Introduction
What is Productions and Operations Management?

A field of study involving the planning, coordinating, and executing of all
activities that create goods or provide services

Focus: To explore a variety of decision making tools that operations
managers can use in the decision making process. These tools are
classified as
o Quantitative
 Queuing techniques
 Inventory Models
 Project models (PERT/CPM)
 Forecasting techniques
 Statistical models
 Breakeven analysis
o Analysis of trade-offs
 In inventory management we balance tradeoff between two
objectives – minimize cost of carrying inventory and
maximize customer service level

The models in discussed will reflect tradeoffs between cost
and benefit
o System approach
 Emphasizes interrelationships among subsystems

Main theme: the whole is greater than the sum of its
individual parts

From a systems viewpoint, the output and objectives of the
organization as a whole takes precedence over those of any
on subsystem
o Establishing priorities
 Recognition of priorities means devoting more attention to
what is most important

Uses the Pareto phenomenon – a relatively few factors are
most important – dealing with those will have a
disproportionately large impact on the results achieved

80/20 rule
o Ethics
 Operations managers, like all managers have the
responsibility to make ethical decisions on:
 Worker safety, product safety, quality, the
environment, the community, hiring and firing
workers, worker’s rights
Why study Operations Management (OM)?

Operations management activities at the core of all business
organizations

35% or more of all jobs are in OM related areas (customer service, quality
assurance, production planning and control, scheduling, job design,
inventory management, etc.

Activities in all other areas of business organizations (finance, accounting,
marketing, human resource, etc.) are interrelated with OM

POM is all about management – all managers need to possess the
knowledge and skill in the content areas in OM – learn and understand
the variety of decision making tools in the decision making process

A course that will prepare students in developing business plans (BA 499
–Business Planning is the capstone course for ALL business majors)
Three Basic Functions of Business Organizations

Finance, Production/operations, Marketing
Marketing
Production/
Operations
Finance
The operations function involves the creation of inputs into outputs
Outputs
Goods and
Services
Transformation/
conversion
process
Inputs
Land
Labor
Capital
Information
Feedback
Feedback
Feedback
Control
Examples of Types of Operations
Type of Operation
Goods producing
Examples
Farming, mining,
construction, manufacturing,
power generation
Storage/transportation Warehousing, trucking, mail
service, moving, taxis,
buses, hotel, airlines
Exchange
Retailing, wholesaling,
banking, renting or leasing,
library loans
Entertainment
Films, radio and TV, plays,
concerts, recording
Communication
Newspapers, radio and TV
newscast, telephone,
satellite
Illustrations of the Transformation Process
Food
Processing
Hospital
Inputs
Processing
Output
Raw vegetables
Metal sheets
Water
Energy
Labor
Building
Equipment
Cleaning
Making cans
Cutting
Cooking
Packing
Labeling
Canned
vegetables
Inputs
Processing
Output
Doctors, nurses
Hospitals
Medical supplies
Equipment
Laboratories
Examination
Surgery
Monitoring
Medication
Therapy
Healthy patients
Examples of inputs, transformation, and outputs
Inputs
Transformation
Output
Land
Human
Physical
Intellectual
Raw materials
Energy
Water
Chemical
Metals
Wood
Equipment
Machines
Computers
Trucks
Tools
Facilities
Hospitals
Factories
Offices
Retail stores
Other
Information
Time
Processes
Cutting, drilling
Transporting
Teaching
Farming
Mixing
Packing
Canning
Consulting
Copying, faxing
Goods
Houses
Autos
Clothing
Computers
Machines
TVs
Food products
Textbooks
Magazines
Shoes
Electronic items
Services
Health care
Entertainment
Car repair
Delivery
Gift wrapping
Legal
Banking
Communication
Production Good versus Service Operations
Characteristics
Goods
Services
Output
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct quality
problems before delivery to
customer
Tangible
Low
High
Low
High
Easy
High
Intangible
High
Low
High
Low
Difficult
Low
Productivity, Competitiveness and Strategy
Productivity – an index that measures outputs (goods or services) relative to the
input
Productivi ty 
Output
Input
Some Examples of Different
Types of Productivity Measures
Partial measures
Output
Labor
Multifactor measures
Output
Labor  Machine
Total Measures
Goods or Service Produced
All inputs used to produce them
Factors that Affect Productivity





Methods
Capital
Quality
Technology
Management
Output
Machine
Output
Capital
Output
Energy
Output
Labor  Capital  Energy
Strategy

Has a long term impact on the nature and characteristics of the
organization

Affects the ability of an organization to compete, or in the case of a
nonprofit organization, the ability to serve its intended purpose

The nature of an organization’s strategy depends on its mission
Mission

The basis of the organization – the reason for its existence
Mission statement

Answers the question, “What business are we in?”

Serves to guide formulation of strategies for the organization as well as the
decision making at all levels

Without it an organization is likely to achieve its true potential because
there is little direction for formulating strategies
Strategies and Tactics

Strategies are plans for achieving goals

Strategies provide focus


Tactics are the methods and actions to accomplish strategies
The “how to” part of the process
Strategy Formulation – the formulation of an effective strategy must take into
account:
1)
distinctive competencies of the organization – this can be accomplished by
doing a SWOT (strengths, weaknesses, opportunities, and threats)
analysis
price, quality, time, flexibility, service, location
2)
scan the environment – the considering of events and trends that present
either threat or opportunities
External factors:
economic condition, political condition, legal environment, technology,
competition, markets
Internal factors:
Human resources, facilities and equipment, financial resources, customers,
products and services, technology, suppliers