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OM Session 1

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    William J. Stevenson

    Operations Management

    8th edition

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    Operations ManagementOperations Management

    The management of systems or processes

    that create goods and/or provide services

    Organization

    Finance Operations Marketing

    Figure 1.1

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    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

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    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

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    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

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    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.

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    Food ProcessorFood Processor

    Inputs Processing Outputs

    Raw Vegetables Cleaning Canned

    vegetablesMetal Sheets Making cansWater CuttingEnergy CookingLabor PackingBuilding Labeling

    Equipment

    Table 1.2

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    Hospital ProcessHospital Process

    Inputs Processing Outputs

    Doctors, nurses Examination Healthy

    patientsHospital SurgeryMedical Supplies MonitoringEquipment MedicationLaboratories Therapy

    Table 1.2

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    Manufacturing or Service?Manufacturing or Service?

    Tangible Act

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    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

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    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

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    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


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