Chapter 1
Introduction to Operations Management
โGoods Physical items produced by business
organizations.
โServices Activities that provide some
combination of time, location, form, and
psychological value.
โOperations management The management of
systems or processes that create goods and/or
provide services.
โSupply chain A sequence of activities and
organizations involved in producing and
delivering a good or service.
- 3 basic functions of business organizations
- Simply product supply chain
โValue-added The difference between the cost
of inputs and the value or price of outputs.
โProcess One or more actions that transform
inputs into outputs.
โ Three categories of business processes:
1. Upper-management processes. These
govern the operation of the entire organization.
Examples include organizational governance and
organizational strategy.
2. Operational processes. These are the
core processes that make up the value stream.
Examples include purchasing, production and/or
service, marketing, and sales.
3. Supporting processes. These support
the core processes. Examples include accounting,
human resources, and IT (information technology).
โ Process Variation. Variation occurs in all
business processes. It can be due to variety or
variability.
โ There are four basic sources of variation:
1. The variety of goods or services being
offered. The greater the variety of goods and
services, the greater the variation in production or
service requirements.
2. Structural variation in demand. These
variations, which include trends and seasonal
variations, are generally predictable. They are
particularly important for capacity planning.
3. Random variation. This natural
variability is present to some extent in all
processes, as well as in demand for services and
products, and it cannot generally be influenced by
managers.
4. Assignable variation. These variations
are caused by defective inputs, incorrect work
methods, out-of-adjustment equipment, and so on.
This type of variation can be reduced or eliminated
by analysis and corrective action.
- Business processes form a sequence of
suppliers and customers
โ THE SCOPE OF OPERATIONS
MANAGEMENT
1. Forecasting
2. Capacity planning,
3. Facilities and layout,
4. Scheduling
5. Managing inventories
6. Assuring quality,
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