Chapter 1: Introduction to Operations Management
production.
Business function:
1. Marketing
Creating wants
Wants individual preference in
satisfying need.
Purchasing power ability to pay
Responsible for assessing consumer
wants and needs and selling and
promoting organizations goods &
services.
2. Operations
Responsible for producing the goods or
providing the services offered by the
organization.
3. Finance
Responsible for securing financial
resources at favorable prices and
allocating resources throughout
organization.
Functional Overlap:
1. Finance and Operation
Budgeting
Economic analysis of investment
proposals
Provision of funds
2. Marketing and operation
Demand data
Product and service design
Competitor analysis
Lead time data time between ordering
good & service & receiving it.
Operations Management the management of system or
processes that create goods or provide services.
Value-added difference between cost of inputs and value
and price of output.
Essence of operation function: Add value during the
transformation process. The greater value-added, the
greater amount of funds available for this purpose.
Feedback measurements taken at various in total
Control comparison of feedback against previously
established standards to determine if corrective decision is
needed.
Supply chain sequence of activities & organization
involve in production & delivery goods or services.
Factors affecting the design and management of Operation
System:
i. Degree involvement of customers in the process
Service - customer involvement
Goods - customer involvement
ii. Degree to which technology is used to produce or
deliver a product or service
iii. Others
Customer involvement - CI; challenging to design &
manage operation.
Impacts of Technology:
i. Productivity
ii. Costs
iii. Flexibility
iv. Quality
v. Customers satisfaction
Service labor extensive (intangible-act oriented)
Goods-Manufacturing capital extensive (tangible)
*No business is purely goods or services
Goods production production of goods results in or
tangible output that anything we can see or touch.
Service delivery implies an act.
Managing services in Challenging than manufacturing
i. Jobs in services are given less structured than in
manufacturing.
ii. Customer contract is generally much higher in
services compared to manufacturing.
iii. In many services, worker skill levels are low
compared to those of manufacturing employees.
iv. Service are adding many new workers in-low skill
entry level positions.
v. Employee turnover is high in services especially
low-skill jobs.
 vi. Input variability tends to be higher in many Decline in Manufacturing Employment:
service environment than in manufacturing. i. Productivity - productionoutputworkers
vii. Service performance can be adversely affected by ii. Outsourcing
many factors outside of the mangers contract. iii. Statistical artifact contract

Scope of Operations Management: Decision Making involve many alternative that can have
i. Forecasting a quite different impacts on costs or profits.
ii. Capacity Planning
iii. Scheduling Typical decisions:
iv. Managing Inventories i. What - resourced need & amount?
v. Assuring quality ii. When resources needed, work be scheduled,
vi. Motivating employees materials & supplies be ordered?
vii. Locating facilities iii. Where work be done?
iv. How products or service be designed, work be
Operation function production of goods or services. done, and resources be allocated?
Operation manager guide the system by decision making. v. Who will do the work?
System Design (strategic) strategic management.
System Operations (tactical) functional managers are Modelling tool used for decision making.
involved. Model abstraction of reality; simplification of something.

System Design strategic decision that commitment on Features:

long-term resources and parameters of operation. i. Simplification of real life phenomena
i. Capacity ii. Omit unimportant details
ii. Facility location
iii. Facility layout Types of Models:
iv. Production & service planning i. Physical model replica of reality
v. Acquisition & placement of equipment ii. Schematic model scale; canvass; map;
blueprint. Look less like there real life
System Operation having feedback of measurement and counterparts than physical model.
control. iii. Mathematical model do not look like theyre
i. Management personnel real life counterpart.
ii. Inventory management and control
iii. Scheduling Understanding the Model
iv. Project Management i. What is the purpose?
v. Quality Assurance ii. How is it used to generate results?
iii. How are the results interpreted & used?
Other Areas: iv. What are the models assumptions and
i. Purchasing procurement of materials, supplier limitations?
and equipment.
Purchasing department evaluate Benefits of Models
vendors quality, reliability, service, price i. Easier to use and less expensive
& stability to adjust change demand. ii. Requires users to organize and sometimes
ii. Industrial Engineering scheduling, performance quantify information
standard, availability control & material handling iii. Increase understanding of the problem
iii. Distribution shipping of goods to warehouse, iv. Enable managers to analyze, What if question
retail outlets or final customers. v. Serve as a consistent tool for evaluation & provide
iv. Maintenance general upkeep of repair of a standardized format for analyzing a problem
equipment, buildings and ground, heating & air- vi. Enable users to bring the power of mathematics to
conditioning, removing toxic wastes, parking & bear on a problem.
security.
Quantitative Methods decision making approach to Ethical Issues:
obtain a mathematical optimal solution. i. Financial Statements
i. Linear programming ii. Work Safety
ii. Queving technique iii. Product
iii. Inventory Model iv. Quality
iv. Project Model v. Environment
v. Forecasting Model vi. Community
vi. Statistical Model vii. Hiring & Firing workers
viii. Closing facilities
Model Limitations: ix. Workers rights
i. Emphasized at the expense of a quantitative
information5 Environmental Concerns:
ii. Incorrect application & results misinterpreted i. Global environmental changes strict regulations
iii. Does not guarantee good decisions are imposed affecting the way business are
operated.
Metrics & Trade-Offs ii. Sustainability refers to the service and
production processes that we use resources in
Performance Metrics all managers use metrics to manage ways that do not harm ecological system. It
& control operations such as profits, cost, productivity and supports environmental and human service.
forecasting accuracy. iii. Green initiative adopt measures in anticipation
of reducing environmental damages.
Analysis of Trade-Offs operation personnel encounter
decisions that can be described as trade-off decisions. Historical Evolution of Operations Management
i. Industrial Evolution
X Y Trade-off ii. Scientific Management
50 30 0 iii. Human Relations Movement
50 30 20 iv. Decision Models & Management Services
v. Influence of Japanese
*Trade-off giving up something in return or something
else. Industrial Revolution:
i. Craft production system in which highly skilled
Establishing Priorities workers use simple, flexible tools to produce
i. Allows managers to focus their attention to those small quantities of customized goods.
efforts that will do most good. ii. Key elements of the industrial evolution:
ii. Pareto Phenomena few factors account for Began in England 1770s
increase percentage of occurrence of some events. Division of labor (Das Capital-
priority critical few factors Comparative Advantage) Adam Smith,
Appropriately applied to all areas and 1776
levels of management. Application of the rotative steam engine
System Approach 1780s
i. System set of interrelated parts that must work
together. iii. Cotton Gin & interchangeable parts Eli
ii. Business organization: Finance, Marketing & Whitney, 1792
Operation. iv. Management theory & practice did not advance
iii. Emphasizes interrelationships among appreciably during this period.
subsystems. v. Scientific Management led by Frederick
iv. Main theme is that the whole is greater than the Winslow Taylor
sum of its parts. Science of management based on
v. The output & objectives of the organization take observation, measurement analysis and
precedence over those of any one subsystem. improvement of work methods, and
economic incentives.
 Management is responsible for planning ii. Credited with fueling the quality revaluation
carefully selecting & training workers iii. Just-in-time system
finding the best way to perform each job
achieving cooperate between Key Trends & Issues in Business
management & workers and separating i. E-business & Ecommerce
management activities from work ii. Management of Technology
activities. Technology utilization of scientific
Emphasis was on maximizing profit. discoveries in order to develop
goods/services.
Scientific Management Product/Service Technology new
i. Frank Gilbreth father of motion studies. development of product/service by
ii. Henry Gat developed the Gant chart (scheduling researchers & engineers who utilize
system & recognized by the value of non- scientific approach to develop new code
monetary rewards for motivating employees). and translate it to commercial
iii. Harrington Emerson applied Taylors ideas to application.
organizational structure. Process technology memos,
iv. Henry Ford employed scientific management procedures & equipment used to produce
techniques to his factories through moving goods & services.
assembly line and mass production. Information technology science of use
of computers & other electronic
Human Relations Movement equipment to store, process and send
i. Emphasized the importance of human element in information.
job design. iii. Globalization
ii. Lilian Gilbreth Global Market taste of different people
iii. Elton Mayo Hawthorne studies or worker are the same.
motivation, 1930 iv. Outsourcing obtaining product/service outside
iv. Abraham Maslow motivation theory, 1940s: the organization.
hierarchy of needs, 1954 v. Agility ability of organization to respond quietly
v. Frederick Hertzberg 2-factor theory, 1959 to demands or opportunity.
vi. Douglas McGregor Theory X & Y, 1960s vi. Ethical Behavior
Theory X (positive reinforcement-
satisfier) Other Important Trends:
Theory Y (negative reinforcement- i. Operations Strategy
dissatisfier) ii. Working with fewer resources lay-offs,
vii. William Ouchi Theory Z (Japan manufacture), downsizing
1981 iii. Revenue Management maximize revenue and
Theory Z skeptical feelings. minimize cost
iv. Process Analysis & Improvement Quality
Decision Model & Management Science Improvement
i. F.W. Harris mathematical model for inventory Process Improvement improved
management, 1915 quality, cost reduction & time reduction.
ii. Dodge, Romig & Shewort statistical procedure Six-sigma improved quality, cost
for sampling & quality control, 1930 reduction & increasing customer
iii. Tippett statistical sampling the organization, satisfaction
1935 v. Increased Regulations & Product Liability Issue
iv. Operations Group Operation application in vi. Lean Production uses minimal amount of
warfare resources to produce a high volume of quality
v. George Dantzig linear programming, 1947 goods with some variety.

Influence of Japanese Manufactures

i. Refined & developed management practices that
increases productivity