Operations Management - Defined

The Importance Of Operations Management

Operations management defined
The study and application of the transformation process

OM is important because it:

Encompasses processes in all organizationsservices as well as manufacturing. Is important in effectively and efficiently managing productivity. Plays a strategic role in an organizations competitive success.

Transformation and Organizations

Transformation process
The process through which an organization creates value by turning inputs (people, capital, equipment, materials) into outputs (goods or services)

Manufacturing organization
Organizations that produce physical goods

Service organization
An organization that produces nonphysical outputs such as educational, medical or transportation services

The Transformation Process

Exhibit 14.1

Productivity
Productivity defined
The overall output of goods and services produced divided by the inputs needed to generate that output.

Outputs Inputs

Benefits of high productivity

Fosters economic growth and development Increases individual wages without inflation Lowers costs and makes firms more competitive

Value and the Value Chain

Value
The performance characteristics, features and attributes, or any other aspects of goods and services for which customers are willing to give up resources.

Value chain
The entire series of organizational work activities that add value at each step beginning with the processing or raw materials and ending with a finished product in the hands of end users.

Value Chain Management versus Supply Chain Management

Value chain management
A method of improving the process of creating and transferring documents by automating the flow of information

Supply chain management

Management of the facilities, functions, and activities involved in producing and delivering a product or service, from suppliers to customers.

The Goals Of Value Chain Management

Creating customer-defined value by:
Providing a unique combination that truly meets customer needs and at a price that cant be matched by competitors. Having a sequence of participants work together as a team, each adding a component of value to the overall process.

Its all about providing value, not bargains, to the customer

Value Chain Management

Business model
A strategic design for how a company intends to profit from its broad array of strategies, processes, and activities.

Value chain management requirements

Coordination and collaboration Technology investment Organizational processes Leadership Employees/human resources management Strong culture and attitudes

Six Requirements for Successful Value Chain Management

Exhibit 14.2

Effect of Value Chain Management on Organizational Processes

Better demand forecasting is necessary and possible because of closer ties with customers and suppliers.
Selected functions may need to be done collaboratively with partners in the value chain. New measures are needed for evaluating the performance of activities along the value chain.

Implementing Value Chain Management

Benefits
Improved customer service Cost savings Accelerated delivery times Improved quality Inventory reduction Improved logistics management Increased sales Increased market share

Obstacles
Organizational barriers Cultural attitudes Required capabilities People

Obstacles to Successful Value Chain Management

Exhibit 14.4

Contemporary Operations Management Issues

Technology
How an organization will transform its inputs into outputs.

Just-in-time (JIT) inventory systems

How to develop systems in which inventory items arrive when needed in the production process instead of being stored in stock.

Quality and Operations Management

Quality control
Monitoring qualityweight, strength, consistency, color, taste, reliability, finish, or any one of myriad characteristicsto ensure that it meets some preestablished standard.

Continuous improvement
A comprehensive, customer-focused program to continuously improve the quality of the organizations processes, products and services.

Managing Projects
Project
One-time-only set of activities with a definite beginning and ending point in time

Project management
Task of getting the activities done on time, within budget, and according to specifications

Popular Scheduling Tools

Gantt chart
A planning tool that shows in bar graph form when tasks are supposed to be done and compares that with the actual progress on each task.

Load chart
As modified version of a Gantt Chart, the load chart lists either whole departments or specific resources.
This

information allows managers to plan and control for capacity utilization in the scheduling of individual work stations.

A Sample Gantt Chart

Exhibit 14.5