Wiley 2010*Chapter 1 Basics of Operations ManagementOperations ManagementbyR. Dan Reid & Nada R. Sanders4th Edition Wiley 2010

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Wiley 2010*Learning ObjectivesDefine and explain OMExplain the role of OM in businessDescribe the decisions that operations managers makeDescribe the differences between service and manufacturing operationsIdentify major historical developments in OM

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Wiley 2010*Learning Objectives contIdentify current trends in OMDescribe the flow of information between OM and other business functions

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Wiley 2010*Operations Management is: The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company

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Wiley 2010*Operations Management is:A management functionAn organizations core functionIn every organization whether Service or Manufacturing, profit or Not for profit

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Wiley 2010*Typical Organization Chart

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Wiley 2010*What is Role of OM?OM Transforms inputs to outputsInputs are resources such asPeople, Material, and MoneyOutputs are goods and services

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Wiley 2010*OMs Transformation Process

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Wiley 2010*OMs Transformation RoleTo add valueIncrease product value at each stageValue added is the net increase between output product value and input material valueProvide an efficient transformationEfficiency means performing activities well for least possible cost

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Wiley 2010*Manufacturers vs Service OrganizationsServices:Intangible productProduct cannot be inventoriedHigh customer contactShort response timeLabor intensive

Manufacturers:Tangible productProduct is inventoriedLow customer contactLonger response timeCapital intensive

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Wiley 2010*Similarities for Service/ManufacturersBoth use technology Both have quality, productivity, & response issuesBoth must forecast demandBoth can have capacity, layout, and location issuesBoth have customers, suppliers, scheduling and staffing issues

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Wiley 2010*Service vs ManufacturingManufacturing often provides servicesServices often provides tangible goodsSome organizations are a blend of service/manufacturing/quasi-manufacturing Quasi-Manufacturing (QM) organizationsQM characteristics includeLow customer contact & Capital Intensive

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Wiley 2010*Growth of the Service SectorService sector growing to 50-80% of non-farm jobsGlobal competitivenessDemands for higher qualityHuge technology changesTime based competitionWork force diversity

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Wiley 2010*OM DecisionsAll organizations make decisions and follow a similar pathFirst decisions very broad Strategic decisionsStrategic Decisions set the direction for the entire company; they are broad in scope and long-term in nature

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Wiley 2010*OM DecisionsFollowing decisions focus on specifics - Tactical decisionTactical decisions: focus on specific day-to-day issues like resource needs, schedules, & quantities to produceare frequentStrategic decisions less frequentTactical and Strategic decisions must align

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Wiley 2010*OM Decisions

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Wiley 2010*Plan of Book-Chapters link to Types of OM Decisions

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Wiley 2010*Historical Development of OMIndustrial revolutionLate 1700sScientific managementEarly 1900sHuman relations movement1930s-60sManagement science1940s-60sComputer age1960sEnvironmental Issues1970sJIT & TQM*1980s

*JIT= Just in Time, TQM= Total Quality Management

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Wiley 2010*Historical Development contReengineering1990sGlobal competition1980sFlexibility1990sTime-Based Competition1990sSupply chain Management1990sElectronic Commerce2000sOutsourcing & flattening of world2000s

For long-run success, companies must place much importance on their operations

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Wiley 2010*Todays OM EnvironmentCustomers demand better quality, greater speed, and lower costsCompanies implementing lean system concepts a total systems approach to efficient operationsRecognized need to better manage information using ERP and CRM systemsIncreased cross-functional decision making

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Wiley 2010*OM in PracticeOM has the most diverse organizational functionManages the transformation processOM has many faces and names such as;V. P. operations, Director of supply chains, Manufacturing managerPlant manger, Quality specialists, etc.All business functions need information from OM in order to perform their tasks

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Wiley 2010*Business Information Flow

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Wiley 2010*OM Across the OrganizationMost businesses are supported by the functions of operations, marketing, and financeThe major functional areas must interact to achieve the organization goals

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Wiley 2010*OM Across the Organization contMarketing is not fully able to meet customer needs if they do not understand what operations can produceFinance cannot judge the need for capital investments if they do not understand operations concepts and needsInformation systems enables the information flow throughout the organizationHuman resources must understand job requirements and worker skillsAccounting needs to consider inventory management, capacity information, and labor standards

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Wiley 2010*Chapter 1 HighlightsOM is the business function that is responsible for managing and coordinating the resources needed to produce a companys products and services.The role of OM is to transform organizational inputs into companys products or services outputsOM is responsible for a wide range of decisions, ranging from strategic to tactical.Organizations can be divided into manufacturing and service organizations, which differ in the tangibility of the product or service

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Wiley 2010*Chapter 1 Highlights contMany historical milestones have shaped OM. Some of these are the Industrial Revolution, scientific management, the human relations movement, management science, and the computer ageOM is highly important function in todays dynamic business environment. Among the trends with significant impact are just-in-time, TQM, reengineering, flexibility, time-based competition, SCM, global marketplace, and environmental issuesOM works closely with all other business functions

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Reid & Sanders, Operations management, c Wiley 2010*Reid & Sanders, Operations management, c Wiley 2010