1. © EJR 20061 Chapter 1 - Introduction to Operations Management Dr. Riddle's Slides

2. © EJR 20062 Chapter Outline What is operations management? Why we study OM Transformation process (also called process) Value added, efficiency, effectiveness Measurement and feedback for process improvement All work is a transformation process Customers Similarities between manufacturing and service operations Decisions in OM – Table 1-1, page 8 Plan of this course

3. © EJR 2006-adapted from Wiley, 20053 Why We Study OM OM produces the goods and services that a company sells. Good OM is essential for profitability Example: Operations tasks in online sales Supply chain management: Purchasing, shipments, customer returns Inventory management

4. © EJR 20064 Why We Study OM (2) OM Can Increase Gross Profit by Increasing Sales Increase sales by producing products with higher quality, so that a higher price can be charged. Attract customers and retain new customers by Producing products with new features. Producing new products. Getting products to customers more quickly Customers may be will ing to pay more for these things. Some of these tasks will require new technology.

5. © EJR 20065 Why We Study OM (3) OM can Increase Gross Profit by Reducing Costs The objective is to reduce Costs of goods sold = fixed costs + variable costs Reducing the costs of inputs, including labor, materials, capital and/or energy More skillful negotiations with suppliers to reduce costs This does not always mean using inputs of lower quality Locate manufacturing facilities where the cost of inputs is cheaper. This applies to labor, materials, and energy. Use recycled materials when they are cheaper.

6. © EJR 20066 Why We Study OM (4) OM can Increase Gross Profit by Reducing Costs Reducing the costs of inputs, including labor, materials, capital and/or energy (continued) Maintain consistent quality and avoid waste Hire qualified people and train them well. Buy equipment that will produce goods or services of appropriate quality and maintain it properly. Buy materials of the quality needed to make a quality product. Use technology and production methods that require fewer workers. This may require capital investment.

7. © EJR 20067 Why We Study OM (5) For professional development: Most business professionals are responsible for some OM activities: Quality management Project management Job design Scheduling work To learn to work effectively with OM professionals To make your company more profitable To advance in your career

8. © EJR 20068 Measurement and Feedback Measurement systems in operations collect data about the transformation process, the inputs, and the outputs Feedback is the use of data to improve the transformation process and the inputs, thereby improving the outputs. Data from operations measurements systems Cost data from accounting systems Customer information: returned products, complaints, customer surveys, focus groups

9. © EJR 20069 Typical Measures Used to Improve Operations Management Costs Quality Quantity produced or number of customers served Timeliness (on-time delivery, service time, etc.) Customer satisfaction

10. © EJR 200610 Work as a Transformation Process All work is a transformation process Uses inputs Produces outputs Is used by an external or internal customer

11. © EJR 200611 Customers External customers purchase goods or services from your company Consumers Businesses Government agencies Non-profit organizations Your internal customers work for the same company that you work for and use your work product.

12. Overview of Management 326 Operations and Operations Strategy Products, Processes, & Quality Operations Planning & Control Facilities and Work Systems Mathematical Tools for Operations © EJR 2006