
1. Degree of customer contact
2. Labor content of jobs
3. Uniformity of inputs and outputs
4. Measurement of productivity
5. Quality assurance
6. Inventory
7. Wages
8. Ability to patent
1-10
Goods vs Service
Characteristic
Goods
Customer contact
Uniformity of input
Labor content
Uniformity of output
Output
Measurement of productivity
Opportunity to correct problems
Inventory
Evaluation
Patentable
Service
1-11
OM Professional Societies and
Certification Opportunities
 ASCM (www.apics.org)
 CPIM, CSCP
 ASQ (www.asq.org)
 CQE, CRE, CQM, Six sigma
 PMI (www.pmi.org)
 PMP
 CSCMP (www.cscmp.org)
 Informs (Informs.org)
 CAP
1-12
Quantitative Approaches
• Linear programming
• Queuing techniques
• Inventory models
• Project models
• Statistical models
1-13
Analysis of Trade-Offs
 Decision on the amount of inventory to stock
 Increased cost of holding inventory
Vs.
 Level of customer service
1-14
Pareto Phenomenon
• A few factors account for a high
percentage of the occurrence of some
event(s).
• 80/20 Rule - 80% of problems are caused
by 20% of the activities.
How do we identify the vital few?
1-15
Ethical Issues
 Financial statements
 Worker safety
 Product safety
 Quality
 Environment
 Community
 Hiring/firing workers
 Closing facilities
 Worker’s rights
1-16
Hazel Case, Page 38
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