Chapter 1 OPerations Management and Value Chain

COLLIER/EVANS
MindTap for Operations and Supply Chain Management
1
Operations
Management and
Value Chains
Copyright ©2019 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or
posted to a publicly accessible website, in whole or in part.
LEARNING OUTCOMES, Part 1
1 Explain the concept and importance of

operations management
2 Describe what operations managers do
3 Explain the differences between goods and
services
4 Define the concept of value and explain how the
value of goods and services can be enhanced
5 Describe a customer benefit package
LEARNING OUTCOMES, Part 2
6 Explain the difference between value chains

and supply chains, and identify three general
types of processes in a business
7 Contrast the three different frameworks for
describing value chains
8 Summarize the historical development of OM
9 Describe key challenges facing OM
LO 1-1
Operations Management (OM), Part 1
• Science and art of ensuring that goods and

services are created and delivered
successfully to customers
• Includes:
• Design of goods, services, and the processes
that create them
• Day-to-day management of processes
• Continual improvement of goods, services, and
processes
Copyright ©2019 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part. CH1 4
LO 1-1
Operations Management (OM), Part 2
• Core of OM:
• Efficiency
• Cost of operations
• Quality of goods
Key Activities of an Operations LO 1-2
Manager
Transactions between Buyers and LO 1-3
Sellers, Part 1
• Types
• Good: Physical product that a person sees,
touches, or consumes
• Durable good: Product that does not quickly
wear out and lasts at least three years
• Non-durable good: Product that perishes and
lasts for less than three years
• Service: Primary or complementary activity that
does not directly produce a physical product
Transactions between Buyers and LO 1-3
Sellers, Part 2
Goods and Services share similarities:

• Driven by customers and provide value and
satisfaction to customers who purchase and
use them
• Standardized or customized to individual
wants and needs
LO 1-3
Goods versus Services, Part 1
LO 1-3
Goods versus Services, Part 2
LO 1-3
Service Management
• Integrates marketing, human resources, and

operations functions to plan, create, deliver
goods and services, and deal with service
encounters.
• Service encounters consist of one or more
moments of truth: Episodes, transactions,
or experiences in which customer
encounters the delivery system and forms
an impressions
LO 1-4
The Concept of Value
• Perception of the benefits associated with a

good, service, or bundle of goods and
services in relation to what a buyer pays
• Goods or services are perceived favorably by
customers if the ratio of perceived benefits to
price to the customer is high
Customer Benefit Packages (CBP), LO 1-5
Part 1
• Clearly defined set of tangible and

intangible features that a customer
recognizes, pays for, uses, or experiences
Customer Benefit Packages (CBP), LO 1-5
Part 2
LO 1-6
Value Chain
- A network of facilities and processes that

describes the flow of materials, finished
goods, services, information, and financial
transactions from suppliers through the
facilities and processes that create goods and
services, and those that deliver them to the
customer
LO 1-6
Supply Chain
• Portion of value chain that focuses on:

• Physical movement of goods and materials
• Supporting flow of information and financial
transactions through the supply, production,
and distribution processes
LO 1-6
Process
• It is a sequence of activities that is intended

to create a certain result, such as a physical
good, a service, or information. It is how
work creates value for customers.
LO 1-6
Types of Business Processes
LO 1-7
Value Chain Frameworks

Exhibit 1.4 Input-Output Framework of a Value Chain
LO 1-7
Exhibit 1.7 Pre- and Postservice View of the Value Chain

LO 1-7
Exhibit 1.9 Typical Goods-Producing Supply Chain Structure

LO 1-7
Goods-Producing Supply Chain
• Activities include shipping finished goods to

distribution centers (DCs)
• Distribution centers
- Warehouses that act as intermediaries
between factories and customers and ship
directly to customers or to retail stores
• Inventory: Raw materials, work-in-process, or
finished goods that are maintained to support
production or satisfy customer demand
LO 1-8
Exhibit 1.10 Seven Eras of Operations Management

LO 1-8
Sustainability
• Organization’s ability to strategically address

current business needs and develop a long-
term strategy to:
• Embrace opportunities and manage risks for
products, systems, supply chains, and processes
• Preserve resources for future generations
LO 1-8
Perspectives of Sustainability, Part 1
• Environmental sustainability
• Organization’s commitment to the long-term
quality of the environment
• Social sustainability
• Organization’s commitment to maintain healthy
communities and a society that improves the
quality of life
LO 1-8
Perspectives of Sustainability, Part 2
• Economic sustainability: Organization’s

commitment to:
• Address current business needs and economic
vitality
• Have the agility and strategic management to
prepare successfully for future business,
markets, and operating environments
LO 1-8
Data in OM
• Used to evaluate:
• Operations performance, quality, order
accuracy, customer satisfaction, delivery, cost,
environmental compliance, etc.
• Helps make decisions using business
analytics
• Business analytics: Process of transforming data
into actions through analysis and insights in the
context of decision making and problem solving
LO 1-8
Current Challenges in OM
KEY TERMS, Part 1
• Operations management • Customer benefit

• Goods packages (CBP)
• Durable good • Primary good or service
• Nondurable good • Peripheral goods or
• Service services
• Service encounter • Variant
• Moments of truth • Value chain
• Service management • Supply chain
• Value
• Process
KEY TERMS, Part 2
• Distribution centers
(DCs)
• Inventory
• Sustainability
• Environmental
sustainability
• Social sustainability
• Economic
sustainability
• Business analytics
SUMMARY
• Principles of OM are used in goods manufacturing

and production activities
• Goods and services are two major transactions
between buyers and sellers
• Evaluating the value of products and customer
benefit packages are a part of OM activities
• OM should focus on developing sustainable business
operations

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COLLIER/EVANS

MindTap for Operations and Supply Chain Management

1 Explain the concept and importance of

6 Explain the difference between value chains

• Science and art of ensuring that goods and

Goods and Services share similarities:

• Integrates marketing, human resources, and

• Perception of the benefits associated with a

• Clearly defined set of tangible and

- A network of facilities and processes that

• Portion of value chain that focuses on:

• It is a sequence of activities that is intended

Value Chain Frameworks

Exhibit 1.7 Pre- and Postservice View of the Value Chain

Exhibit 1.9 Typical Goods-Producing Supply Chain Structure

• Activities include shipping finished goods to

Exhibit 1.10 Seven Eras of Operations Management

• Organization’s ability to strategically address

• Economic sustainability: Organization’s

• Operations management • Customer benefit

• Principles of OM are used in goods manufacturing

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