whats is operation management.docx

7/29/2019 Whats is operation management.docx

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Whats is operation management..?

2CHAPTER 1 INTRODUCTIONTO OPERATIONS MANAGEMENT Many ofyou reading this book may think that you dontknow

what operations management (OM) is or that itis not

something you are interested in.However,afterreading this

chapter you will realize that you already knowquite a bit about

operations management.You may evenbe working in an

operations management capacity andhave used certainoperations management techniques.Youwill also realize that

operations management is probablythe most critical

business function today.Ifyou want to beon the frontier

ofbusiness competition,you want to be inoperations

management.Today companies are competing in a very different

environment than they were onlya few years ago.To survive they

must focus on quality,time-based competition,effi-ciency,international

perspectives,and customer relationships.Global

competition,e-business,the Internet,and advances in technology

require flexibility and responsiveness.This new focus has placed

operations management in the limelight ofbusiness,becauseit

is the function through which companies can achieve this type

ofcompetitiveness.Considersome oftodays most successful

companies,such as Wal-Mart,SouthwestAirlines,General

Electric,Starbucks,Toyota,FedEx,and Procter & Gamble.These

com-panies have achieved world-class status in large part due to a

strong focus on operationsmanagement.In this book you will learn

specific tools and techniques ofoperationsmanagement that have


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helped these,and other companies,achieve their success.The

purpose ofthis book is to help prepare you to be successful

in this newbusiness environment.Operations

management will give you an understanding of how to helpyour organization gain a competitive advantage in the

marketplace.Regardle ss ofwhe ther your area

ofexpertise is marketing,finance,MIS,or opera -

tions,the techniques and concepts in this book will help

you in your businesscareer.The material in this book will teach

you how your company can offer prod-ucts and services

cheaper,better,and faster.You will also learn that

operationsmanagement concepts are far reaching,affectingevery aspect ofthe organizationand even everyday life.Finance, MarketingEvery business is managed through three major

functions:finance,marketing,a ndoperations

management.Figure 1-1 illustrates this by showing that the vice

presidentsofeach ofthese functions reports directly to the

president or CEO ofthe company.Other businessfunctionssuch as accounting,purchasing,human

resources,andengineeringsupport these three major

functions.Finance is the function responsi-ble for

managing cash flow,current assets,and capital

investments.Marketing is re-sponsible for sales,generating

customer demand,and understanding customer wantsand

needs.Most ofus have some idea ofwhat finance and

market ing are about,but what does operations

management do?WHAT IS OPERATIONS MANAGEMENT?


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WHAT IS OPERATIONS MANAGEMENT?3

Operations managementThe business functionresponsible forplanning,coordinating,and controlling the resources needed

toproduce a companys goodsand services.

Role ofoperationsmanagementTo transform organizationalinputs into outputs. MarketingV.P. of MarketingFinanceV.P. of FinancePresident or CEOOperationsV.P. ofOperationsManages: people,equipment,technology,materials, andinformationTo produce: goodsand/orservicesManages:

customerdemandsGenerates: sales forgoodsandservicesManages: cash flow,current assetsandcapitalinvestmentsFIGURE 1-1Organizational chartshowing the three majorbusiness functionsOperations management (OM)is the business function that plans,organizes,coordinates,and

controls the resources needed to produce a companys goodsandservices.Operations management is amanagement

function.It involves

managingpeople,equipment,technology,information,an

d many other resou rce s.Opera tions management is the


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central core function ofevery company.This is true whether

thecompany is large or small,provides a physical good or a

service,is for profit ornot for profit.Every company has an

operations management function.Actually,all the otherorganizational functions are there primarily to support the

operationsfunction.Without operations,there would be

no goods or services to sell.Considera retailer such as Gap

that sells casual apparel.The marketing

function providespromotions for the merchandise,and the

finance function provides the neededcapital.It is the

operations function,however,that plans and coordinates

all theresources needed to design,produce,and deliver themerchandise to the various retaillocations.Without

operations,there would be no goods or services to sell to

customers.Therole ofoperations managementis to transform a companys inputs into thefinished goods or

services.Inputs include human resources (such as workers and

man-agers),facilities and processes (such as buildings andequipment),as well as materials,technology,and

information.Outputs are the goods and services a company

produces.Figure 1-2 shows thistransformation process.At a factory the transformation is theInputs HumanResources Facilities& Processes TechnologiesMaterialsTheTransformationProcessOutputs Goods ServicesPerformance InformationCustomerFeedbackFIGURE 1-2


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The transformation process


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4CHAPTER 1 INTRODUCTIONTO OPERATIONS MANAGEMENT physical change ofraw materials into products,such as

transforming leather andrubber into sneakers,denim into

jeans,or plastic into toys.At an airline it is the effi-cientmovement ofpassengers and their luggage from one location to

another.At ahospital it is organizing resources such

as doctors,medical procedures,and medica-tions

to transform sick people into healthy ones.Operations management


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is responsible for orchestrating all the resources neededto

produce the final product.This includes designing the

product;decidingwhat

resources are needed;arranging schedules,equipment,andfacilities;manag-

ing inventory;controlling quality;designing the jobs to

make the product;anddesigning work

methods.Basically,operations management is responsible for

allaspects ofthe process oftransforming inputs into

outputs.Customer feedback andperformance information

are used to continually adjust the inputs,the trans-formation

process,and characteristics ofthe outputs.As shown in Figure 1-2,thistrans-formation process is dynamic in order to adapt to

changes in the environment.Proper management ofthe

operations function has led to success for many compa-nies.For

example,in 1994 Dell Inc.was a second-tier computer maker that

managedits operations similar to others in the industry.Then

Dell implemented a new businessmodel that completely changed

the role ofits operations function.Dell developed newandinnovative ways ofmanaging the operations function that have

become one ofto-days best practices.These changes enabled Dell to

provide rapid product delivery of customized products to customers

at a lower cost,and thus become an industry leader.Just as proper

management ofoperations can lead to company success,improper man-

agement ofoperations can lead to failure.This is illustrated by

Kozmo.com,a Web-basedhome delivery company founded in

1997.Kozmos mission was to deliver products tocustomerseverything

from the latest video to ice creamin less than an

hour.Kozmowas technology enabled and rapidly became a

huge success.However,the initial successgave rise to overly fast

expansion.The company found it difficult to manage the opera-tions


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needed in order to deliver the promises made on its Web site.The

consequenceswere too much inventory,poor deliveries,and losses in

profits.The company rapidly triedto change its operations,but it was too

late.It had to cease operations in April 2001.The Web-based age hascreated ahighly competitive world ofon-line shopping that

poses specialchallenges for operations man-agement.The Web

can be usedfor on-line purchasing ofevery-thing from

CDs,books,and gro-ceries to prescription medicationsand

automobiles.Whereas the In-ternet has given consumers flexi-

bility,it has also created one of the biggest challenges for

companies:delivering exactly what the customer ordered atthe

time promised.As we saw with theexample ofKozmo.com,making promises on aWeb site is one

thing;delivering on those promises is yet another.Ensuring

that or-ders are delivered from mouse to houseis the job

ofoperations and is much morecomplicated than it might

seem.In the 1990s many dot-com companies discovered just

how difficult this is.They were not able to generate a profit

and went out ofbusi-ness.To ensure meeting promisescompanies must forecast what customers want andmaintain

adequate inventories ofgoods,manage distribution centers

and warehouses

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