INTRODUCTION to Operations Management

Chapter 1, The Operations Function

McGraw-Hill/Irwin

The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

Chapter Outline
Definition of Operations Management Decisions at Pizza U.S.A. Operations Decisions - A Framework Cross-Functional Decision Making Operations as a System Contemporary Operations Themes

1-2

Definition of Operations Management

Operations is responsible for supplying the product or service of the organization. Operations managers make decisions regarding the operations function and its connection with other functions. Operations managers plan and control the production process and its interfaces within the organization and with the external environment.
1-3

Key Points in OM Definition

Decisions the operations manager must

make
Functions in the organization.

Process for producing goods and services

1-4

Major Decisions at Pizza USA A Framework for OM

Process
How to produce & deliver

Quality
Criteria, measurement & process for achieving

Capacity
Physical facilities & labor

Inventory
What, when & how much?
1-5

Cross-Functional Decision Making

Operations as the primary function. Other primary functions:
Marketing Finance

Supporting functions: all others Major cross-functional decisions (See Table 1.1)

1-6

Operations as a Process

Input

Transformation (Conversion) Process

Output

1-7

Operations as a Process

Input

Transformation Fabrication

Transformation Assembly

Output

Fabrication: making the parts

Assembly: putting the parts together
1-8

Operations as a Process (Figure 1.1)

Energy Materials Labor Capital Information

Transformation (Conversion) Process

Goods or Services

Feedback information for control of process inputs and process technology

1-9

Relation of Operations to its Environment (Figure 1.2)

SOCIETY
Human Engineering Marketing Resources

External Environment

Suppliers

Operations transformation system

Accounting Finance MIS

CUSTOMERS

COMPETITORS

GOVERNMENT
1-10

Contemporary Operations Themes

Service and Manufacturing (differences and implications) Customer-Directed Operations Time Reduction (Lean Operations) Integration of Operations and Other Functions Environmental Concerns Supply Chain Management Globalization of Operations

1-11

Environmental Concerns
Volkswagen, Germanys biggest car maker, was reported to be setting aside DM1 billion ($470m) to pay for compliance with a European directive that will come into force in 2007 forcing car makers to pay for recycling their vehicles. New cars will be required to be 85% recyclable. --The Economist, 15 February 2001
1-12

Globalization: Who took my job?

Early 1990s Small town near Charlotte, NC Aluminum smelter closed after 50 years Only significant industry in town In many families, several generations had worked there. Now all out of work. Who caused it to close?
1-13

Mikls Nmeth
WHO!?!?!?
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

U.S. production of aluminum dropped dramatically in the early 1990s because the Russians dumped aluminum on the world market. Why? The opening of the Hungarian border, 2 May 1989, led to the fall of the Berlin Wall in November, 1989, which led to the breakup of the Soviet Union in 1991, which caused them to downsize their military, which gave them overcapacity in aluminum production, which caused them to dump in the world markets, which led to the closing of U.S. smelters such as the one near Charlotte, NC.
1-15

Mikls Nmeth
Was the Hungarian Prime Minister who opened the border on 2 May 1989.
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

Moral of the Story

In an age of globalization, you never know who will be the competition or who is doing something that will affect your job or your life.
The aluminum workers in NC had never heard of Mikls Nmeth, but he ultimately cost them their jobs.
McGraw-Hill/Irwin
The McGraw-Hill Companies, Inc. 2007, All Rights Reserved

Summary
Definition of Operations Management Decisions at Pizza U.S.A. Operations Decisions - A Framework Cross-Functional Decision Making Operations as a System Contemporary Operations Themes

1-18

End of Chapter One

1-19