Lecture 1: Introduction to Operations Management

Overview of Operations Management

• Definition: Operations management is responsible for producing goods or services within a business.
• Examples:
  • Restaurant: Making and serving food.
  • Automobile Manufacturer: Producing cars.

Goods vs. Services

• Goods: Tangible items that can be produced, e.g., cars, computers, ovens, shampoo.
• Services: Activities that provide value without producing a tangible product, e.g., air travel, education, haircuts, legal counsel.

Supply Chain Introduction

• Definition: A sequence of activities and organizations that produce or deliver goods or services.
• Components of Supply Chain:
  • Suppliers → Direct Suppliers → Producers → Distributors → Customers.

Transformational Process

• Definition: The process where value is added to inputs to create outputs (goods/services).
• Inputs: Land, labor, capital, information, raw materials.
• Feedback Loops: Used for continuous improvement based on customer and supplier feedback.

Goods and Services Continuum

• Many products are a mix of goods and services. Examples include:
  • Automobile assembly and steel making (mostly goods)
  • Restaurant meal (combination of goods and services)
  • Surgery and teaching (mostly services).

Importance of Studying Operations Management

• Affects every business aspect; understanding enhances knowledge of global dependencies and reasons for success or failure.
• Basic Functions of an Organization: Marketing, Operations, Finance.
  • Marketing: Identifies customers and creates demand.
  • Operations: Produces goods/services.
  • Finance: Manages funds, budgeting for operations.

Career Opportunities in Operations Management

• Positions include:
  • Operations Manager
  • Supply Chain Manager
  • Production Analyst
  • Industrial Engineer
  • Quality Control Manager
  • Purchasing Manager.

Process Management

• Categories of Business Processes:
  • Upper Management Processes: Govern overall operations.
  • Operational Processes: Core activities.
  • Supporting Processes.
• Supply and Demand: Critical to balance; excess supply leads to waste, and insufficient supply leads to lost sales and dissatisfied customers.

Sources of Process Variation

• Types:
  1. Variety of goods/services offered (high variety = more variation).
  2. Structural variation in demand (predictable patterns, e.g., lunchtime rush).
  3. Random variation (unpredictable, natural occurrences).
  4. Assignable variation (identifiable sources that can be corrected).

Scope of Operations Management

• Includes interrelated activities such as forecasting, capacity planning, facilities layout, scheduling, inventory management, and quality assurance.

Role of Operations Manager

• Responsibilities:
  • Guide systems through design and operation decisions.
  • System Design Decisions: Capacity, facility layout, location, product/service planning.
  • System Operation Decisions: Managing people, inventory control, scheduling, quality assurance.

Decision-Making in Operations Management

• Decisions involve:
  • What resources are needed (What)?
  • When will resources be needed (When)?
  • Where will work be done (Where)?
  • How will work be done (How)?
  • Who will do the work (Who)?

Models in Decision Making

• Definition: Simplifications or abstractions of real-world systems.
• Purpose: Helps analyze different scenarios and improve understanding of complex issues.
• Key Considerations: Purpose, usage, assumptions, and limitations of models.

Systems Approach

• A business is a system composed of interrelated subsystems (marketing, operations, finance).
• Emphasizes the importance of collaboration between subsystems for organizational success.
• Prioritization: Focus on the most impactful areas (Pareto Principle: 80% of problems from 20% of sources).

Historical Evolution of Operations Management

1. Industrial Revolution: Shift from craft production to manufacturing.
2. Scientific Management: Focus on efficiency and measurement (Frederick Winslow Taylor).
3. Human Relations Movement: Emphasis on worker motivation and psychology.
4. Decision Models/Management Science: Mathematical modeling and analysis.
5. Influence of Japanese Manufacturers: Quality revolution, just-in-time production.

Key Issues for Operations Managers Today

• Economic conditions, innovation, quality management, risk management, global competition, environmental concerns, and ethical issues.
• Importance of sustainability and ethical practices in operations and supply chain management.