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1. 2 Chapter 1 Introduction to Operations Management.

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2 2 Chapter 1 Introduction to Operations Management

3 3 OverviewOverview l Introduction l Historical Milestones in OM l Factors Affecting OM Today l Different Ways of Studying OM l Wrap-Up: What World-Class Producers Do

4 4 IntroductionIntroduction l Operations management is the management of an organization’s productive resources or its production system. l A production system takes inputs and converts them into outputs. l The conversion process is the predominant activity of a production system. l The primary concern of an operations manager is the activities of the conversion process.

5 5 Organizational Model Marketing Marketing MIS Engineering HRM QA Accounting Accounting Sales Finance OM

6 6 Entry-Level Jobs in OM l Purchasing planner/buyer l Production (or operations) supervisor l Production (or operations) scheduler/controller l Production (or operations) analyst l Inventory analyst l Quality specialist

7 7 Studying Operations Management l Operations as a System l Decision Making in OM

8 8 Operations as a System InputsInputsOutputsOutputs ConversionSubsystemConversionSubsystem Production System ControlSubsystemControlSubsystem

9 9 Inputs of an Operations System l External l Legal, Economic, Social, Technological l Market l Competition, Customer Desires, Product Info. l Primary Resources l Materials, Personnel, Capital, Utilities

10 10 Conversion Subsystem l Physical (Manufacturing) l Locational Services (Transportation) l Exchange Services (Retailing) l Storage Services (Warehousing) l Other Private Services (Insurance) l Government Services (Federal)

11 11 Outputs of an Operations System l Direct l Products l Services l Indirect l Waste l Pollution l Technological Advances

12 12 Decision Making in OM l Strategic Decisions l Operating Decisions l Control Decisions

13 13 Strategic Decisions l These decisions are of strategic importance and have long-term significance for the organization. l Examples include deciding: l the design for a new product’s production process l where to locate a new factory l whether to launch a new-product development plan

14 14 Operating Decisions l These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. l Examples include deciding: l how much finished-goods inventory to carry l the amount of overtime to use next week l the details for purchasing raw material next month

15 15 Control Decisions l These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. l Examples include deciding: l labor cost standards for a new product l frequency of preventive maintenance l new quality control acceptance criteria

16 16 What Controls the Operations System? l Information about the outputs, the conversions, and the inputs is fed back to management. l This information is matched with management’s expectations l When there is a difference, management must take corrective action to maintain control of the system

17 17 Wrap-Up: World Class Practice l OM important in any organization l Global competition forces rapid evolution of OM l Decision based framework focus of course l Strategic, Operating, and Control

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