Week 1

Chapter 1:

The Operations Function

Operations Management in the

Supply Chain: Decisions and Cases,

6th edition

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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Chapter 1 Outline • Why Study Operations Management?

• Definitions of Operations Management and Supply Chains

• Decisions at Pizza U.S.A.

• Operations Decisions - A Framework with Contingencies

• Cross-Functional Decision Making

• Operations as a Process

• Contemporary Operations Themes

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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 organization

• Operations Management is an interesting and challenging field of study

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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.

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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 (internal/external)

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Definition of Supply Chain

• Network of manufacturing and service operations that supply one another

• From raw materials through production to the end consumer

• Flows of materials, money, and information

• Links operations across organizations

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Major Decisions at Pizza USA

• Process

• How should we produce pizzas?

• Quality

• How do we meet quality standards and ensure a good customer experience?

• Capacity

• How much output do we need, at various times?

• Inventory

• Which ingredients, when & how much?

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Contingencies Decisions related to process, quality, capacity, inventory

must account for:

- upstream suppliers

- downstream customers

- other functions (marketing, finance)

- support functions (HR, Info systems, accounting)

- situations (supply disruption, seasonal demand peaks)

- conditions (economy, changing customer preferences)

- many other contingencies

In other words, there is no single set of

“best” practices. The best decision-making

will depend on the situation.

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Cross-Functional Decision Making • Operations as the primary production function.

• Other primary functions:

• Marketing

• Finance

• Supporting functions: all others

• Major cross-functional decision making relationships (See

Table 1.2)

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Operations as a Process

Transformation (Conversion)

Process

Input Output

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Operations as a Process

Transformation Fabrication

Input OutputTransformation Assembly

Fabrication: making the parts

Assembly: putting the parts together

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Operations as a Process (Figure 1.2)

Transformation (Conversion)

Process

Energy Materials

Labor

Capital

Information

Goods or Services

Feedback information for control of process inputs and process technology

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Contemporary Operations Themes • Service and Manufacturing (differences and

implications)

• Customer-Directed Operations (“voice of the customer”)

• Lean Operations

• Integration of Operations with Other Functions

• Environmental Concerns and Sustainability

• Supply Chain Management

• Globalization of Operations

• Contingencies that Impact Operations Decisions

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Chapter 1 Summary

• Why Study Operations Management?

• Definitions of Operations Management and Supply Chains

• Decisions at Pizza U.S.A.

• Operations Decisions - A Framework with Contingencies

• Cross-Functional Decision Making

• Operations as a Process

• Contemporary Operations Themes