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INTRODUCTIONINTRODUCTIONtoto

Operation ManagementOperation Management

Chapter 1Chapter 1

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Chapter OutlineChapter Outline

Definition of Operations ManagementDefinition of Operations Management

Decisions at Pizza U.S.A.Decisions at Pizza U.S.A.

Operations Decisions - A FrameworkOperations Decisions - A Framework

Cross-Functional Decision MakingCross-Functional Decision Making

Operations as a SystemOperations as a System

Contemporary Operations ThemesContemporary Operations Themes

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Definition ofDefinition ofOperations ManagementOperations Management

Operations is responsible for supplying the product orservice of the organization. Operations managers make

decisions regarding the operations function and itsconnection with other functions. The operations managersplan and control the production system and its interfaces

within the organization and with the external environment.

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The Operations DefinitionThe Operations Definition

Operations as a basic functionOperations as a basic functionOperations as a transformation processOperations as a transformation processOperations as the technical coreOperations as the technical core

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The Operation As A BasicThe Operation As A Basic

FunctionFunction

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Basic FunctionBasic Function

The best way to start understanding the nature The best way to start understanding the nature of P/OM is to look around you.of P/OM is to look around you.

Everything you can see around you (except the Everything you can see around you (except the flesh and the blood) has been done by P/OM.flesh and the blood) has been done by P/OM.

Every service you consumed today (radio Every service you consumed today (radio station, bus service, lecture, etc.) has also been station, bus service, lecture, etc.) has also been basically P/OM.basically P/OM.

P/O managers create everything you buy, sit on, P/O managers create everything you buy, sit on, wear, eat, throw at people and throw away.wear, eat, throw at people and throw away.

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Operations As A TransformationOperations As A Transformation

ProcessProcess

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Operations as a SystemOperations as a System(Figure 1.1)(Figure 1.1)

Transformation(Conversion)

Process

EnergyMaterials

LaborCapital

Information

Goods orServices

Feedback information forcontrol of process inputsand process technology

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INPUT OUTPUTINPUT OUTPUT Material GoodsMaterial Goods Machines TRANSFORMATION ServicesMachines TRANSFORMATION Services Manpower PROCESSManpower PROCESS Methods &Methods & ManagementManagement MoneyMoney FEEDBACKFEEDBACK

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THE 5 Ps or THE 5 Ms POMTHE 5 Ps or THE 5 Ms POM 5Ps 5Ms 5Ps 5Ms People Manpower People Manpower Plants Machines Plants Machines Parts Money Parts Money Processes Materials Processes Materials Planning and Methods Planning and Methods Control and Control and Management Management

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Transformation ProcessesTransformation Processes Physical Manufacturing Physical Manufacturing Location TransportationLocation Transportation Warehouse WarehouseExchange RetailExchange RetailPhysiological Health carePhysiological Health carePsychological EntertainmentPsychological EntertainmentInformational Communications Informational Communications

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Characteristics of GoodsCharacteristics of Goods

Tangible productTangible productConsistent product definitionConsistent product definitionProduction usually separate from Production usually separate from consumptionconsumptionCan be inventoriedCan be inventoriedLow customer interactionLow customer interaction

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Characteristics of ServicesCharacteristics of Services Intangible productIntangible productInconsistent product definitionInconsistent product definitionProduced and consumed at same timeProduced and consumed at same timeCannot be inventoriedCannot be inventoriedHigh customer interaction. High customer interaction.

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Operations as the Technical CoreOperations as the Technical Core

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Finance and AccountingFinance and Accounting Production and inventory data Technology plansProduction and inventory data Technology plans Capital budgeting and investments Costs analysis Capital budgeting and investments Costs analysis MarketingMarketing Product/service availability Status of ordersProduct/service availability Status of orders Lead time estimates PromotionsLead time estimates Promotions Delivery schedules Customer feedbacksDelivery schedules Customer feedbacks Sales forecastsSales forecasts Human ResourcesHuman Resources Personnel needs Skill setsPersonnel needs Skill sets Hiring/firing/training Job design/work measurementHiring/firing/training Job design/work measurement SuppliersSuppliers Orders for materials Quality dataOrders for materials Quality data Production/delivery Performance specsProduction/delivery Performance specs

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Relation of Operations to its Relation of Operations to its EnvironmentEnvironment

Figure 1.2Figure 1.2

Operations transformation systemSuppliers

HumanResources

Marketing

Accounting Finance MIS

Engineering

SOCIETY

GOVERNMENT

ExternalEnvironment

CUSTOMERS

COMPETITORS

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Key Points in OM DefinitionKey Points in OM Definition

DecisionsDecisionsFunctionsFunctionsSystemSystem

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Cross-FunctionalCross-FunctionalDecision MakingDecision Making

Operations as the primary functionOperations as the primary function

Other primary functions:Other primary functions:– MarketingMarketing– FinanceFinance

Supporting functionsSupporting functions

Major cross-functional decisions Major cross-functional decisions

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Definition ofDefinition ofOperations ManagementOperations Management

The design, operation, and improvement of The design, operation, and improvement of production systems that create the firm’s primary production systems that create the firm’s primary products or services.products or services.

The design and control of the systems responsible The design and control of the systems responsible for the productive use of raw materials, human for the productive use of raw materials, human resources, equipment, and facilities in the resources, equipment, and facilities in the development of a product or services.development of a product or services.

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Operations ManagementOperations Management

Planning Planning Organizing Organizing Staffing Staffing Directing and Directing and Controlling Controlling

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Desirable FeaturesDesirable Featuresof the Processof the Process

Low CostLow CostHigh QualityHigh QualityFlexibilityFlexibilitySpeed of DeliverySpeed of DeliveryInnovationInnovationEnvironmentally AcceptableEnvironmentally Acceptable

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Major Decisions at Pizza USAMajor Decisions at Pizza USAA Framework for OMA Framework for OM

ProcessProcess

QualityQuality

CapacityCapacity

InventoryInventory

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Contemporary Operations ThemesContemporary Operations Themes

Service and Manufacturing (differences and Service and Manufacturing (differences and implications)implications)

Customer-Directed OperationsCustomer-Directed Operations

Time Reduction (Lean Operations)Time Reduction (Lean Operations)

Integration of Operations and Other FunctionsIntegration of Operations and Other Functions

Environmental ConcernsEnvironmental Concerns

Globalization of OperationsGlobalization of Operations

Supply Chain ManagementSupply Chain Management