OM Chapter-1
OM Chapter-1
OM Chapter-1
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Operations managers are the people who have
it produces the goods and services which are its reason for
existing, but it is neither the only nor necessarily the most
important function. It is, however, one of the three core
functions of any organization.
These are:
Finance,
Marketing and
Operations management
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Furthermore, we can say operations management (OM) is the
business function that plans, organizes, coordinates, and controls
the resources needed to produce a company’s goods and services.
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Cont’d
This is true whether the company is large or small, provides
a physical good or a service, is for-profit or not-for-profit.
Every business is managed through three major functions:
finance, marketing, and operations management.
Other business functions, such as accounting, purchasing,
human resources, and engineering, support these three
major functions.
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Cont’d
Finance is the function responsible for managing
cash flow, current assets, and capital investments.
Marketing is responsible for sales, generating
customer demand, and understanding customer
wants and needs.
Most of us have some idea of what finance and
marketing are about, but what does operations
management do in organization?
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Cont’d
Every company has an operations management function.
Actually, all the other organizational functions are there
primarily to support the operations function.
Without operations, there would be no goods or services
to sell.
The marketing function provides promotions for the
merchandise, and the finance function provides the
needed capital.
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Cont’d
It is the operations function, however, that plans and coordinates all
the resources needed to design, produce, and deliver the
merchandise to the various retail locations.
Without operations, there would be no goods or services to sell to
customers.
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Cont’d
Operations management is responsible for arranging all the
resources needed to produce the final product.
This includes:
designing the product
managing inventory
controlling quality
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Cont’d
The Transformation Process
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Generally, why is operations management so important?
to the business.
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It can reduce the costs of producing products and services and
being efficient;
It can increase revenue by increasing customer satisfaction
The United States had just emerged from the war as the undisputed
global manufacturing leader due in large part to efficient operations.
At the same time, Japan and Europe were in ruins, their businesses
and factories destroyed.
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Cont’d
U.S. companies had these markets to themselves, and so the
post-World War II period of the 1950s and 1960s
represented the golden era for U.S. business.
It appeared that U.S. firms had become lax due to the lack of
competition in the 1950s and 1960s.
Environmental Issues 1970s Considered waste reduction, the need for recycling, and product reuse.
Focused on reducing the overall cost of the system that manages the flow of
Supply Chain Management 1990s materials and information from suppliers to final customers.
2000s Uses the Internet and World Wide Web for conducting business activities.
Electronic Commerce
Manufacturing Operations
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Cont’d
Characteristics of Manufacturing Operation and Service
Operations
Manufacturing Operation Services Operation
Large facilities with economies of scale Small facilities (often difficult to automate)
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Cont’d
Manufacturing Operation Services Operation
Site of the facility is important for cost Site of the facility is important for
customer contact
Strategic decisions are decisions that set the direction for the
entire company; they are broad in scope and long-term in nature.
They address questions such as: What are the unique features
of our product? What market do we plan to compete in?
What do we believe will be the demand for our product?
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Cont’d
1.6. Productivity Measurement
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Cont’d
For example, let us say that the weekly dollar value of a
company’s output, such as finished goods and work in
progress, is $10,200 and that the value of its inputs, such as
labor, materials, and capital, is $8600.
The company’s total weekly productivity would be
computed as follows:
Total Productivity = = = 1.186.
Often it is much more useful to measure the productivity of
one input variable at a time in order to identify how
efficiently each is being used.
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Cont’d
When we compute productivity as the ratio of output
relative to a single input, we obtain a measure of
partial (fractional) productivity, also called single-
factor productivity.
Following are two examples of the calculation of
partial productivity:
A bakery oven produces 346 pastries in 4 hours.
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What is its productivity
Cont’d
Machine Productivity = Number of Pastries/Oven time = =
86.5 Pastries/hour
Two workers paint tables in a furniture shop.
If the workers paint 22 tables in 8 hours, what is their
productivity?
Labor Productivity = = 1.375 tables/hour
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Cont’d
Sometimes we need to compute productivity as the ratio of
output relative to a group of inputs, such as labor and
materials. This is a measure of multifactor productivity.
For example, let us say that output is worth $382 and labor
and materials costs are $168 and $98, respectively.
A multifactor productivity measure of our use of labor and
materials would be:
Multifactor Productivity = = = = 1.436
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Cont’d
Productivity and Competitiveness
Here inputs are the medical staff, yet outputs may not exist if no
one needed treatment on that shift. In that case, by traditional
measures, productivity would be zero.
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