Intro to OM.ppt - Chapter 1 INTRODUCTION TO OPERATIONS...

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Chapter 1
INTRODUCTION TO OPERATIONS
MANAGEMENT

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Operations Management = OM
 Management of ANY activities/process that create goods and provide services
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Exemplary Activities: Forecasting, Scheduling, Quality management
 Why to study OM
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At a typical manufacturing company
Profit 5%
OM Cost 21%
Marketing
Cost 26%
Manufacturing
Cost 48%

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The management of systems or processes that create goods and/or
provide services
Organization
Finance Operations Marketing
The distinct –active- role of operations:
Inputs become Outputs after some
Transformation
Operations Management = OM

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Operations example in Manufacturing:
Food Processing
INPUTS PROCESS OUTPUTS
Raw vegetables Cleaning Clean vegetables
Metal sheets Cutting/Rolling/Welding Cans
Energy, Vegetables Cutting Cut vegetables
Energy, Water,
Vegetables
Cooking Boiled
vegetables
Energy, Cans, Boiled
vegetables
Placing Can food

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Operations example in service:
Health care
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patients
Hospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

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Types of Operations
Operation Examples
Goods producing Farming, mining, construction
Storage/transportation Warehousing, trucking, mail, taxis,
buses, hotels, location
Exchange Trade, retailing, wholesaling, renting,
leasing, loans
Entertainment Radio, movies, TV, concerts, recording
Communication Newspapers, journals, magazines, radio,
TV, telephones, satellite

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Why OM?
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Core of all business organizations
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Many areas interrelated with OM activities
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Management of operations is critical to create and
maintain competitive advantages

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Organization of Businesses
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Three basic functions
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Operations/Production
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Goods oriented (manufacturing and assembly)
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Service oriented (health care, transportation and retailing)
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Value-added (the essence of the operations functions)
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Finance-Accounting
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Budgets (plan financial requirements)
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Economic analysis of investment proposals
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Provision of funds (the necessary funding of the operations)

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Organization of Businesses (Cont.)
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Marketing
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Selling
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Promoting
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Assessing customer wants and needs
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Communicating those needs to operations
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The need for working closely
Operations
Finance
Marketing