Chapter 1 Introduction to Operations Management in a Global Environment

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CHAPTER 1

Introduction to Operations Management in a Global
Environment
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Learning Objectives

1. Discuss the role of operations in the
   organization.
2. Describe the differences and similarities between
   producers of services and producers of goods.
3. Explain why the approach to managing operations
   should grow from the organization's goals.

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Learning Objectives --Continued

• Discuss the growing impact of global competition
  on organizations and their operations.
• Understand key ethical issues that impact
  organizations and operations.
• Define systems theory and discuss the
  relationships between operations and the other
  functional areas in the organization.

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General Topics In Chapter

• Defining Operations Management
• Understanding the Systems Approach to Operations
• The Organization as Part of the Economic and
  Government System
• Operations as Part of the Organization
• Operations as a Series of Related Subsystems

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Defining Operations Management

• Defining Operations
• Service versus Manufacturing Operations
• Understanding Operations
• Global Trade and Competition

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Operations in the Organization

• Organizations exist to meet the needs of society
  that people working alone cannot achieve.
• Operations within organizations produce the items
  we consume each day.
• Fast food
• Calculators
• Personal computers
• Withdrawals from automated tellers (ATMs)

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Operations Management

1. Operations
2. Definition of Operations
3. Definition of Operations Management

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Operations
People
Services
Transformation Process
Products
Capital
Goods
Material
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Operations-- Continued

• Operations are the processes within organizations
  that acquire inputs (people, capital, and
  material) and transform these inputs into outputs
  (services and goods) consumed by the public.

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Operations-- Continued

• Operations Management is decision making
  involving the design, planning, and control of
  the many factors that affect operations.

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Goods and ServicesProduced by Organizations

• Goods (physical products) produced by
  organizations
• For profit
• Not-for-profit
• Services (intangible products) produced by
  organizations
• For profit
• Not-for-profit

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Examples of Goods (physical products) Produced by
Organizations

• Profit
• Starter motors
• Electronics
• Oil refining
• Air conditioners
• Appliances
• Furniture

• Not-for-Profit
• Highways
• Dams
• Flood control projects
• Workshops for handicapped assemble headrests for
  cars

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Examples of Services (intangible products)
Produced by Organizations

• Not-for-profit
• Police protection
• Health care
• Public welfare
• Parks and recreation
• Fire protection
• Education

• Profit
• Banking
• Health care
• Stock brokerage
• Telephone services
• Repair services
• Education
• Retail shops

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Service Versus Manufacturing Operations

• Comparing Services and Goods
• Comparing Organizations that Produce Services and
  Goods
• Managing Service Operations without Finished
  Goods Inventory
• Some Service Operations Have Finished Good
  Inventory
• Designing Products for Goods and Services

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Comparing Services and Goods

• a. Interdependency of service and manufacturing
  operations
• b. Similarities between service and manufacturing
  operations
• c. Differences between service and manufacturing
  operations

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Comparing Services and Goods-- Continued
Electric utility generates power for a facility
Service and manufacturing sectors of the economy
are highly interdependent
The facility makes lamps
Lamps are delivered by truck to retail stores
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Comparing Organizations that Produce Services and
Goods

• Service and manufacturing sectors have many
  similarities.
• Lima Fire Department
• Air-Temp Corporation

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Comparing Organizations that Produce Services and
Goods-- Continued

• Major differences between service and
  manufacturing operations

• Services cannot have finished goods inventory.

• Goods require physical design.

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Understanding Operations

• 1. Operations strategy
• 2. Operations add value
• - Customer
• - Private sector
• - Public sector
• 3. Technology operations
• - Product technology
• - Process technology
• 4. Teamwork leads to better system performance

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Operation Strategy

• Operations should be linked to the organizations
  strategy to achieve the greatest benefit.

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Operations Add Value

• 1. Consumer willing to pay more for a
  product than the costs of the inputs
• 2. Private sector profits can be
  reinvested
• 3. Public sector creates grater wealth
  for society

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Technology and Operations

• Product technology cellular phone change
  demand for competing products customer behavior
• Process technology lasers change the way
  services and goods are produced

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Product Design and Technology
New Product Enabling Technology Outcome
Antilock brakes Microprocessor Safer automobiles
Lasik eye surgery Laser Faster recovery and fewer complications
Online banking services Microcomputer, Internet, and telecommunications Convenient, twenty-four-hour service from home or work
Nationwide reservation system for hotels, airlines, etc. Large-scale database Make reservations from anywhere in country
Plastic bottles versus glass bottles Injection molding Cheaper and lighter containers as well as less breakage
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Process Design and Technology
New Process Enabling Technology Outcome
Creating a research paper with Microsoft Word Microcomputer Easy to change text and tables, many fonts, easy storage and retrieval of documents
Punching a hole in a steel plate versus drilling a hole Punch press Takes less time to make the hole
Using Power Point software for presentations versus overhead projector Microcomputer and video graphic Ability to deliver information with words and pictures, easy and inexpensive to update and to distribute
Delivering music via the Internet Internet, digital processing, and communication Easy to locate music and fast, low-cost downloads
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Operations and teamwork lead to better system
performance

• Organization can meet increasing demand for
  high-quality, low-cost products
• Labor gets continuing job opportunities
• Consumers more people can afford the product
• Management gets more sales and higher profits

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Global Trade and Competition

• Relative Advantage
• Creating Global Markets

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Relative Advantage

• Relative advantage -- the difference between
  the lowest cost producer and the next lowest cost
  producer.
• Relative advantage leads to the percentage of
  world production moving between nations, and
  creating Global Markets.

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Changing Global Environment

• North American Free Trade Agreement (NAFTA)
• General Agreement on Tariffs and Trade (GATT)
• Shift from national markets to global markets

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Understanding the Systems Approach to Operations

• A system is a group of items, events, or actions
  in which no item, event, or action occurs
  independently.
• Understanding the relationship among the various
  subsystems is an integral part of the study of
  operations management.

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A Systems View of Operations, the Organization,
and the Organizations Environment
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In order to design, plan, and manage operations
effectively, managers should be aware that

• An organization is part of the global economic
  and government system.
• Operations are an integral part of the
  organization.
• Operations are composed of a series of related
  subsystems.

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The Organization as Part of the Economic and
Government System
FACTOR INTEREST GROUP IMPACT OF OPERATING DECISIONS
Wage rates and working conditions Labor and middle management Good working conditions and fair wages can be positive factors in employee performance.
Pollution General public Well-managed operations should not cause pollution.
Product safety Consumers When products are well designed, consumers are safer and more satisfied.
Global competition Stockholders, labor, and middle management When operations are well managed, costs are not excessive. If this is coupled with high quality, the organization becomes competitive.
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Legal and Ethical Issues in Operations

• Labor Relations
• Environmental Impact
• Product Safety
• Ethical Behavior
• Impact of Ethical Behavior on Performance

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Operations as Part of the Organization

• Strategy
• Organizational Structure
• Operations and Marketing Interface
• Business Processes versus Business Functions

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The Operations andMarketing Interface
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Marketing and Operations are Important Subsystems
in an Organization
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Relationship Between Functions, Process, and
Outcomes
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Operations can be divided into different parts
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Operations can be divided into different parts--
Continued
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Framework forOperations Management