1-1 Introduction to Operations Management

Operations Management

William J. Stevenson

8th edition
1-2 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

 1-3 Introduction to Operations Management

CHAPTER
1

Introduction to
Operations Management

Operations Management, Eighth Edition, by William J. Stevenson

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.
1-4 Introduction to Operations Management

Value-Added
Figure 1.2
The difference between the cost of inputs
and the value or price of output. The greater the value added the
greater the profit.
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
1-5 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 goods

Low percentage service High percentage service
1-6 Introduction to Operations Management

Food Processor
Table 1.2

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
1-7 Introduction to Operations Management

Hospital Process
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
1-8 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
1-9 Introduction to Operations Management

Key Differences

1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Production and delivery
7. Quality assurance
8. Amount of inventory
1-10 Introduction to Operations Management

Scope of Operations Management

• Operations Management in an airline co.
includes:
• Forecasting-weather and landing conditions
• Capacity planning-too few or too many planes will hurt profit

• Scheduling-maintenance schedules of planes, pilots and attendants

schedule

• Managing inventories-food and beverages, first aid equipment

• Assuring quality-safety of passengers and efficiency

• Motivating employees-in all phases of operations

• Deciding where to locate facilities-manager’s view 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
Year Mfg. Service
45 79 21
100
50 72 28
55 72 28 80
60 68 32
Percent 60
65 64 36
70 64 36 40
75 58 42
80 44 46 20
85 43 57
0
90 35 65
95 32 68 45 50 55 60 65 70 75 80 85 90 95 00
00 30 70 Year
1-13 Introduction to Operations Management

Responsibilities of Operations Management

Table 1.6

Planning Organizing
– Capacity – Degree of centralization
– Location – Process selection
– Products & services Staffing
– Make or buy – Hiring/laying off
– Layout – Use of Overtime
– Projects Directing
– Scheduling – Incentive plans
Controlling/Improving – Issuance of work orders
– Inventory – Job assignments
– Quality
– Costs
– Productivity
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 Public
Operations Relations

Legal
Personnel

Accounting MIS
1-17 Introduction to Operations Management

HISTORICAL EVOLUTIONS OF OM

• Great Wall of China, Egyptians Pyramid, etc. provide

examples of the human ability to organize for
productions.
• The Industrial Revolution in the 1770’s in England and
spread to the rest of Europe and US during the 19th
century. Prior to that time, goods were produced in small
shops by craftsmen and their apprentices.

Craft production- system in which highly skilled workers

use simple tools to produce small quantities of customized
goods.
1-18 Introduction to Operations Management

Scientific Management

Frederick Taylor
• the father of Scientific Management
Henry Ford
• Mass production(low-skilled worker use specialized
machinery to produce high volume of goods), division of
labor(breaking up a production process into small tasks,
so that each worker performs a small portion of the
overall job)
Japanese
• Just-In-Time principles
1-19 Introduction to Operations Management

Trends in Business

• Major trends
• The Internet, e-commerce, e-business
• Management technology

• Globalization

• Management of supply chains

• Agility
1-20 Introduction to Operations Management

Next meeting

4 GROUPS FOR THE WHOLE CLASS:

TO BE PRESENTED NEXT MEETING
DISCUSS THE FOLLOWING
GROUP 1-DELEGATION
GROUP 2-SPAN OF CONTROL
GROUP 3-DEPARTMENTALIZATION
GROUP 4-UNITY OF COMMAND
Discuss its relationship in Operations management.