PRODUCTION - is the creation of goods & services
OPERATIONS MANAGEMENT (OM)
- is the management of systems or processes that create goods and/or services
through the transformation of inputs to outputs. It includes planning, designing and
operating systems to achieve goals of the organization.
Why Study OM?
1. Study how people organize themselves for productive enterprise
2. Know how goods and services are produced
3. Understand what operations managers do
4. Because OM is such a costly part of an organization
What Operations Managers do?
Management Process - the application of planning, organizing, staffing, leading and controlling
to the achievement of objectives.
10 OM Strategy Decisions
1. Design of Goods & Services
2. Managing Quality
3. Process Strategy
4. Location Strategies
5. Layout Strategies
6. Human Resources
7. Supply Chain Management
8. Inventory Management
9. Scheduling
10.Maintenance
Where are the OM Jobs?
- OM activities are at the core of all business organizations.
- 40% or more of all jobs are in OM.
- Activities in all other areas of business organizations are all interrelated with OM.
- Ex: plant manager, quality manager, supply chain manager and planner, director of
purchasing, process improvement consultant
3 Basic Functions of Business Organizations: (finance,
operations, marketing)
- They perform different but related activities; they must interact to achieve organization
goals and objectives
- Organizational Success = Interface
1. Finance Function
- securing resources at favorable prices
- allocating resources throughout the organization
- personnel cooperate by exchanging information and expertise in such activities
as: budgeting, economic analysis of investment proposals, provision of funds
2. Marketing Function
- Focus is on selling and/or promoting goods or services of the organization
- Responsible for assessing customer wants & needs
- Communicates to Operations:
- demand info : purchase materials and schedule work
- competitor info:new product design, quality improvement, processenhancement
- consumer preference: lead time, capacity info, manufacturability of design
3. Operations Function
- Goods and service oriented
Types of Operation
1. Goods Producing (farming, mining, manufacturing)
2. Storage/ Transportation (warehousing, airline, mail)
3. Exchange (retailing, banking)
4. Entertainment (films, radio, tv)
5. Communications (newspaper, telephone, internet)
Value-added
- difference between the cost of inputs and the value or price of outputs.
- example:
Non-Profit Organizations
- the value of outputs is their value to the society.
- the greater the value added , the greater the effectiveness of these operations.
Profit Organizations
- The value of outputs is measured by the prices that customers are willing to pay for
those goods or services.
- The greater the value added the greater the amount of funds available for these
purposes.
SCOPE OF OM
System Design
- involves decisions relating to the system capacity, geographic locations of facilities,
arrangement of departments, layout of equipment, product or service planning, and
acquisition of equipment.
System Operation
- involves management of personnel, inventory planning & control, scheduling, project
management, and quality assurance
Differentiating Features of Operating Systems
1. Degree of Standardization
2. Type of Operation
3. Production of Goods vs. Service Operations
Degree of Standardization
● Standardized Output
- high degree of uniformity in goods (ex. computers, canned goods) or services
(ex. carwash, commercial airline service)
● Customized Output
- product or service is designed for a specific case or individual (ex. cut-to-order
glass windows, tailor-fitted suits)
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Production of Goods vs Service Operations
● Manufacturing: goods-oriented
● Service: act-oriented
● Differences:
1. Customer contact
2. Uniformity of input
3. Labor content of jobs
4. Uniformity of output
5. Measurement of productivity
6. Simultaneous production & delivery
7. Quality assurance
