1. Introduction to the Field
CHASE AQUILANO JACOBS
Operations Management
For Competitive Advantage
Chapter 1
Introduction to the Field
ninth edition

2. Chapter 1 Overview: Introduction to the Field
Operations Management
Why Study Operations Management?
Production System Defined
Operations as a Service
Plan of This Book
Historical Development of OM
Current Issues in OM

3. What is Operations Management? Defined
Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services.

4. Operations Perspectives
Primary Transformation
Input
Process
Output
Macro OM
Micro OM
Service to Transformation
Some Examples:
CIS Department
H.R. Department

5. Why Study Operations Management?
Business Education
Systematic Approach
to Org. Processes
Career Opportunities
Cross-Functional
Applications

6. What is a Production System? Defined
A production system is defined as a user of resources to transform inputs into some desired outputs. 4

7. OM involves management of the entire system that produces a good or service
Material
Money
Information

8. Transformations Physical--manufacturing Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications 7

9. What is a Service and What is a Good?
“If you drop it on your foot, it won’t hurt you.” (Good or service?)
“Services never include goods and goods never include services.” (True or false?)

10. Characteristics of Goods
Tangible product
Consistent product definition
Production usually separate from consumption
Can be inventoried
Low customer interaction
© 1995 Corel Corp.

11. Characteristics of Services
Intangible product
Inconsistent product definition
Produced & consumed at same time
Cannot be inventoried
High customer interaction
© 1995 Corel Corp.

12. Core Services
Definition
Core services are basic things that customers want from products they purchase.

13. Core Services Performance Objectives
Operations
Management
Flexibility
Quality
Speed
Price (or cost
Reduction)

14. Value-Added Services Defined
Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way.

15. Value-Added Service Categories
Operations
Management
Information
Problem Solving
Sales Support
Field Support

16. Historical Development of OM Carefully read this section in the Text
Carefully read this section in the Text for Exam Review

17. Manufacturing’s Role in Corporate Strategy
Stage 1--Internally Neutral
Stage II--Externally Neutral
Stage III--Internally Supportive
Stage IV-- Externally Supportive
The role of the operations management function (i.e., to minimize production costs) remained virtually unchanged throughout the 1950s and early 1960s. By the late 1960s, at the Harvard Business School, C. Wickham Skinner (who is often called the grandfather of operations strategy) recognized this weakness among U.S. manufacturers and suggested the need for an operations strategy to complement existing marketing and finance strategies. In one of his initial articles on the subject, Skinner referred to manufacturing as the missing link in corporate strategy.
Subsequent work in this area by Harvard Business School researchers (including William Abernathy, Kim Clark, Robert Hayes, and Steven Wheelwright) continued to emphasize the importance of using the strengths of a firm's manufacturing facilities as a competitive weapon in the marketplace. They also argued that a firm could not be competitive in the long run if manufacturing's strategic role was limited to stage 1 or 2.

18. Manufacturing’s Role in Corporate Strategy
Stage 1--Internally Neutral
Not involved at all in corporate strategy
Operations is a necessary evil
Stage II--Externally Neutral
Not involved in corporate strategy but recognized as necessary
Allowed to keep up with the competition, but no more
Steel mills as an example
Stage III--Internally Supportive
Not involved in the corporate strategic development but:
Recognized for their importance to the strategy
Asked to support the strategy dictated by corporate
Given tools as required to meet or exceed
Stage IV-- Externally Supportive
World class
Operations is totally involved in the corporate strategy
The role of the operations management function (i.e., to minimize production costs) remained virtually unchanged throughout the 1950s and early 1960s. By the late 1960s, at the Harvard Business School, C. Wickham Skinner (who is often called the grandfather of operations strategy) recognized this weakness among U.S. manufacturers and suggested the need for an operations strategy to complement existing marketing and finance strategies. In one of his initial articles on the subject, Skinner referred to manufacturing as the missing link in corporate strategy.
Subsequent work in this area by Harvard Business School researchers (including William Abernathy, Kim Clark, Robert Hayes, and Steven Wheelwright) continued to emphasize the importance of using the strengths of a firm's manufacturing facilities as a competitive weapon in the marketplace. They also argued that a firm could not be competitive in the long run if manufacturing's strategic role was limited to stage 1 or 2.

19. Four Stages of Service Firm Competitiveness
Stage I. Available for Service
Stage II. Journeyman
Stage III. Distinctive Competence Achieved
Stage IV. World Class Service Delivery
Here are some additional comments about the framework: First, the stage attained by any given firm is a composite. Every service delivery system embodies a unique set of choices about service quality, workforce policies, and so forth. A company may be at a different stage for a given dimension, or have service units that are further or less advanced than others. Second, a firm can be very competitive (Stage III or even Stage IV) even if it is not outstanding on all dimensions. This could happen when it is doing an exceptional job on its critical success factors. Third, it is difficult or impossible to skip a stage in moving up the ladder. A company obviously must achieve journeyman performance before distinctive competence, and must attain distinctive competence before becoming world class. (However, a firm can move through the stages relatively rapidly. For example, Scandinavian Airlines System (SAS) instituted some 120 service improvements that moved it from Stage I to Stage III within a year and a half. ValuJet seems to be there already, as the Breakthrough box on ValuJet relates. Finally, it is all too easy to slip back a stage. The Los Angeles Police Department (LAPD), for example, was viewed as being equivalent to a Stage III law enforcement organization before the Rodney King incident was made public.

20. Current Issues in OM
Effectively consolidating the operations resulting from mergers (with cultural and technology differences)
Developing flexible supply chains to enable mass customization of products and services (variety and delivery worldwide)
Managing global supplier, production and distribution networks (ERP systems) 14

21. Current Issues in OM (cont’d)
Increased “commiditization” of suppliers
use of standard internet connections
Achieving the “Service Factory”
providing personalized service to each customer
Achieving good service from service firms
use of information 15