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INTRODUCTION

to
Operations Management

Chapter 1, The Operations Function

McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved


Chapter Outline
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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Definition of
Operations Management
•Operations is responsible for supplying the product
or service of the organization.
•Operations managers make decisions regarding
the operations function and its connection with
other functions.
•Operations managers plan and control the
production process and its interfaces within the
organization and with the external environment.

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Key Points in OM Definition

 Decisions the operations manager must


make

 Functions in the organization.

 Process for producing goods and services

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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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Cross-Functional
Decision Making
Operations as the primary function.
Other primary functions:
– Marketing
– Finance
Supporting functions: all others
Major cross-functional decisions (See
Table 1.1)

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Operations as a Process

Input Transformation Output


(Conversion)
Process

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Operations as a Process

Input Transformation Transformation Output


Fabrication Assembly

Fabrication: making the parts


Assembly: putting the parts together

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Operations as a Process
(Figure 1.1)

Energy
Materials
Labor Transformation
Goods or
(Conversion)
Capital Services
Process
Information

Feedback information for


control of process inputs
and process technology

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Relation of Operations to its
Environment
(Figure 1.2)
SOCIET
Y External
Human Environment
Engineering Marketing
Resources

Suppliers Operations transformation system CUSTOMERS

Accounting Finance MIS

COMPETITORS
GOVERNMENT

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Contemporary Operations Themes
Service and Manufacturing (differences and
implications)
Customer-Directed Operations
Time Reduction (Lean Operations)
Integration of Operations and Other Functions
Environmental Concerns
Supply Chain Management
Globalization of Operations

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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
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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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Miklós Németh

WHO!?!?!?
McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved
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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Miklós Németh
Was the Hungarian Prime
Minister who opened the
border on 2 May 1989.

McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved


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.
McGraw-Hill/Irwin  The McGraw-Hill Companies, Inc. 2007, All Rights Reserved
Summary
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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End of Chapter One

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