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What Is Operations Management and Why Is It Important?

 Explain what operations management is.

 Contrast manufacturing and services organizations.
 Describe managers’ role in improving productivity.
 Discuss the strategic role of operations management.

Operations management is the design, operation, and control of the transformation

process that converts resources into finished goods and services. (See Exhibit 19-1.)

Manufacturing organizations produce physical goods. Service organizations

product nonphysical outputs in the form of services.

Improving productivity has become an important goal in virtually every

organization. Managers have to recognize that productivity is a composite of people and

operations variables. Effective organizations will maximize productivity by successfully

integrating people in the overall operations system.

Operations management plays a crucial role in an organization’s overall strategy

to establish and maintain global leadership.

Value Chain Management

 Define value chain and value chain management.

 Describe the goal of value chain management.
 Discuss the requirements for successful value chain management.
 Describe the benefits that result from value chain management.
 Explain the obstacles to value chain management.

A value chain is the entire series of work activities that add value at each step

from raw materials to finished product. Value chain management is the process of

managing the sequence of activities and information along the entire value chain.
The goal of value chain management is to create a value chain strategy that meets

and exceeds customers’ needs and desires and allows for full and seamless integration

among all members of the chain.

There are six requirements for successful value chain management: coordination

and collaboration, technology investment, organizational processes, leadership,

employees, and organizational culture and attitudes. (See Exhibit 19-3.)

The four primary benefits that result from value chain management include

improved procurement, improved logistics, improved product development, and

enhanced customer order management.

The obstacles to value chain management (see Exhibit 19-4) include

organizational barriers, cultural attitudes, required capabilities, and people.

Current Issues in Operations Management

 Discuss technology’s role in manufacturing.

 Describe some of the various quality dimensions.
 Explain ISO 9000 and Six Sigma.
 Describe mass customization and how operations management contributes to it.

Technology allows extensive collaboration between an organization and its

customers and suppliers.

Some quality dimensions for products include performance, features, flexibility,

aesthetics, and durability. Some quality dimensions for services include timeliness,

courtesy, consistency, and convenience. (See Exhibit 19-5.)

ISO 9000 is a series of international quality management standards established by

the International Organization for Standardization, which set uniform guidelines for

processes to ensure that products conform to customer requirements. Six Sigma is a

quality standard that establishes a goal of no more than 3.4 defects per million units or


Mass customization provides consumers with a product when, where, and how

they want it. It requires flexible manufacturing technology and continual customer