Chapter I: Introduction to

Operations Management
Delivered by: Dr. Bui Cong Son
 Learning Objectives
1. LO1.1 Define the terms operations management and supply chain.

2. LO1.2 Identify similarities and differences between production and service operations.

3. LO1.3 Explain the importance of learning about operations management.

4. LO1.4 Identify the three major functional areas of organizations and describe how they interrelate.

5. LO1.5 Summarize the two major aspects of process management.

6. LO1.6 Describe the operations function and the nature of the operations manager’s job.

7. LO1.7 Explain the key aspects of operations management decision making.

8. LO1.8 Briefly describe the historical evolution of operations management.

9. LO1.9 Describe current issues in business that impact operations management.

10.LO1.10 Explain the need to manage the supply chain.

Production of Goods VS Providing Services

• Operations is that part of a business organization that is responsible

for producing goods and/or services.

• Goods Physical items produced by business organizations.

• Services Activities that provide some combination of time, location,

form, and psychological value.

 Production of Goods VS Providing Services
• Operations management is the
management of systems or processes that
create goods and/or provide services.
• A supply chain is the sequence of
organizations - their facilities, functions, and
activities - that are involved in producing
and delivering a product or service. The
sequence begins with basic suppliers of raw
materials and extends all the way to the final
customer.
 Production of Goods VS Providing Services

FIGURE 1.1 The three basic functions of business organizations

FIGURE 1.2 A simple product supply chain

Production of Goods VS Providing Services

• The essence of the operations

function is to add value during
FIGURE 1.4
The operations function involves the conversion of inputs into outputs
the transformation process:
Value-added is the term used to
describe the difference between
the cost of inputs and the value
or price of outputs.
Production of Goods VS Providing Services

15 mins Group
discussion: Pick up
a service/ product
then analyze it
operation process
Production of Goods VS Providing Services
Identify the similarities and differences between
production and service operations.
 Typical differences between production of goods
and provision of services
Characteristic Product Service
Output Tangible Intangible
Customer contact Low High
Labor content Low High
Uniformity of input High Low
Measurement of productivity Easy Difficult
Opportunity to correct problems before delivery High Low
Inventory Much Little
Wages Narrow range Wide range
Patentable Usually Not Usually
 Why Learn about Operations Management?
• There are many career-related reasons for wanting to learn about operations management,
whether you plan to work in the field of operations or not.

• This is because every aspect of business affects or is affected by operations. Operations and
sales are the two line functions in a business organization. All other functions—accounting,
finance, marketing, IT, and so on—support the two line functions.

• Working together successfully means that all members of the organization understand not only
their own role, but they also understand the roles of others. In practice, there is signifi- cant
interfacing and collaboration among the various functional areas, involving exchange of
information and cooperative decision making.
 Why Learn about Operations Management?
Finance and operations management personnel cooperate by exchanging

information and expertise in such activities as the following:

• Budgeting. Budgets must be periodically prepared to plan financial requirements. Bud- gets must

sometimes be adjusted, and performance relative to a budget must be evaluated.

• Economic analysis of investment proposals. Evaluation of alternative investments in plant and

equipment requires inputs from both operations and finance people.

• Provision of funds. The necessary funding of operations and the amount and timing of funding can

be important and even critical when funds are tight. Careful planning can help avoid cash-flow
FIGURE 1.6 The three
major functions of business problems.
organizations overlap
Marketing, operations, and finance must interface on product and process design,

forecasting, setting realistic schedules, quality and quantity decisions, and keeping

each other informed on the other’s strengths and weaknesses.

Why Learn about Operations Management?
Legal

Public
Accounting
relations

Operation

Personnel
MIS
/ HR

Operations interfaces with a number

of supporting functions
Process Management
• A key aspect of operations management is process management.

• A process consists of one or more actions that transform inputs into outputs. In
essence, the central role of all management is process management.

• There are 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).
 Process Management
• Business process management (BPM) activities include process design, process
execution, and process monitoring.
• Two basic aspects of this for operations and supply chain management are
managing processes to meet demand and dealing with process variability.
• Ideally, the capacity of a process will be such that its output just matches demand.
Excess capacity is wasteful and costly; too little capacity means dissatisfied
customers and lost revenue.
• Process variation and demand variability can make the achievement of a match
between process output and demand difficult. Variation occurs in all business
processes. It can be due to variety or variability.
 Forecasting

The Scope of Capacity planning

Operations Locating facilities

Management Facilities and layout

Scheduling

Managing inventories

Assuring Quality

Motivating and training employees

 Operations Management and Decision Making
• The chief role of an operations manager is that of planner and decision maker.

• Operations management professionals make a number of key decisions that

affect the entire organization. These include the following:
• What: What resources will be needed, and in what amounts?
• When: When will each resource be needed? When should the work be scheduled? When
• should materials and other supplies be ordered? When is corrective action needed?
Where: Where will the work be done?
• How: How will the product or service be designed? How will the work be done
(organization, methods, equipment)? How will resources be allocated?
• Who: Who will do the work?
Operations Management and Decision Making
General approaches to decision making

Quantitative
Model methods

Analysis trade- Establishing

off priorities

Systems
Ethic
approach
The Historical Evolution of Operations Management
The Historical Evolution of Operations Management
 Operations Today
• Advances in information technology and global competition have had a major influence
on operations management. While the Internet offers great potential for business
organizations, the potential as well as the risks must be clearly understood in order to
determine if and how to exploit this potential.

• Technology The application of scientific knowledge to the development and

improvement of products and services and operations processes.

• E-business is changing the way business organizations interact with their customers and
their suppliers. Most familiar to the general public is e-commerce, consumer–business
transactions such as buying online or requesting information.
Key Issues for Today’s Business Operations
Economic conditions.

Innovating.

Quality problems.

Risk management.

Cyber-security.

Competing in a global economy.