Introduction to

Operations
Management

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You should be able to:
LO 1.1 Define the terms operations management and supply chain
LO 1.2 Identify similarities and differences between production and service
operations
LO 1.3 Explain the importance of learning about operations management
LO 1.4 Identify the three major functional areas of organizations and explain
how they interrelate
LO 1.5 Summarize the two major aspects of process management
LO 1.6 Describe the operations function and the nature of the operations
manager’s job
LO 1.7 Explain the key aspects of operations management decision making
LO 1.8 Briefly describe the historical evolution of operations management
LO 1.9 Describe the current issues in business that impact operations
management
LO 1.10 Explain the need to manage the supply chain

1-2
 What is operations?
 The part of a business organization that is responsible
for producing goods or services

1-3
LO 1.1
 Supply Chain – a sequence of activities and
organizations involved in producing and delivering
a good or service

Suppliers’ Direct Final

Producer Distributor
suppliers suppliers Customers

1-4
LO 1.1
 Products are typically neither purely service- or purely goods-
based.
Goods Services
Surgery, Teaching

Songwriting, Software Development

Computer Repair, Restaurant Meal

Home Remodeling, Retail Sales

Automobile Assembly, Steelmaking

1-5
LO 1.2
 Every aspect of business affects or is affected by
operations
 Many service jobs are closely related to operations
 Financial services
 Marketing services
 Accounting services
 Information services

1-6
LO 1.3
 Finance & Operations
 Budgeting
 Economic analysis of investment
proposals
 Provision of funds
 Marketing & Operations
 Demand data
 Product and service design
 Competitor analysis
 Lead time data

1-7
LO 1.4
 Process - one or more actions that transform inputs into outputs

Three Categories of Business Processes:

Upper-management processes
Operational processes
Supporting processes
These govern the operation of the entire
organization.
These are core processes that make up the
value stream.
These support the core processes.

1-8
LO 1.5
The Operations Function consists of all activities
directly related to producing goods or providing
services.

A primary function of the operations manager is to

guide the system by decision making.
 System Design Decisions
 System Operation Decisions

1-9
LO 1.6
 Most operations decisions involve many alternatives that can
have quite different impacts on costs or profits
 Typical operations decisions include:
 What: What resources are needed, and in what amounts?

 When: When will each resource be needed? When should the work be
scheduled? When should materials and other supplies be ordered?
 Where: Where will the work be done?

 How: How will he product or service be designed? How will the work be
done? How will resources be allocated?
 Who: Who will do the work?

1-10
LO 1.7
 Performance Metrics  Analysis of Trade-Offs
 All managers use metrics to  A trade-off is giving up one
manage and control operations thing in return for
 Profits something else
 Costs  Carrying more inventory
 Quality (an expense) in order to
 Productivity achieve a greater level of
 Flexibility customer service
 Inventories
 Schedules
 Forecast accuracy

1-11
LO 1.7
 Industrial Revolution
 Scientific Management
 Human Relations Movement
 Decision Models and Management Science
 Influence of Japanese Manufacturers

1-12
LO 1.8
 The Industrial Revolution was a time when the
manufacturing of goods moved from small shops
and homes to large factories. This shift brought
about changes in culture as people moved from
rural areas to big cities in order to work

1-13
The scientific management theory
focused on improving the efficiency of
each individual in the organization. The
major emphasis is on increasing the
production through the use of intensive
technology, and the human beings are
just considered as adjuncts to
machines in the performance of routine
tasks

1-14
 Human relations movement refers to the
researchers of organizational development who
study the behaviour of people in groups, in
particular workplace groups and other related
concepts in fields such as industrial and
organizational psychology

1-15
1-16
 During the early times, the quality of Japanese export
goods was not as excellentas what they have today. They
were determined to do something about it and it
wasduring 1970’s that Japanese were gaining markets
previously dominated by Americans.Japanese
manufacturing techniques, as era of influential
practices, became prominentin 1980’s when Toyota’s
Just-in-Time production system had an appeal to
Americanswho were trying to understand Japanese
production methods. Japanese manufacturersdeveloped
practices that have an emphasis to quality of products,
improving efficiencyand achieving customer
satisfaction. Their influence has been enormous and
promise to continue in future.
1-17
 Economic conditions
 Innovating
 Quality problems
 Risk management
 Competing in a global economy

1-18
LO 1.9
  In the past, organizations did little to manage the
supply chain beyond their own operations and
immediate suppliers which led to numerous problems:
 Oscillating inventory levels
 Inventory stockouts
 Late deliveries
 Quality problems

1-19
LO 1.10
 1. The need to improve operations
2. Increasing levels of outsourcing
3. Increasing transportation costs
4. Competitive pressures
5. Increasing globalization
6. Increasing importance of e-business
7. The complexity of supply chains
8. The need to manage inventories

1-20
LO 1.10