1. © Wiley 20071 Chapter 1 - Introduction to Operations Management Operations Management by R. Dan Reid & Nada R. Sanders 3 rd Edition © Wiley 2007

2. © Wiley 20072 Learning Objectives Define OM Role of OM in business Decisions that operations managers make OM differences between service and mfg. Major historical developments in OM Identify current trends in OM Define information flow between OM and other business functions

3. © Wiley 20073 What is Operations Management? The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services. It is a management function. Organization’s core function. Every organization has the OM function Manufacturing or Service For Profit or Not For Profit

4. © Wiley 20074 Typical Organization Chart

5. © Wiley 20075 Systems Concept outputs SYSTEM transformations inputs productivity OI missiongoalsobjectives (See SINK, figure 2.1, p. 24) goodsservices landlaborcapital facilitiesfacilities equipmentequipment toolstoolsenergymaterialsdata PhysicalLocationalExchangeStoragePhysiologicalInformational

6. © Wiley 20076 Why OM? “In business today, the emphasis is not so much on what you make, but on how you do business. Dell makes computers just like every other PC manufacturer.” Quote: KT CEO on CNBC 4/99 The resurgence of American business in the 1990’s capitalized on improved operations.

7. © Wiley 20077 Differences between Manufacturers and Service Organizations Services: Intangible product Product cannot be inventoried High customer contact Short response time Labor intensive Manufacturers: Tangible product Product can be inventoried Low customer contact Longer response time Capital intensive

8. © Wiley 20078 Similarities-Service/Manufacturers All use technology Both have quality, productivity, & response issues All must forecast demand Each will have capacity, layout, and location issues All have customers and suppliers All have scheduling and staffing issues

9. © Wiley 20079 Trends in OM Service sector growing to 80% of non-farm jobs- See Figure 1-4 Global competitiveness Demands for higher quality Huge technology changes Time based competition Work force diversity

10. © Wiley 200710 OM Decisions

11. © Wiley 200711 Plan of Book-Chapters link to Types of OM Decisions

12. © Wiley 200712 Historical Development of OM Industrial revolutionLate 1700’s Scientific managementEarly 1900’s Human relations movement1930’s to 1960’s Management scienceMid-1900’s Computer age1970’s Just-in-Time Systems (JIT)1980’s Total quality management (TQM)1980’s Reengineering 1990’s Flexibility1990’s Time-Based Competition1990’s Supply chain Management1990’s Global Competition1990’s Environmental Issues1990’s Electronic CommerceLate 1990’s

13. © Wiley 200713 Today’s OM Environment Customers demand better quality, faster deliveries, and lower costs Increased cross-functional decision making Recognized need to better manage information using ERP and CRM systems Global competition

14. © Wiley 200714 Business Information Flow

15. © Wiley 200715 Chapter 1 Highlights OM is the function that manages the resources that add value Its role is to transform inputs into products or services Decisions are many and vary from daily tactical to long-term strategic Key differences between mfg. and service companies are tangibility of product and degree of customer contact Historical milestones range from 1700s Industrial Revolution to the modern Electronic Commerce age OM must understand and implement major process changes like JIT, TQM, supply chain management, and environmental changes OM works closely with all other business functions