MODULE 1 - INTRODUCTION TO OPERATIONS MANAGEMENT

Module Objectives
1. Define operations management.
2. Cite examples of service and manufacturing.
3. Identify the three major functional areas in organizations and their relationship.
4. Discuss the value-added process
5. Use the IPO concept in various sample industries.

Operations Management is the management of systems or processes that create goods and/or
provide services

Operations Management affects:

 Companies’ ability to compete
 Nation’s ability to compete internationally

Operations Examples

Goods Producing Farming, mining, construction ,

manufacturing, power generation

Storage/Transportation Warehousing, trucking, mail

service, moving, taxis, buses,

hotels, airlines

Exchange Retailing, wholesaling, financial

advising, renting or leasing

Entertainment Films, radio and television,

concerts, recording

Communication Newspapers, radio and TV

newscasts, telephone, satellites

Manufacturing of Goods vs. Delivery of Services
 Production of goods – tangible output; physical items produced by business
organizations
 Delivery of services – an act; activities that provide some combination of time, location
form, and psychological value
 Service job categories
 Government
 Wholesale/retail
 Financial services
 Healthcare
 Personal services
 Business services
 Education

The Three Basic Functional Areas in Organizations

1. Finance is responsible for securing monetary resources at favorable prices and allocating
those resources throughout the organization, as well as budgeting, analyzing investment
proposals, and providing funds for operations.
2. Marketing is responsible for assessing consumer wants and needs and selling and
promoting organizations goods and services.
3. Operations is responsible for producing the goods or providing the services offered by
the organization.
“If the business organization were a car, operations would be its engine”
Value-Added Process

The operations function involves the conversion of inputs into outputs

Value-Added and Product Packages

 Value-added elements make 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.
Examples of IPO

1. Food Processor
Inputs Processing Outputs
Raw vegetables Cleaning Canned
Metal sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment

2. Hospital
Inputs Processing Outputs
Doctors, nurses Examination Treated
Hospital Surgery patients
Medical supplies Monitoring
Equipment Medication
Laboratories Therapy

Discussion Question:
1. “If you drop it on your foot, it won’t hurt you.” (Goods or service?) Explain.
2. “Services never include goods and goods never include services.” (True or false?) Explain your
answer and provide example.