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INTRODUCTION

toOperations Management

Chapter 1, The Operations Function

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Chapter Outline

Definition of Operations Management

Decisions at Pizza U.S.A.

Operations Decisions - A FrameworkCross-Functional Decision Making

Operations as a System

Contemporary Operations Themes

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Definition ofOperations Management

Operations is responsible for supplying theproduct

orserviceof the organization.

Operations managers makedecisions regardingthe operations function and itsconnectionwith

otherfunctions.

Operations managersplanandcontroltheproductionprocess and its interfaces within the

organization and with the external environment.

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Key Points in OM Definition

Decisions the operations manager mustmake

Functions in the organization.

Process for producing goods and services

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MajorDecisions at Pizza USAA Framework for OM

Process How to produce & deliver

Quality Criteria, measurement & process for

achieving

Capacity

Physical facilities & laborInventory What, when & how much?

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Cross-FunctionalDecision Making

Operations as the primary function.

Other primary functions:

Marketing Finance

Supporting functions: all others

Major cross-functional decisions (SeeTable 1.1)

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Operations as a Process

Transformation

(Conversion)

Process

Input Output

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Operations as a Process

Transformation

Fabrication

Input OutputTransformation

Assembly

Fabrication: making the parts

Assembly: putting the parts together

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Operations as a Process(Figure 1.1)

Transformation

(Conversion)

Process

Energy

Materials

LaborCapital

Information

Goods orServices

Feedback information for

control of process inputs

and process technology

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Relation of Operations to itsEnvironment

(Figure 1.2)

Operations transformation systemSuppliers

Human

Resources

Marketing

Accounting Finance MIS

Engineering

SOCIETY

GOVERNMENT

External

Environment

CUSTOMERS

COMPETITORS

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Contemporary Operations Themes

Service and Manufacturing (differences andimplications)

Customer-Directed Operations

Time Reduction (Lean Operations)

Integration of Operations and Other Functions

Environmental Concerns

Supply Chain ManagementGlobalization of Operations

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Environmental Concerns

Volkswagen, Germanys biggest carmaker, was reported to be setting asideDM1 billion ($470m) to pay for

compliance with a European directivethat will come into force in 2007 forcingcar makers to pay for recycling their

vehicles. New cars will berequired to be 85% recyclable.

--The Economist, 15 February 2001

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Globalization: Who took my job?

Early 1990s

Small town near Charlotte, NC

Aluminum smelter closed after 50 yearsOnly significant industry in town

In many families, several generations had

worked there. Now all out of work.Who caused it to close?

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Mikls Nmeth

WHO!?!?!?

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U.S. production of aluminum dropped dramatically

in the early 1990s because the Russians dumped

aluminum on the world market. Why? The openingof the Hungarian border, 2 May 1989, led to the fall

of the Berlin Wall in November, 1989, which led to

the breakup of the Soviet Union in 1991, which

caused them to downsize their military, which gave

them overcapacity in aluminum production, which

caused them to dump in the world markets, which

led to the closing of U.S. smelters such as the onenear Charlotte, NC.

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Mikls NmethWas the Hungarian PrimeMinister who opened the

border on 2 May 1989.

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Moral of the StoryIn an age of globalization, you neverknow who will be the competition or

who is doing something that will affectyour job or your life.

The aluminum workers in NC hadnever heard of Mikls Nmeth, but he

ultimately cost them their jobs.

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Summary

Definition of Operations Management

Decisions at Pizza U.S.A.

Operations Decisions - A FrameworkCross-Functional Decision Making

Operations as a System

Contemporary Operations Themes

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End of Chapter One