1.OM. Chapter 1
1.OM. Chapter 1
1.OM. Chapter 1
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LEARNING OUTCOME
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1.1 INTRODUCTION
• Operations is that part of a business organization that is responsible for
producing goods and/ or services.
• Services: Activities that provide some combination of time, location, form, and
psychological value
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1.1 INTRODUCTION
• The three basic functions of business organizations
Organization
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PRODUCTION & OPERATION
Value-added
The operations function involves systems for converting inputs into outputs
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1.1 INTRODUCTION
• Illustrations of the transformation process
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1.2 PRODUCTION OF GOODS VERSUS PROVIDING SERVICES
• Production of goods results in a tangible output, such as an automobile,
eyeglasses, a golf ball, a refrigerator—anything that we can see or touch.
• The delivery of a service generally implies an act: TV and auto repair, lawn
care, and the projection of a film in a theater, healthcare, Shipping and
delivery
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1.2 PRODUCTION OF GOODS VERSUS PROVIDING SERVICES
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1.3 SCOPE OF OPERATIONS MANAGEMENT
• The operation functions includes many interrelated activities such as:
✓ Forecasting
✓ Capacity planning
✓ Locating facilities
✓ Facilities and layout
✓ Scheduling
✓ Managing inventories
✓ Assuring quality
✓ Motivating and training employees
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1.4 TYPE OF OPERATIONS
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
• Most decisions involve many possible alternatives that can have quite different
impacts on costs or profits.
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
• Quantitative Approaches
• Performance Metrics
• Analysis of Trade-Offs
• Degree of Customization
• A Systems Perspective
• Establishing Priorities
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
a) Models
• Model are often a key tool used by all decision makers.
✓ Physical model: look like their real-life counterparts. Ex: miniature cars, trucks,
airplanes, toy animals and trains, and scale-model buildings
✓ Schematic model: look less like their real-life counterparts than physical
model. Ex: include graphs and charts, blueprints, pictures, and drawings
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
a) Models
• Models are beneficial because they:
1. Are generally easy to use and less expensive than dealing directly with the actual situation.
2. Require users to organize and sometimes quantify information and, in the process, often
indicate areas where additional information is needed.
5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a
problem.
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
a) Models
• Models have certain limitations:
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
b) Quantitative Approaches
✓ linear programming,
✓ Queuing techniques
✓ Inventory models
✓ Forecasting techniques
✓ Statistical model
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
d) Analysis of Trade-Offs
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
e) Degree of Customization
• Offering highly customized products or services => involves more labor, time, skilled
personnel, and flexible equipment
• Customized processes typically have lower output volume but command higher prices
• The level of customization not only influences operations and supply chains but also
extends its impact to marketing, sales, accounting, finance, and information systems.
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
f) A Systems Perspective
• The systems approach highlights interrelationships, emphasizing that the whole is greater
than the sum of its parts
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1.5 OPERATIONS MANAGEMENT AND DECISION MAKING
g) Establishing Priorities
• In virtually every situation, certain issues or items are more important than others
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