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Chapter 1

Introduction to the Field

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OBJECTIVES
 Operations Management
 Why Study Operations Management?
 Transformation Processes Defined
 Operations as a Service
 The Importance of Operations
Management
 Historical Development of OM
 Current Issues in OM

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 Responsibility of a Manager
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 Company’s survival : delivering goods

and services
 Queuing is not an option

 Exe.

– Progressive Insurance :
a. Lower price [Efficiency]
b. Better Service [Effectiveness & Value]
a. Immediate Response claims handling
b. Adjusters work out of mobile claim vans(target
only 9 hours out of 7-10 days by competitor)
c. Adjusters may possible write the check on spot

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Why Study Operations

Management?
Systematic Approach
to Org. Processes

Business Education Operations Career Opportunities

Management

Cross-Functional
Applications

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What is Operations Management?

Defined
Operations management (OM) is
defined as the design, operation,
and improvement of the systems
that create and deliver the firm’s
primary products and services

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 Management Decision
a. Strategic (Long-term) decisions
b. Tactical (Intermediate-term) decisions
c. Operational planning and control
(short-term) decisions

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A. The strategic issues :

- How will we make the product?
- Where do we locate the facilities?
- How much capacity do we need?
- When should we add more capacity?

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B. Tactical Planning ;
- How many workers do we need?
- When do we need them?
- Should we have overtime or put on a
second shift?
- When should we have material
delivered?
- Should we have a finished goods
inventory?

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C. Operational planning and control:

- What jobs do we work on today or
this week?
- Whom do we assign to what tasks?
- What jobs have priority

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What is a Transformation
Process?

Defined
A transformation process is defined
as a use of resources to transform
inputs into some desired outputs

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Transformations
 Physical--manufacturing
 Locational--transportation
 Exchange--retailing
 Storage--warehousing
 Physiological--health care
 Informational--telecommunications

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What is a Service and What is a

Good?

 “If you drop it on your foot, it won’t

hurt you.” (Good or service?)

 “Services never include goods and

goods never include services.” (True
or false?)

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 Example:
Taco Bell :Transformed its
restaurant operations by
reconsidering them in
manufacturing.
On-site food preparation by suppliers
Centralizing the production of key components
Concentrating on assembly rather than fabrication
Focus on customers rather than production
It takes 20 second for the customer to get their food
from hitting the counter until leaving with their food.

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OM in the Organization Chart

Finance Operations
Operations Marketing

Plant
Plant Operations
Operations Director
Director
Manager
Manager Manager
Manager

Manufacturing,
Manufacturing, Production
Production control,
control,
Quality
Quality assurance,
assurance, Engineering,
Engineering,
Purchasing,
Purchasing, Maintenance,
Maintenance, etc
etc

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Core Services
Defined

Core services are basic things

that customers want from
products they purchase

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Core Services Performance Objectives

Quality

Operations
Flexibility Speed
Management

Price (or cost

Reduction)

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Value-Added Services
Defined
Value-added services
differentiate the organization
from competitors and build
relationships that bind
customers to the firm in a
positive way

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Value-Added Service Categories

Problem Solving

Operations Sales Support

Information
Management

Field Support

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The Importance of Operations

Management

 Synergies must exist with other

functional areas of the
organization
 Operations account for 60-80%

of the direct expenses that

burden a firm’s profit.

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Historical Development of OM
 JIT and TQC
 Manufacturing Strategy Paradigm
 Service Quality and Productivity
 Total Quality Management and Quality
Certification

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Historical Development of OM
(cont’d)
 Business Process Reengineering

 Supply Chain Management

 Electronic Commerce

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Current Issues in OM
 Coordinate the relationships between
mutually supportive but separate
organizations.(outsourcing; such as IS, Product
Development, Engineering services, packaging, testing and
distribution)

 Optimizing global supplier, production,

and distribution networks.
 Increased co-production of goods and
services.(internet helps)

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Current Issues in OM (cont’d)

 Managing the customer’s
experience during the service
encounter
 Raising the awareness of
operations as a significant
competitive weapon

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Question Bowl
A major objective of this book is to show how smart
managers can do which of the following?
a. Improve efficiency by lowering costs
b. Improve effectiveness by creating value
c. Increasing value by reducing prices
d. Serving customers well
e. All of the above

Answer: e. All of the above

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Question Bowl
In the Input-Transformation-Output Relationship,
a typical “input” for a Department Store is
which of the following?
a. Displays
b. Stocks of goods
c. Sales clerks
d. All of the above
e. None of the above

Answer: e. None of the above (The above are

considered “Resources” of a department store.
The correct answer is “Shoppers”.)

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Question Bowl
In which of the following decades did the
concept of quality control originate?
a. 1920’s
b. 1930’s
c. 1940’s Answer: b. 1930’s (Tools such
d. 1950’s
as sampling inspection and
e. 1970’s
statistical tables where first
developed by Walter
Shewhart, H. F. Dodge, and H.
G. Romig.)
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End of Chapter 1

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