1. Quan 4640 Course Introduction

2. What Is Operations Management? Production is the creation of goods and services Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs

3. Organizing to Produce Goods and Services Essential functions: 1.Marketing – generates demand 2.Production/operations – creates the product 3.Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

4. Productivity Challenge Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital) The objective is to improve productivity! Important Note! Production is a measure of output only and not a measure of efficiency

5. Feedback loop Outputs Goods and services Transformation The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%). The Economic System Inputs Labor, capital, management Figure 1.6

6. OM’s Contribution to Strategy Product Quality Process Location Layout Human resource Supply chain Inventory Scheduling Maintenance DIFFERENTIATION: Innovative designSafeskin’s innovative gloves Broad product lineFidelity Security’s mutual funds After-sales serviceCaterpillar’s heavy equipment service ExperienceHard Rock Café’s dining experience COST LEADERSHIP: Low overheadFranz-Colruyt’s warehouse-type stores Effective capacity Southwest Airline’s useaircraft utilization Inventory Walmart’s sophisticated managementdistribution system RESPONSE: FlexibilityHewlett-Packard’s response to volatile world market ReliabilityFedEx’s “absolutely, positively, on time” QuicknessPizza Hut’s 5-minute guarantee at lunchtime Figure 2.4 10 OperationsCompetitive DecisionsStrategyExampleAdvantage Response (faster) Cost leadership (cheaper) Differentiation (better)