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Operations management is management of the transformation process so that it is both effective and efficient
Effective: goal achievement (doing the right things right). Efficient: output/input (doing things right)
PLOC- Planning, leadership, organizing, controlling. Questions to ask What to change, what to change to, how to cause
the change?
Functional definition- operations functions consists of all activities directly related to producing goods or providing
services.
Process performance metrics
Throughput time- average amount of time product takes to move through the system.
Process velocity= throughput time/ value-added time- a measure of wasted time in the system
Productivity= output/input- a measure of how well a company uses its resources
Utilization= time a resource used/ time a resource available- the proportion of time a resource is actually used.
Efficiency= actual output/ standard output- measures performance relative to a standard.
Service operations
Manufacturing versus service
Manufacturing is physical, large facilities, capital intensive, quality objective, longer response time, lower customer
contact, output can be inventories, regional- international markets. Service is the complete opposite of all those.
Unique characteristics of service
Intangible: creative advertising, no patient protection, importance of reputation
Perishable: cannot inventory, opportunity loss of idle capacity, need to match supply with demand
Heterogeneous: customer participation in delivery process results in variability
Simultaneious: opportunities for personal selling, interaction creates customer perceptions of quality
Customer Participation in the Service Process: attention to facility design, but opportunities for co- production
Order qualifier: customers shop around to ensure these criteria are met. Competitive priorities that must be met for a
company to qualify as a competitor in the marketplace.
Order winner: customers shop to find the best on this criterion. Competitive priorities that win orders in the market
place.
Chapter 1 Questions
1. Define the term operations management.
Operations management manages the resources needed to produce the companys products and services. It
involves managing people, machines and information.
2. Explain the decisions operations managers make and give three examples.
Operations managers must plan the production schedule. This entails deciding how much to produce and in
what order. This information would be used to make purchasing and staffing decisions. Operations managers
must manage inventory. They must arrange the inventory in the warehouse. They also facilitate the
movement of inventory from the warehouse to the retail facilities or the customer. Operations managers also
must manage quality levels. This may include inspection of materials, and the use of quality tools such as
control charts.
3. Describe the transformation process of a business. Give three examples. What constitutes the
transformation process at an advertising agency, a bank, and a TV station?
The transformation process involves taking the various inputs and transforming them into outputs. An
advertising agency would transform the time of its staff into an advertising campaign. A bank may use the
time of a teller, an input computer, and a bank branch to accept a deposit. A TV station could use the time of
its production crew, the video equipment, and the studio to produce a news story.
4. What are the three major business functions, and how are they related to one another? Give
specific examples.

The three major business functions are finance, marketing and operations. Operations entail the
production of a product or service and must manage the inputs to production such as workers' time,
aluminum, and machine time to create airplane parts Finance manages the assets, such as the building
used for production, investments and cash flows related to production, such as providing the needed
machines. Marketing generates sales of the product or service, such as finding customers for the
proposed airplanes.
5. What are the differences between strategic and tactical decisions, and how are they related to
each other?
Strategic decisions are long-term decisions that set the direction for the entire organization. They are broad in
scope and set the tone for other, more specific decisions. They address question such as what were the unique
features of our product? What market do we plan to compete in? What do we believe will be the demand for
our product? Tactical decisions are short-term decisions that focus on specific departments tasks. Focus more
on day-to-day issues such as the quantities and timing of specific resources. Strategic decisions are made first
and determine the direction of tactical decisions, which are made more frequently and routinely. There- fore,
we have to start with strategic decisions and then move on to tactical decisions. Tactical decisions must be
aligned with strategic decisions because they are the key to the companys effectiveness in the long run.
Tactical decisions provide feedback to strategic decisions, which can be modified accordingly.
6. Identify the two major differences between service and manufacturing organizations. Find an
example of a service and manufacturing company and compare them.
Service organizations involve the customers in the operations to some degree, while manufacturing
organizations do not. Manufacturing organizations produce a physical product that can be stored in inventory.

Service organizations cannot create an inventory of the service since it is intangible. For example, Ford Motors
is a manufacturer. It makes automobiles, customers have little contact with the operation, and they can create
an inventory of vehicles. McDonalds is an example of a service organization. Customers go directly to the
restaurant where they are served quickly by the staff.

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Three questions from above. The two answers. Well its depends. And not my problem.
Conceptual blocks
Constancy- vertical thinking, one thinking language
Commitment- sterotyping, ignoring commonalities
Compression- narrow boundaries, poor filtering
Complacency- not asking questions, bias towards activity
Paradigm flexibility- is an active behavior in which we challenge our paradigms on a regular basis
Paradigm paralysis- is the belief that there is and can only be one way to do things, and that there is no other or better
way.
1. Explain the importance of a business strategy. It is important for a company to have a clear plan of action
since we are in a highly competitive, global environment. A clear strategy allows the whole company to work toward
common goals.
2. Explain the role of operations strategy in a business. The role of operations strategy is to provide a plan for
the best usage of resources in order to reach the objectives set in the corporate strategy. These resources include
employees, machines, technology and information.
3. Describe how a business strategy is developed. A business strategy is developed after the companys
mission, an understanding of the market (environmental scanning) and the core competencies of the company have
been identified. The mission involves the determination of what business to be in, who the customers will be and how
the companys beliefs will define the business. Environmental scanning includes an examination of the current market
trends in the market, economy, political environment and in society, resulting in an identification of opportunities and
threats. Finally, core competencies are the strengths of the company. The company should match its strengths to its
business strategy.
4. Describe how an operations strategy is formulated from the business strategy. The operations strategy is
formulated by first determining the competitive priorities of the firm. Then, these priorities are translated into
production requirements related to the structure and infrastructure of the firm. The structure involves the decisions
related to the design of the production process, while the infrastructure involves decisions related to the planning and
control of the operation.
5. Explain what is meant by the term competitive priority and describe the four categories of competitive
priorities discussed in the chapter. The competitive priority is the way in which we will compete in the
marketplace. For example, will we be known for low prices or high quality? The categories of competitive
priorities are cost, quality, time and flexibility. Cost involves a focus on keeping costs low. Quality focuses on the ability
of the product or service to meet specifications or the requirements of the customer. The competitive priority of time
focuses on speed of delivery and/or on-time delivery performance. Flexibility relates to the ability to customize the
product or quickly change the production quantity.
6. Find an example of a company that makes quality its competitive priority. Find another company that
makes time its competitive priority. Compare these strategies. Toyota focuses on producing a quality car. It has
one of the lowest defect rates in the industry. LensCrafters promises to make your glasses in one hour or less. So they
have focused on the speed of delivery.
7. What is meant by the terms order qualifiers and order winners? Explain why they are important. Order
qualifiers are competitive priorities for which we must reach some minimum target in order to be qualified to sell in
that market. Order winners are those competitive priorities that will help us win orders. It is important to understand
whether competitive priorities are order qualifiers or order winners since our decisions about priorities will determine
our level of success.
8. Describe the three types of technologies. Explain the strategic role of technology. The three primary
types of technologies are: product technology, process technology, and information technology. Product technology,
new technology developed by a firm, allows it to offer improved products. New generations of cellular telephones are a
current example. Process technology allows a firm to create goods and services more effectively. Cash register
scanners are an example where supermarkets can process customers through the checkout line faster and keep better
records of items sold. Information technology impacts communication and information collection and processing. An
example of improved operations through this technology would be cross docking. These technologies improve
products, processes, and coordination. Effective use of emerging technologies can give a firm a competitive
advantage. As competitive approach is a strategic decisions, so is the use of technology.
9. Describe the meaning of productivity. Why is it important? Productivity measures how well we turn our
inputs into outputs. For example, can one automobile manufacturer produce more cars of the same size per factory
employee? Productivity is important because it determines our cost structure.
10. Explain the three types of productivity measures. The three types of productivity measures are total
productivity, partial productivity and multifactor productivity. Total productivity utilizes all inputs and outputs in the
calculation. Therefore, we are calculating the entire organizations productivity. Partial productivity involves calculating
the productivity for only one type of input, such as machines, labor or materials. Finally, multifactor productivity is the
ratio of outputs to inputs for several, but not all, types of inputs.

Productivity- Doing the right things right

Productivity= outputs/ inputs.
Partial measures= output/(single input)=(output/labor) or (output/machine) or (output/capital)
Multi-factor measures=output/(multiple inputs)= (output/(labor+machine)) or (output/(labor+capital))
Total measure= outputs/(total inputs)= (goods or services produced/ all inputs used to produce them)
Operations strategy
Create a manufacturing strategy is consistent with and supports the overall business strategy and the other functional
strategies.
Mission- the reason for existence for an organization
Mission statement- a clear statement of the purpose
Strategy- a plan for achieving organizational goals
Tactics- the actions taken to accomplish strategies
Types of strategy
Market dominance-acquisitions or internal growth
New product development- to keep ahead of rivals and set the pace
Contraction/expansion- focus on what you are good at, or seek to expand into a range of markets
Price leadership- through dominating the industry others follow your price lead
Global- seeking to expand global operations
Reengineering- thinking outside the box- looking at new ways of doing things to leverage the originations
performance.
Manufacturing-based strategies
Quality-based strategies- focus on quality in all phases of an organization, quality at the source
Time-based strategies- focuses on reduction of time needed to accomplish tasks
Lean manufacturingDistinctive competencies- the special attributes or abilities that give an organization a competitive edge.
Environmental scanning- the considering of events and trends that present threats or opportunities for a company
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Forecasting
1. Give three examples showing why a business needs to forecast. Forecasts are needed as inputs to other
operations decisions such as inventory planning, production scheduling, and staff scheduling and hiring.
3. Describe the steps involved in forecasting. The first step is to decide what to forecast in terms of the data to
forecast and the level of detail required. The second step is to evaluate and analyze the appropriate data. In this step,
we identify the data needed and its availability. The third step is to select and test the forecasting model. We must
consider different factors when selecting the model such as ease of use, cost and accuracy. In the fourth step, the
forecasts are generated using the model. During the last step, we monitor the accuracy of the forecasts since we may
need to change the model if the environment has changed.
4. Identify the key differences between qualitative and quantitative forecasting methods. Which is better
in your opinion and why? Qualitative methods are subjective since they rely on the educated guesses of the
forecaster. Quantitative forecasting methods are based on using calculations to make forecasts. These calculations
require past data. They are more objective. I think that qualitative methods are better because we are in a rapidly
changing environment where many times the past is not a good predictor of the future.
5. What are the main types of data patterns? Give examples of each type. The main types of data patterns
are level or horizontal, trend, seasonality and cycles. Level patterns show a stable demand that fluctuates some
around the mean. The demand for some food items is relatively stable. A trend is where the data is either increasing or
decreasing rather steadily over time. For example, the current trend in computer sales has been decreasing in the U.S.
because less people need to upgrade their computers. Seasonality occurs when the season affects the level of
demand. For example, computer sales increase during the Christmas season dramatically. Cycles are movements in
the data up and down over longer periods of time. The demand for housing tends to follow a cyclical pattern based on
the interest rates and other economic factors.
6. Describe the different assumptions of time series and causal models. Time series models assume that the

demand is only related to its own past demand patterns. Causal models assume that the some other factor affects the
variable we are trying to predict. Causal models measure the relationship between the other factor(s) and the data we
are trying to forecast.
8. Explain why it is important to monitor forecast errors. It is important to monitor forecast errors because
using the same forecasting model may not continue to be the best way to accurately forecast demand if changes in
the environment occur. Errors in forecasts will affect our costs and customer service levels since many operations
decisions are based on the forecasts.
9. Explain some of the factors to be considered in selecting a forecasting model. We should consider the
amount and type of available data. For example, if we do not have any data for a new product we plan to introduce to
the market, we will need to rely on quantitative methods. We should also consider the degree of accuracy, the length
of forecast horizons and whether data patterns exist. We should evaluate the trade-offs between data accuracy and
the cost to forecast. The forecast horizon and data patterns help determine which method is more appropriate.