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Quan 4640

Quan 4640. Course Introduction. What Is Operations Management?. Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs. Production is the creation of goods and services.

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Quan 4640

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  1. Quan 4640 Course Introduction

  2. What Is Operations Management? Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs Productionis the creation of goods and services

  3. Organizing to Produce Goods and Services • Essential functions: • Marketing – generates demand • Production/operations– creates the product • Finance/accounting– tracks how well the organization is doing, pays bills, collects the money

  4. Productivity Challenge Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital) The objective is to improve productivity! Important Note! Production is a measure of output only and not a measure of efficiency

  5. Transformation Outputs Inputs The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase in productivity per year. The productivity increase is the result of a mix of capital (38% of 2.5%), labor (10% of 2.5%), and management (52% of 2.5%). Goods andservices Labor,capital,management Feedback loop The Economic System Figure 1.6

  6. DIFFERENTIATION: Innovative design Safeskin’s innovative gloves Broad product line Fidelity Security’s mutual funds After-sales service Caterpillar’s heavy equipment service Experience Hard Rock Café’s dining experience COST LEADERSHIP: Low overhead Franz-Colruyt’s warehouse-type stores Effective capacity Southwest Airline’s use aircraft utilization Inventory Walmart’s sophisticated management distribution system RESPONSE: Flexibility Hewlett-Packard’s response to volatile world market Reliability FedEx’s “absolutely, positively, on time” Quickness Pizza Hut’s 5-minute guarantee at lunchtime Product Quality Process Location Layout Human resource Supply chain Inventory Scheduling Maintenance Differentiation (better) Response (faster) Cost leadership (cheaper) OM’s Contribution to Strategy 10 Operations Competitive Decisions Strategy Example Advantage Figure 2.4

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