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© Wiley 2007 1
Chapter 1 - Introduction to Operations Management
Operations Managementby
R. Dan Reid & Nada R. Sanders3rd Edition © Wiley 2007
© Wiley 2007 2
Learning Objectives Define OM Role of OM in business Decisions that operations managers
make OM differences between service and mfg. Major historical developments in OM Identify current trends in OM Define information flow between OM and
other business functions
© Wiley 2007 3
What is Operations Management?
The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services.
It is a management function. Organization’s core function. Every organization has the OM function
Manufacturing or Service For Profit or Not For Profit
© Wiley 2007 5
Systems Concept
outputsoutputs
SYSTEMSYSTEM
transformationstransformationsinputsinputs
productivityproductivity
OOII
missionmissiongoalsgoals
objectivesobjectives
(See (See SINKSINK, figure 2.1, p. 24), figure 2.1, p. 24)
goodsgoodsservicesservices
landlandlaborlaborcapitalcapital•facilitiesfacilities•equipmentequipment•toolstoolsenergyenergymaterialsmaterialsdatadata
PhysicalPhysical
LocationalLocational
ExchangeExchange
StorageStorage
PhysiologicalPhysiological
InformationalInformational
© Wiley 2007 6
Why OM? “In business today, the emphasis is not
so much on what you make, but on how you do business. Dell makes computers just like every other PC manufacturer.” Quote: KT CEO on CNBC 4/99
The resurgence of American business in the 1990’s capitalized on improved operations.
© Wiley 2007 7
Differences between Manufacturers and Service Organizations
Services: Intangible product Product cannot be
inventoried High customer
contact Short response
time Labor intensive
Manufacturers: Tangible product Product can be
inventoried Low customer contact Longer response time Capital intensive
© Wiley 2007 8
Similarities-Service/Manufacturers
All use technology Both have quality, productivity, & response
issues All must forecast demand Each will have capacity, layout, and
location issues All have customers and suppliers All have scheduling and staffing issues
© Wiley 2007 9
Trends in OM Service sector growing
to 80% of non-farm jobs- See Figure 1-4
Global competitiveness Demands for higher
quality Huge technology
changes Time based competition Work force diversity
© Wiley 2007 12
Historical Development of OM
Industrial revolution Late 1700’s Scientific management Early 1900’s Human relations movement 1930’s to 1960’s Management science Mid-1900’s Computer age 1970’s Just-in-Time Systems (JIT) 1980’s Total quality management (TQM) 1980’s Reengineering 1990’s Flexibility 1990’s Time-Based Competition 1990’s Supply chain Management 1990’s Global Competition 1990’s Environmental Issues 1990’s Electronic Commerce Late 1990’s
© Wiley 2007 13
Today’s OM Environment Customers demand better quality,
faster deliveries, and lower costs Increased cross-functional decision
making Recognized need to better manage
information using ERP and CRM systems
Global competition
© Wiley 2007 15
Chapter 1 Highlights OM is the function that manages the resources that add
value Its role is to transform inputs into products or services Decisions are many and vary from daily tactical to long-term
strategic Key differences between mfg. and service companies are
tangibility of product and degree of customer contact Historical milestones range from 1700s Industrial Revolution
to the modern Electronic Commerce age OM must understand and implement major process changes
like JIT, TQM, supply chain management, and environmental changes
OM works closely with all other business functions