© Dr. Mehdi Kaighobadi, FAU

INTRODUCTION TO OM

Chapter 1

© Dr. Mehdi Kaighobadi, FAU

Basic Concepts

Product Operating Systems Operations Management

© Dr. Mehdi Kaighobadi, FAU

Product

Core Peripheral Services “Facilitating Goods”

© Dr. Mehdi Kaighobadi, FAU

Product Definition

Total package of values delivered to customers

© Dr. Mehdi Kaighobadi, FAU

Operations Management(System’s View)

Management of Decisions and Activities Needed to Effectively and Efficiently Transform the Inputs of an Operating System to Throughput of the System

Food for thought: What is the difference between “output” and “throughput?

© Dr. Mehdi Kaighobadi, FAU

Operations and Supply ManagementA Different View

Management of Decisions and Activities Needed to Effectively and Efficiently Transform the Inputs of an Operating System to Outputs of the System and Deliver them to the Right Customers, at the Right Time and Place, and with the Right Quality/Quantity.

© Dr. Mehdi Kaighobadi, FAU

Operations and Supply Management

Key words/concepts in the definition: Right Product Customer (Consumers?) – What’s the difference?

Delivery (speed vs. consistency) Quality Quantity Efficiency Effectiveness Value

Integrated view

© Dr. Mehdi Kaighobadi, FAU

Types of Transformations (NOT mutually exclusive)

Physical (Manufacturing). Transform “A” into “B”

Location (Transportation) Move “A” from location X to location Z

Exchange (Retailing) – Be a middleman

Storage (Warehousing) – Store for future use

Physiological (Healthcare) – Change a patient physically

and/or mentally. Informational (Telecommunication) – Facilitate

exchange of data and info.

© Dr. Mehdi Kaighobadi, FAU

A Typical Supply NetworkNotice that the word “chain” was not used; “network” was used)

© Dr. Mehdi Kaighobadi, FAU

“Goods” versus “Services”

Manufacturing Processes Tangible output

Low consumer contact

Homogenous output

Output can be inventoried

Long lead time

Capital and labor intensive

Quality/Productivity is less difficulty to define and thus measure

Product and Process are distinguished from each other.

Services ProcessesIntangible output

High consumer contact

Heterogeneous output

Output cannot be inventoried

Shorter lead time

Labor and information intensive

Quality/Productivity is harder to define and thus measure

Services are offered in “Service Package” form

“Product” and “process” are often the same.

© Dr. Mehdi Kaighobadi, FAU

“Goods” and “Services”Not a B&W Classification!

100% 75% 50% 25% 0% 100%75%50%25%

Self-service groceries

Automobile

Installed carpeting

Fast-food restaurant

Gourmet restaurant

Auto maintenance

Haircut

Consulting services

Goods Services

Classifying a firm as “goods producing” or “service” operation is not a B&W case; it is a matter of degrees.

© Dr. Mehdi Kaighobadi, FAU

Why is “Operations” Important?

It’s like asking why is having a “heart” important in your health!

Operation is the heart of any organization. (Note that it is “organization”, not just “business”)

Without operations, other functions have no place in organization.

Studying operations makes it possible to realize how a firm integrates its functions around one major goal.

Any organization has two fundamental functions (pared down to the minimum); they are a) making and b) delivering. Operations is 100% responsible for the first and at least 50% for the second.