Chapter 1

1. Chapter 1 Introduction:Why Operations Management?

2. Learning Objectives • Describe the relationships among value, profitability, cost, processes, and capabilities • Describe the components of value • Differentiate between the resources that create value • Describe the changes in the business environment and the impact they have • Describe the external forces that affect the business • Explain the differences between service and product outputs • Explain why B2B and B2C customers may define value differently • Describe how operations concepts will affect you in your field

3. Why Operations Management Is Critical to a Career in Business • What is operations management? • “The management of resources used to create salable products and services.” • Why is it important to all business majors? • Businesses have broadened employee responsibilities • This creates a need for an “enterprise view” • College graduates face unpredictable future opportunities

4. A New Business Environment • Technological progress is moving at a tremendous rate • There are many new products and services in addition to old ones • Rapid change is the norm

5. A New Business Environment • Businesses try to break down the “silos” that used to define business functions.

6. Overview of the Resource/Profit Model • The Resource/Profit Model serves as an organizational model to put operations in a business context Exhibit 1.3 The Resource/Profit Model

7. Foundations for Success • Chapter 3 focuses on Strategy and Value • Strategy consists of decisions about the way the firm will try to add value. How will the firm’s resources be aligned? • Who are the customers? What do they want? How will value be delivered? • Value is determined by the customer • Value created must exceed the cost of creating it, or there will be no profitability. • Value is the basis upon which customers decide to purchase and the basis on which a business competes. • Chapter 2 is devoted to Profitability • It is the primary business objective • It measures the long-run productivity of the business • It is the outcome of effective strategy and value creation • Chapter 4 examines Processes • Processes are used to organize resources so that they create value • Effective Processes give rise to capabilities, which are valued by customers

8. Components of Value • Chapter 5 examines Cost • Cost is the amount of scarce resources (usually money) consumed to achieve an objective • Cost has a huge impact on the customer’s perception of value. • Chapters 6 and 7 are focused on Quality • Chapter 6 examines quality and its impact on value, while Chapter 7 presents the commonly-used tools associated with quality improvement. • The customer determines is a product or service is high quality. • Chapter 8 looks at Timeliness • Timeliness includes when and/or how fast something happens • Scheduling a project management are key topics • Timeliness has an impact on financial performance • Timeliness is also a part of value for customers

9. Managing Resources to Create Value • Chapter 10 examines Demand Forecasting • A projection of future demand is necessary to determine resource requirements and obtain them in the correct quantities, at the correct time, and at the lowest cost. • Supply Chain Management is the topic of Chapter 9 • SCM recognizes that decisions within one business affect suppliers and customers • Chapter 13 is devoted to Lean Systems • A productive system that functions with little waste or excess, usually with low • Chapter 11 covers Inventory • Materials used to produce goods and services • Raw, WIP, Finished Goods, MRO and Supplies • Logistics is the topic of Chapter 12 • Logistics is the movement and storage of goods in a supply chain.

10. Managing Resources to Create Value • Chapter 14 is devoted to Capacity • Capacity is the level of productive output in a specified period of time • Chapter 15 focuses on Constraint Management • Constraint Management is a framework for managing the constraints of a system in a way that maximizes the system’s accomplishment of its goals. • The topic of Chapter 17 is Workforce • The employees are a critical resource contributing to value creation • Chapter 16 is devoted to Facilities decisions. • Facilities are the land and buildings that house a business • The decisions include location and layout decisions

11. Environmental Forces • Environmental forces affect the business • Globalization • The Internet and Other Technologies • The Natural Environment • Regional Pressures

12. Business Outputs: Products and Services • Product Characteristics • Tangible • Easy to measure • Can be stored for later use • Quality can be assessed prior to customer delivery • Production processes are relatively unimportant to customers • Defective products can be repaired or scrapped • Service Characteristics • Intangible • Harder to measure • Cannot be stored for later use • Quality cannot be checked prior to delivery • Production processes can be very important to customers • Producers of defective services must attempt to recover to retain the customer

13. Continuum of Product andService Providers Mix of Product and Service • Retailer • Computer Manufacturer • Automobile Manufacturer • Restaurant • Car Rental Agency • Landscaping Firm • Print Shop Service Only • Advertising Firm • Brokerage • Bank • Prison • Tanning Salon • Hair Stylist Product Only • Furniture • Paint • Grocery Products • Steel Mill

14. The Type of Customer Determines the Value that Must be Created by the Business • B2B = Business-to-Business • B2C = Business-to-Consumer • Value differs from customer to customer Insert Exhibit 1.6 Exhibit 1.9 Business Output/Customer Matrix