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OperationsMgt-Chapter-1.pdf - Chapter 1 Operations...

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Unformatted text preview: Chapter 1 Operations Management Bianka Ara Sunga WHAT IS AN ORGANIZATION? ORGANIZATION An organization is an entity – such as a company, an institution, or an association – comprising one or more people and having a particular purpose. Another plausible understanding of organization is indicating such as “a group of individuals who are cooperating willingly and effectively for a common end”. ELEMENTS OF AN ORGANIZATION unifies employees or members by giving everyone an understanding of the organization’s mission, strategy, and values is an arrangement in which different people Division of Labor perform discrete parts of a task for greater efficiency Common purpose Hierarchy of authority is the control mechanism for making sure the right people do the right things at the right time. This control enables organization members to make decisions quickly when necessary s n o i t a z i n a g r o o d y Wh ? s t s i ex ? S T S I X E S N O I T A Z I N A G R O O D Y WH Every human being has needs; but No one can satisfy all his needs on his own. Therefore, everyone needs others to satisfy at least some of his needs; but No one can satisfy others’ needs on his own. Therefore, anyone who would like to satisfy others’ needs must work together with others who aim to satisfy the same set of needs. As the organization satisfies others’ needs, its own needs, in turn, are satisfied. STAKEHOLDERS OF AN ORGANIZATION 1. Customers Stake: Product/service quality and value Many would argue that businesses exist to serve their customers. Customers are actually stakeholders of a business, in that they are impacted by the quality of service/products and their value. 2. Employees Stake: Employment income and safety Employees have a direct stake in the company in that they earn an income to support themselves, along with other benefits (both monetary and non-monetary). Depending on the nature of the business, employees may also have a health and safety interest STAKEHOLDERS OF AN ORGANIZATION 3. Investors Stake: Financial returns Investors include both shareholders and debtholders. Shareholders invest capital in the business and expect to earn a certain rate of return on that invested capital. Investors are commonly concerned with the concept of shareholder value. Lumped in with this group are all other providers of capital, such as lenders and potential acquirers. STAKEHOLDERS OF AN ORGANIZATION 4. Suppliers and Vendors Stake: Revenues and safety Suppliers and vendors sell goods and/or services to a business and rely on it for revenue generation and on-going income. In many industries, suppliers also have their health and safety on the line, as they may be directly involved in the company’s operations. STAKEHOLDERS OF AN ORGANIZATION 5. Communities Stake: Health, safety, economic development Communities are major stakeholders in large businesses located in them. They are impacted by a wide range of things, including job creation, economic development, health, and safety. When a big company enters or exits a small community, there is an immediate and significant impact on employment, incomes, and spending in the area. With some industries, there is a potential health impact, too, as companies may alter the environment. STAKEHOLDERS OF AN ORGANIZATION 6. Governments Stake: Taxes and GDP Governments can also be considered a major stakeholder in a business, as they collect taxes from the company (corporate income taxes), as well as from all the people it employs (payroll taxes) and from other spending the company incurs (sales taxes). Governments benefit from the overall Gross Domestic Product (GDP) that companies contribute to. HOW BUSINESS ORGANIZATIONS ACCOMPLISH THEIR PURPOSE? "By creating goods and providing services" What is operations? Operations Operations is the part of a business organization that is responsible for producing goods and/or services Goods These are the physical items including raw materials, parts, subassemblies and final products. Services These are activities that provide some combination of time, form or psychological value. Production of goods vs services Goods Production of goods results in tangible products Services Delivery service generally implies an act Professional services Mass services Service shops Personal care Government Education Food service Shipping and delivery Travel and Hospitality What is Operations Management? Operations Management is the process, which combines and transforms various resources used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organization. Therefore, it is that part of an organization, which is concerned with the transformation of a range of inputs into the required (products/services) having the requisite quality level. Operations Management For over two centuries operations and production management has been recognized as an important factor in a country’s economic growth. The traditional view of manufacturing management began in eighteenth century when Adam Smith recognized the economic benefits of specialization of labor. He recommended breaking of jobs down into subtasks and recognizes workers to specialized tasks in which they would become highly skilled and efficient. As service sector became more prominent, the change from ‘production’ to ‘operations’ emphasized the broadening of our field to service organizations. The second, more suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in management practices. ...
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