8/3/2019 OM Session 1

1/12

William J. Stevenson

Operations Management

8th edition

8/3/2019 OM Session 1

2/12

Operations ManagementOperations Management

The management of systems or processes

that create goods and/or provide services

Organization

Finance Operations Marketing

Figure 1.1

8/3/2019 OM Session 1

3/12

What Do Operations Managers

Do? What is Operations?

a function or system that transforms inputs into

outputs of greater value

What is a Transformation Process? a series of activities along a value chain extending

from supplier to customer

activities that do not add value are superfluous and

should be eliminated

What is Operations Management?

design, operation, and improvement of productive

systems

8/3/2019 OM Session 1

4/12

ValueValue--AddedAdded

The difference between the cost of inputs

and the value or price of outputs.

InputsLand

Labor

Capital

Transformation/

Conversion

process

Outputs

Goods

Services

Control

Feedback

FeedbackFeedback

Value added

Figure 1.2

8/3/2019 OM Session 1

5/12

Steel production

Automobile fabrication

Home remodeling

Retail sales

Auto Repair

Appliance repair

Maid Service

Manual car wash

Teaching

Lawn mowing

High percentage goods

Low percentage service

GoodsGoods--service Continuumservice Continuum

Low percentage goods

High percentage service

Figure 1.3

8/3/2019 OM Session 1

6/12

Goods-service Continuum

Source:Adapted from Earl W. Sasser, R. P. Olsen, and D. Daryl Wyckoff, Management of

Service Operations (Boston: Allyn Bacon, 1978), p.11.

8/3/2019 OM Session 1

7/12

Food ProcessorFood Processor

Inputs Processing Outputs

Raw Vegetables Cleaning Canned

vegetablesMetal Sheets Making cansWater CuttingEnergy CookingLabor PackingBuilding Labeling

Equipment

Table 1.2

8/3/2019 OM Session 1

8/12

Hospital ProcessHospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy

patientsHospital SurgeryMedical Supplies MonitoringEquipment MedicationLaboratories Therapy

Table 1.2

8/3/2019 OM Session 1

9/12

Manufacturing or Service?Manufacturing or Service?

Tangible Act

8/3/2019 OM Session 1

10/12

Production ofGoods vs. Delivery ofServices

Production of goods tangible output

Delivery of services an act

Service job categories

Government Wholesale/retail

Financial services

Healthcare

Personal services

Business services

Education

8/3/2019 OM Session 1

11/12

Key Differences

1. Customer contact2. Uniformity of input

3. Labor content of jobs

4. Uniformity of output

5. Measurement of productivity

6. Production and delivery

7. Quality assurance

8. Amount of inventory

8/3/2019 OM Session 1

12/12

Manufacturing vs ServiceManufacturing vs Service

Characteristic Manufacturing ServiceOutput

Customer contact

Uniformity of input

Labor content

Uniformity of output

Measurement of productivityOpportunity to correct

Tangible

Low

High

Low

High

EasyHigh

Intangible

High

Low

High

Low

DifficultLow

quality problemsHigh