INTRODUCTION to Operations Management Chapter 1, The Operations Function.

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2 INTRODUCTION to Operations Management Chapter 1, The Operations Function

3 Chapter Outline Definition of Operations Management Decisions at Pizza U.S.A. Operations Decisions - A Framework Cross-Functional Decision Making Operations as a System Contemporary Operations Themes

4 Definition of Operations Management Operations is responsible for supplying the product or service of the organization. Operations managers make decisions regarding the operations function and its connection with other functions. Operations managers plan and control the production process and its interfaces within the organization and with the external environment.

5 Key Points in OM Definition  Decisions the operations manager must make  Functions in the organization.  Process for producing goods and services

6 Major Decisions at Pizza USA A Framework for OM Process –How to produce & deliver Quality –Criteria, measurement & process for achieving Capacity –Physical facilities & labor Inventory –What, when & how much?

7 Cross-Functional Decision Making Operations as the primary function. Other primary functions: –Marketing –Finance Supporting functions: all others Major cross-functional decisions (See Table 1.1)

8 Operations as a Process Transformation (Conversion) Process InputOutput

9 Operations as a Process Transformation Fabrication InputOutput Transformation Assembly Fabrication: making the parts Assembly: putting the parts together

10 Operations as a Process (Figure 1.1) Transformation (Conversion) Process Energy Materials Labor Capital Information Goods or Services Feedback information for control of process inputs and process technology

11 Relation of Operations to its Environment (Figure 1.2) Operations transformation system Suppliers Human Resources Marketing AccountingFinanceMIS Engineering SOCIET Y GOVERNMENT External Environment CUSTOMERS COMPETITORS

12 Contemporary Operations Themes Service and Manufacturing (differences and implications) Customer-Directed Operations Time Reduction (Lean Operations) Integration of Operations and Other Functions Environmental Concerns Supply Chain Management Globalization of Operations

13 Environmental Concerns “Volkswagen, Germany’s biggest car maker, was reported to be setting aside DM1 billion ($470m) to pay for compliance with a European directive that will come into force in 2007 forcing car makers to pay for recycling their vehicles. New cars will be required to be 85% recyclable.” --The Economist, 15 February 2001

14 Globalization: Who took my job? Early 1990s Small town near Charlotte, NC Aluminum smelter closed after 50 years Only significant industry in town In many families, several generations had worked there. Now all out of work. Who caused it to close?

15 Miklós Németh WHO!?!?!?

16 U.S. production of aluminum dropped dramatically in the early 1990s because the Russians dumped aluminum on the world market. Why? The opening of the Hungarian border, 2 May 1989, led to the fall of the Berlin Wall in November, 1989, which led to the breakup of the Soviet Union in 1991, which caused them to downsize their military, which gave them overcapacity in aluminum production, which caused them to dump in the world markets, which led to the closing of U.S. smelters such as the one near Charlotte, NC.

17 Miklós Németh Was the Hungarian Prime Minister who opened the border on 2 May 1989.

18 Moral of the Story In an age of globalization, you never know who will be the competition or who is doing something that will affect your job or your life. The aluminum workers in NC had never heard of Miklós Németh, but he ultimately cost them their jobs.

19 Summary Definition of Operations Management Decisions at Pizza U.S.A. Operations Decisions - A Framework Cross-Functional Decision Making Operations as a System Contemporary Operations Themes

20 End of Chapter One