Chapter 1 - Introduction to Operations ManagementLearning ObjectivesLearning Objectives – con’tOperations Management is:Slide 5Typical Organization ChartWhat is Role of OM?OM’s Transformation ProcessOM’s Transformation RoleManufacturers vs Service OrganizationsSimilarities for Service/ManufacturersService vs ManufacturingGrowth of the Service SectorOM DecisionsSlide 15OM DecisionsPlan of Book-Chapters link to Types of OM DecisionsHistorical Development of OMHistorical Development con’tToday’s OM EnvironmentOM in PracticeBusiness Information FlowOM Across the OrganizationOM Across the Organization – con’tChapter 1 HighlightsChapter 1 Highlights – con’tThe End© Wiley 2010 1Chapter 1 - Introduction to Operations ManagementOperations ManagementbyR. Dan Reid & Nada R. Sanders4th Edition © Wiley 2010© Wiley 2010 2Learning ObjectivesDefine and explain OMExplain the role of OM in businessDescribe the decisions that operations managers makeDescribe the differences between service and manufacturing operationsIdentify major historical developments in OM© Wiley 2010 3Learning Objectives – con’tIdentify current trends in OMDescribe the flow of information between OM and other business functions© Wiley 2010 4Operations Management is: The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company© Wiley 2010 5Operations Management is:A management functionAn organization’s core functionIn every organization whether Service or Manufacturing, profit or Not for profit© Wiley 2010 6Typical Organization Chart© Wiley 2010 7What is Role of OM?OM Transforms inputs to outputsInputs are resources such asPeople, Material, and MoneyOutputs are goods and services© Wiley 2010 8OM’s Transformation Process© Wiley 2010 9OM’s Transformation RoleTo add valueIncrease product value at each stageValue added is the net increase between output product value and input material valueProvide an efficient transformationEfficiency – means performing activities well for least possible cost© Wiley 2010 10Manufacturers vs Service OrganizationsServices:Intangible productProduct cannot be inventoriedHigh customer contactShort response timeLabor intensiveManufacturers:Tangible productProduct is inventoriedLow customer contactLonger response timeCapital intensive© Wiley 2010 11Similarities for Service/ManufacturersBoth use technology Both have quality, productivity, & response issuesBoth must forecast demandBoth can have capacity, layout, and location issuesBoth have customers, suppliers, scheduling and staffing issues© Wiley 2010 12Service vs ManufacturingManufacturing often provides servicesServices often provides tangible goodsSome organizations are a blend of service/manufacturing/quasi-manufacturing Quasi-Manufacturing (QM) organizationsQM characteristics includeLow customer contact & Capital Intensive© Wiley 2010 13Growth of the Service SectorService sector growing to 50-80% of non-farm jobsGlobal competitivenessDemands for higher qualityHuge technology changesTime based competitionWork force diversity© Wiley 2010 14OM DecisionsAll organizations make decisions and follow a similar pathFirst decisions very broad – Strategic decisionsStrategic Decisions – set the direction for the entire company; they are broad in scope and long-term in nature© Wiley 2010 15OM DecisionsFollowing decisions focus on specifics - Tactical decisionTactical decisions: focus on specific day-to-day issues like resource needs, schedules, & quantities to produceare frequentStrategic decisions less frequentTactical and Strategic decisions must align© Wiley 2010 16OM Decisions© Wiley 2010 17Plan of Book-Chapters link to Types of OM Decisions© Wiley 2010 18Historical Development of OMIndustrial revolution Late 1700sScientific management Early 1900sHuman relations movement 1930s-60sManagement science 1940s-60sComputer age 1960sEnvironmental Issues 1970sJIT & TQM* 1980s*JIT= Just in Time, TQM= Total Quality Management© Wiley 2010 19Historical Development con’tReengineering 1990sGlobal competition 1980sFlexibility 1990sTime-Based Competition1990sSupply chain Management 1990sElectronic Commerce 2000sOutsourcing & flattening of world 2000sFor long-run success, companies must place much importance on their operations© Wiley 2010 20Today’s OM EnvironmentCustomers demand better quality, greater speed, and lower costsCompanies implementing lean system concepts – a total systems approach to efficient operationsRecognized need to better manage information using ERP and CRM systemsIncreased cross-functional decision making© Wiley 2010 21OM in PracticeOM has the most diverse organizational functionManages the transformation processOM has many faces and names such as;V. P. operations, Director of supply chains, Manufacturing managerPlant manger, Quality specialists, etc.All business functions need information from OM in order to perform their tasks© Wiley 2010 22Business Information Flow© Wiley 2010 23OM Across the OrganizationMost businesses are supported by the functions of operations, marketing, and financeThe major functional areas must interact to achieve the organization goals© Wiley 2010 24OM Across the Organization – con’tMarketing is not fully able to meet customer needs if they do not understand what operations can produceFinance cannot judge the need for capital investments if they do not understand operations concepts and needsInformation systems enables the information flow throughout the organizationHuman resources must understand job requirements and worker skillsAccounting needs to consider inventory management, capacity information, and labor standards© Wiley 2010 25Chapter 1 HighlightsOM is the business function that is responsible for managing and coordinating the resources needed to produce a company’s products and services.The role of OM is to transform organizational inputs into company’s products or services outputsOM 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