1. INTRODUCTION to Operation Management
Chapter 1, The Operations Function
4e, Schroeder
McGraw-Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc., All Rights Reserved.

2. Chapter Outline Why Study Operations Management?
Definition of Operations Management
Decisions at Pizza U.S.A.
Operations Decisions - A Framework
Cross-Functional Decision Making
Operations as a Process
Contemporary Operations Themes
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3. Why Study Operations Management?
Every decision is cross-functional in nature.
Operations is a major function in every organization.
The principles of process thinking can be applied across the business.
Operations Decisions - A Framework
Operations Management is an interesting and challenging field of study.
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4. Definition of Operations Management
Operations is responsible for supplying the product or service of the organization. Operations managers provide value for the customer at the lowest cost by making decisions for the operations function and by managing the transformation process.
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5. Key Points in OM Definition
1. Decisions the operations manager must make:
Process, quality, capacity, inventory
2. Functions in the organization.
Operations, marketing, finance
3. Process: planning and controlling the transformation process and its interfaces
Expansion of these points follows on the next slides.
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6. Major Decisions at Pizza USA A Framework for OM
Process
How to produce & deliver
Quality
Criteria, measurement & process for achieving
Capacity
Physical facilities & labor
Inventory
What, when & how much?
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7. Cross-Functional Decision Making
Operations as the primary function.
Other primary functions:
Marketing
Finance
Supporting functions: all others
Major cross-functional decision making relationships (See Table 1.1)
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8. Operations as a Process
Transformation
(Conversion)
Process
Input
Output
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9. Operations as a Process
Transformation
Fabrication
Transformation
Assembly
Input
Output
Fabrication: making the parts
Assembly: putting the parts together
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10. Operations as a Process (Figure 1.1)
Energy
Transformation
(Conversion)
Process
Materials
Labor
Goods or
Services
Capital
Feedback information for
control of process inputs
and process technology
Information
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11. Relation of Operations to its Environment (Figure 1.2)
SOCIETY
GOVERNMENT
External
Environment
CUSTOMERS
COMPETITORS
Human
Resources
Marketing
Accounting
Finance
MIS
Engineering
Operations transformation system
Suppliers
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12. Contemporary Operations Themes
Service and Manufacturing (differences and implications)
Customer-Directed Operations
Lean Operations
Integration of Operations and Other Functions
Environmental Concerns
Supply Chain Management
Globalization of Operations
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13. Environmental Concerns
“Volkswagen, Germany’s biggest car maker, was reported to be setting aside DM1 billion ($470m) to pay for compliance with a European directive that will come into force in 2007 forcing car makers to pay for recycling their vehicles. New cars will be
required to be 85% recyclable.”
--The Economist, 15 February 2001
See:
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14. Globalization: Who took my job?
Early 1990s
Small town near Charlotte, NC
Aluminum smelter closed after 50 years
Only significant industry in town
In many families, several generations had worked there. Now all out of work.
Who caused it to close?
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15. Miklós Németh
WHO!?!?!?
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16. U.S. production of aluminum dropped dramatically in the early 1990s because the Russians dumped aluminum on the world market. Why? The opening of the Hungarian border, 2 May 1989, led to the fall of the Berlin Wall in November, 1989, which led to the breakup of the Soviet Union in 1991, which caused them to downsize their military, which gave them overcapacity in aluminum production, which caused them to dump in the world markets, which led to the closing of U.S. smelters such as the one near Charlotte, NC.
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17. Was the Hungarian Prime Minister who opened the border on 2 May 1989.
Miklós Németh
Was the Hungarian Prime Minister who opened the border on 2 May 1989.
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18. Moral of the Story
In an age of globalization, you never know who will be the competition or who is doing something that will affect your job or your life.
The aluminum workers in NC had never heard of Miklós Németh, but he ultimately cost them their jobs.
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19. Summary Why Study Operations Management?
Definition of Operations Management
Decisions at Pizza U.S.A.
Operations Decisions - A Framework
Cross-Functional Decision Making
Operations as a System
Contemporary Operations Themes
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20. End of Chapter One
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