DAVIS

AQUILANO
CHASE

chapter 1

Introduction to Operations
Management

The McGraw-Hill Companies, Inc., 2003

PowerPoint
Presentation
by
Charlie
Cook

Chapter
Chapter Objectives
Objectives
Introduce and define operations management (OM) in
terms of its contribution and the activities it involves.
Describe how operations contributes to the overall
betterment of society.
Present operations as a function that addresses
issues in both manufacturing and services.
Show how operations management is gaining more
recognition both internally and externally to an
organization.

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Chapter
Chapter Objectives
Objectives (contd)
(contd)
Demonstrate how the operations management
function interacts with the other functional areas within
an organization.
Present a brief history of operations management as a
field and its evolution to its current role in an
organization.

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Managerial
Managerial Issues
Issues
Shift in balance of power to consumers
Globalization of business and markets
E-commerce

Achieving higher levels of productivity

Creating higher quality products
Delivering better customer service
Achieving shorter delivery times
Reducing labor and material costs

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What
What Is
Is Operations
Operations Management?
Management?
Operations Management
Management of the conversion process which
transforms inputs such as raw material and
labor into outputs in the form of finished goods
and services.
Inputs
(customers
and/or
materials)

Transformation Process
(components)

Outputs
(goods
and
services)

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Role
Role of
of OM
OM within
within an
an Organization
Organization

Exhibit 1.1

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Top-down
Top-down Approach
Approach to
to OM
OM Strategy
Strategy
Operations Strategy Decisions
Strategic (long-range)
Needs of customers
(capacity planning)

Tactical (medium-range)
Efficient scheduling of
resources

Operational planning
and control (short-range)
Immediate tasks and
activities

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An
An Operational-Level
Operational-Level OM
OM Perspective
Perspective
OMs function focuses on adding value
through the transformation process
(technical core) of converting inputs into
outputs.
Physical: manufacturing
Locational: transportation
Exchange:retailing
Storage: warehousing
Physiological: health care
Informational: telecommunications
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The
The Transformation
Transformation Process
Process within
within OM
OM

Exhibit 1.2

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Input-Transformation-Output
Input-Transformation-Output
Relationships
Relationships for
for Typical
Typical Systems
Systems

Exhibit 1.3

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OMs
OMs Contributions
Contributions to
to Society
Society
Higher Standard of Living
Ability to increase productivity
Lower cost of goods and services

Better Quality Goods and Services

Competition increases quality

Concern for the Environment

Recycling and concern for air and water quality

Improved Working Conditions

Better job design and employee participation
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Annual
Annual Change
Change in
in Productivity
Productivity in
in
the
the United
United States
States (1980-2000)
(1980-2000)

Source: Economic Report of the President, United States

Government Printing Office, Washington, DC. January, 2001.

Exhibit 1.4

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Services
Services as
as aa Percent
Percent of
of Gross
Gross Domestic
Domestic
Product
Product (GDP)
(GDP) for
for Different
Different Countries
Countries

Source: The World Factbook 2000, Central

Intelligence Agency, Washington, DC.

Exhibit 1.5

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The
The Emergence
Emergence of
of OM
OM
Application of OM to Service Operations
Batch cooking operations at McDonalds
Just-in-Time (JIT) at Northern Telecomm, Inc.
Automatic inventory replenishment at Wal-Mart

Service Product

Good

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Growth
Growth in
in Services
Services in
in the
the United
United States
States

1-6

Source: Handbook of U.S. Labor Statistics, edited by Eva E. Jacobs,

Fifth Edition, Bernan Press, 2001, Table 2-1, pp. 161164.

Exhibit 1.6

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Differences
Differences Between
Between
Goods
Goods and
and Services
Services
Goods
Tangible
Can be
inventoried
No interaction
between
customer and
process
1-6

Services
Intangible
Cannot be
inventoried
Direct interaction
between
customer and
process
Exhibit 1.7

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Most
Most Products
Products Are
Are aa Bundle
Bundle
of
of Goods
Goods and
and Services
Services

Exhibit 1.8

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An
An Expanded
Expanded Definition
Definition of
of Quality
Quality
Quality is important in all functional areas of
an organization.
Quality is now much more than the technical
requirements for manufactured goods.
Service quality (customer
relationships) is equally
important.
Quality

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AA New
New Paradigm
Paradigm for
for OM
OM
Post-War U.S. Dominance in Manufacturing
Available capacity built to support the war effort
Pent-up demand for consumer goods
Destruction of overseas production capabilities

Proactive Operations Function (Skinner)

Add value to products, increase profit margins.
Compete on dimensions other than costs:
Quality
Speed of delivery
Process flexibility

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The
The Ever-Changing
Ever-Changing World
World of
of OM
OM
Increased Global Competition
Transformation into a global economy
Pressure to excel on multiple competitive
dimensions
Increased emphasis on logistics

Advances in Technology
Information technology (IT)
Internet email and commerce (B2B)
Automation and robotics

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Fords
Fords Global
Global Network
Network to
to Support
Support
the
the Manufacturing
Manufacturing of
of the
the Escort
Escort

Source: From Joseph E. Stiglitz, Principles of Micro-economics, 2nd ed.

(New York: W.W. Norton and Company, 1997), p. 58.

Exhibit 1.9

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Linking
Linking OM
OM to
to Customers
Customers and
and
Suppliers
Suppliers
Benefits of Buffering the Transformation
Process
The process was not disturbed by
environmental interaction.
The process was often more efficient than input
and distribution processes.
Productivity was maximized when processes
operated at continuous rates.
Process management skills were different from
those of other functional activities.

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Linking
Linking OM
OM to
to Customers
Customers and
and
Suppliers
Suppliers
Disadvantages of Buffering the Transformation
Process
Information lag in interaction with other
functional activities.
Lack of communication between customers and
the shop floor for problem solving.

Value Chain
Steps an organization requires to produce a
good or a service regardless of where they are
performed.
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The
The Value
Value Chain
Chain and
and Its
Its Support
Support Functions
Functions

Exhibit 1.10

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Line
Line and
and Staff
Staff Jobs
Jobs in
in OM
OM

Exhibit 1.11

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Inputs
Inputs Provided
Provided by
by OM
OM to
to
Other
Other Functional
Functional Areas
Areas

Exhibit 1.12

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Historical
Historical Development
Development of
of OM
OM
Prior to 1900
Cottage industry produced custom-made goods.
Watts steam engine in 1785.
Whitneys standardized gun parts in 1801.
Industrial Revolution began at mid-century.

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Historical
Historical Development
Development of
of OM
OM (cont.)
(cont.)
Scientific Management (Frederick W. Taylor)
Systematic approach to increasing worker
productivity through time study, standardization
of work, and incentives.
Viewed workers as an interchangeable asset.

Other Management Pioneers

Frank and Lillian Gilbreth
Motion study and industrial psychology

Henry L. Gantt
Scheduling and the Gantt chart

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Historical
Historical Development
Development of
of OM
OM (cont.)
(cont.)
Moving Assembly Line (1913)
Labor specialization reduced assembly time.

Hawthorne Studies
Yielded unexpected results in the productivity of
Western Electric plant workers after changes in
their production environment.
Led to recognition of the importance of work
design and employee motivation.

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Historical
Historical Development
Development of
of OM
OM (cont.)
(cont.)
Operations Research (Management Science)
Outgrowth of WWII needs for logistics control
and weapons-systems design.
Seeks to obtain mathematically optimal
(quantitative) solutions to complex problems.

OM Emerges as a Field
19501960, OM moved beyond industrial
engineering and operations research to the view
of the production operation as a system.

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Historical
Historical Development
Development of
of OM
OM (cont.)
(cont.)
OM Emerges as a Field
19501960, OM moved beyond industrial
engineering and operations research to the view
of the production operation as a system.

The Marriage of OM and IT

Integrated solutions approaches
Business process reengineering
Supply chain management
Systems integration (SAP)

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Historical
Historical Development
Development of
of OM
OM (cont.)
(cont.)
Operations Management in Services
OM concepts can apply to both manufacturing
and service operations.

Integration of Manufacturing and Services

Conducting world class operations requires
compatible manufacturing and service
operations.

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