Chapter 1 Introduction to Operations Management

Operations Management

the management of systems or processes that create goods and/or provide services 

OM relation with marketing

Demand data

Product and service design

Competitor analysis

Lead time data

OM relation with Finance

Budgeting

Economic analysis of investment proposals

Provision of funds

Transformation process, value added

Feedback

Measurements taken at various points in the transformation process

Differences between manufacturing and service operations

1. Degree of customer contact

2. Labor content of jobs

3. Uniformity of input

4. Uniformity of output

5. Measurement of productivity

6. Production and delivery

7. Quality assurance

8. Amount of inventory

9. Evaluation of work

10. Ability to patent design

Four basic sources of variation

1. variety of goods or services being offered

2. structural variation in demand

3. random variation

4. assignable variation

Variety of goods or services being offered

The greater the variety of goods and services offered, the greater the variation in production or service requirements

Structural variation in demand

These are generally predictable. They are important for capacity planning.

Random Variation

Natural variation that is present in all processes. Generally, it cannot be influenced by managers

Assignable Variation

Variation that has identifiable sources. This type of variation can be reduced, or eliminated, by analysis and corrective action

Benefit of using models in decision making

1. Generally easier to use and less expensive than dealing with the real system

2. Require users to organize and sometimes quantify information

3. Increase understanding of the problem

4. Enable managers to analyze “What if?” questions

5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem

6. Enable users to bring the power of mathematics to bear on a problem

Systems Approach

a set of interrelated parts that must work together

The business organization is a system composed of subsystems

• Marketing subsystem

• Operations subsystem

• Finance subsystem

System Operation

–Management of personnel

–Inventory management and control

–Scheduling

–Project management

–Quality assurance

Job responsibilities of operations manager

guide system by decision-making:

• System design decisions

• System operation decisions

System design decisions vs system operations decisions

System Design Decisions: These are typically strategic decisions that usually require long-term commitment of resources + determine parameters of system operation

System Operations Decisions: Operations managers spend more time on system operation decision than any other decision area they still have a vital stake in system design