1. Operations Management Contemporary Concepts and Cases
Chapter One
The Operations Function
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter Outline Why Study Operations Management?
Definitions of Operations Management and Supply Chains
Decisions at Pizza U.S.A.
Operations Decisions - A Framework
Cross-Functional Decision Making
Operations as a Process
Contemporary Operations Themes

3. Why Study Operations Management?
Cross-functional nature of decisions
Operations is a major function in every organization
Principles of process thinking can be applied across the business
Operations Management is an interesting and challenging field of study

4. Definition of Operations Management
The operations function of an organization is responsible for producing and delivering goods or services of value to customers of the organization.
Operations managers make decisions to manage the transformation process that converts inputs into desired finished goods or services.

5. Key Points in OM Definition
Decisions:
The operations manager must decide:
Process, quality, capacity, inventory
Function:
Major functional areas in organizations:
Operations, marketing, finance
Process: planning and controlling the
transformation process and its interfaces
Expansion of these points follows on the next slides.

6. 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?

7. Definition of Supply Chain
Network of manufacturing and service operations that supply one another
From raw materials through manufacturing to the end consumer
Flows of materials, money, and information
Links operations across organizations

8. Cross-Functional Decision Making
Operations as the primary function.
Other primary functions:
Marketing
Finance
Supporting functions: all others
Major cross-functional decision making relationships (See Table 1.2)

9. Operations as a Process
Transformation
(Conversion)
Process
Input
Output

10. Operations as a Process
Transformation
Fabrication
Transformation
Assembly
Input
Output
Fabrication: making the parts
Assembly: putting the parts together

11. Operations as a Process (Figure 1.1)
Energy
Transformation
(Conversion)
Process
Materials
Labor
Goods or
Services
Capital
Feedback information for
control of process inputs
and process technology
Information

12. Relation of Operations to its Environment (Figure 1.2)
SOCIETY
GOVERNMENT
External
Environment
CUSTOMERS
COMPETITORS
Human
Resources
Marketing
Accounting
Finance
MIS
Engineering
Operations transformation system
Suppliers

13. Contemporary Operations Themes
Service and Manufacturing (differences and implications)
Customer-Directed Operations
Lean Operations
Integration of Operations withOther Functions
Environmental Concerns and Sustainability
Supply Chain Management
Globalization of Operations

14. 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
See: to learn what the Netherlands has done to implement this directive.

15. 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 plant to close?

16. Miklós Németh
WHO!?
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17. U.S. production of aluminum dropped dramatically in the early 1990s because Russia dumped aluminum on the world market.
Why? The opening of the Hungarian border on May 2, 1989 led to the fall of the Berlin Wall in November 1989…
…which led to the breakup of the Soviet Union in 1991…

18. …which caused Russia to downsize their military…
…which gave Russia overcapacity in aluminum production…
…which caused Russia to dump aluminum in the world markets…
…which led to the closing of U.S. smelters such as the one near Charlotte, NC.

19. Miklós Németh
The Hungarian Prime Minister who opened the Hungarian border on May 2, 1989
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20. 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 North Carolina had never heard of Miklós Németh, but he ultimately cost them their jobs.
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21. Summary Why Study Operations Management?
Definition of Operations Management and Supply Chains
Decisions at Pizza U.S.A.
Operations Decisions - A Framework
Cross-Functional Decision Making
Operations as a System
Contemporary Operations Themes

22. End of Chapter One