1. Nature of Operations
Objectives:
Describe the activities involved in the operations function.
Discuss the impact of operations on a business.

2. Describe the activities involved in the operations function.

3. What Is Operations? Operations: Operations goals: Inputs:
Consists of day-to-day activities for continued business functioning
Allows business to keep producing and providing goods and services for customers
Means taking inputs and using them to make outputs:
Inputs:
Employees
Raw materials
Equipment
Capital
Outputs: goods and services
Adds value to product
Operations goals:
Efficiency (keeping costs low)
Effectiveness (keeping customers satisfied)

4. Operations Acivities:
Production planning
Site Selection and Layout
Purchasing
Quality Control
Inventory Control
Logistics
Scheduling
Safety and Security
Maintenance and Repairs
Expense Control

5. Operations Activities: Production Planning
Foundation of operations—most other operations activities are based on decisions made here.
Manufacturing a good or providing a service requires a specific process made up of:
This process is called an operating system—every business has one.
May be complex or simple
People
Places
Must be planned before production can begin
Operating system
Must be regularly evaluated and improved
Materials
Information
Equipment

6. Factors to consider when determining business location:
Operations Activities: Site Selection and Layout
Factors to consider when determining business location:
Costs – Location, Size etc.
Labor – availability, wages and unions
Community – enough customers, taxes affodable, local laws

7. Operations Activities: Site Selection and Layout
Factors to consider when determining facility layout:
Need for office space
Need for storage space
Need for production areas
Type of good/service being produced
Sizes and shapes of materials
Type of production process

8. Operations Activities: Purchasing
Purchasing—buying goods and services for a business
Also known as procuring
Businesses purchase:
Materials needed to produce goods and services
Products for resale
Day-to-day supplies and equipment needed to run the business

9. Operations Activities: Purchasing
Purchasers are concerned with obtaining materials, products, and supplies:
When they are needed
In the right
At the best available costs
amounts

10. Operations Activities: Purchasing
They work with suppliers to find:
Good prices
Quality products
Reliable customer service
Reasonable credit terms
Affordable shipping costs

11. Operations Activities: Quality Control
Quality control—ensuring the degree of excellence of a good or service
Businesses make sure products meet certain predetermined standards, set by:
The company itself
Government laws and regulations
Standards-setting organizations, such as ISO
Large manufacturers that require vendors to meet their standards

12. Operations Activities: Quality Control
Dish Soap
Quality inspection—getting rid of “bad” or defective products
Quality assurance:
Building quality into entire operating system
Preventing defective products from being made
Placing responsibility on every employee, not just inspectors
Benefits of creating quality products:
Higher level of competitiveness
Lower costs
Higher productivity
Fewer wasted resources
Fewer returns and lost sales
Less wasted time

13. Operations Activities: Inventory Control
Inventory control—tracking the amount, kind, and value of inventory
Involves a lot of knowledge, planning, and work
Key to inventory control—making sure inventory is high enough for business to function, but low enough not to incur unnecessary expenses
Holding cost - The money it takes to keep inventory in stock
Stockout costs - Costs associated with running out of needed inventory

14. Operations Activities: Logistics
Managing the flow of goods and services from production to consumption
Includes all the people, information, and processes involved in storing and transporting goods

15. Operations Activities: Scheduling
Scheduling—operations activity that establishes the timetable to be followed in production
Controls the flow of the entire production process
Includes sequencing—determining the most effective and efficient route for materials
Includes timing—determining when materials will arrive and how long they will stay there
Service businesses use scheduling, too

16. Operations Activities: Safety and Security
Employees, customers, and visitors must be protected from:
Hazardous materials (chemicals, acids, paints)
Hazardous processes (welding, cutting)
Ensuring safety requires compliance with:
Internal rules/procedures
Government standards
Certain businesses may also comply with laws regarding environmental safety.
Operations managers may also be responsible for security needs (alarm systems, security guards, etc.).

17. Operations Activities: Maintenance and Repairs
Routine maintenance and occasional repairs for:
Facilities
Equipment
Custodial work

18. Operations Activities: Expense Control
At the heart of operations is the bottom line.
Operations managers control so many activities and so much of the business’s money—their focus is on efficiency and keeping costs low across the board.

19. Discuss the impact of operations on a business.

20. Impact of Product on Operations
Operations activities vary from business to business, depending on the product.
Product affects every aspect of operations.
Examples:

21. Operations and Other Business Functions
Operations managers work closely with managers and employees in every other part of the company.
They control up to 75 percent of a firm’s assets.

22. Nature of Production
Describe the importance of production to an organization.

23. What Is Production?
production, pruh-duhk-shuhn, n. The creation of goods and services from economic resources
factors of production, fak-ters uhv pruh-duhk-shuhn, n. The resources used in production

24. Importance of Production
Provides form utility
Enables companies to stay in business
Allows businesses to turn out the maximum number of products at the lowest cost

25. Production Activities
Planning
Purchasing—buying the resources needed for production
Production process—the way in which production will be carried out

26. Describe the role of purchasing in business.
Nature of Purchasing
Describe the role of purchasing in business. A

27. What Is Purchasing? The buying of goods and services for a business
Who does this purchasing?
Purchasing specialists
Purchasing agents
Purchasing managers
Procurement managers
Buyers

28. What Do Purchasing Specialists Buy?
Raw materials
Parts
Equipment
Finished products
Supplies
Furniture
Uniforms
Services