The Importance Of Operations Management

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Lecture 1

Value Chain:
Factors of Production => Organize Human Resources  Operations ManagementManagement Information Systems Marketing Accounting Finance => $$$$$$$$$
The process of turning factors of production into saleable goods and services.
Transforming things Fabrication, Assembly, Chemical , Transportation
Production implies that we make products. Products are tangible goods.

Capacity Planning; forecast likely demand, are the facilities (shop, factory, warehouse, restaurant) big enough?
Location Planning: figure out best place to locate facility. Close to –skilled labour, market, suppliers, sources of capital
Layout Planning: Design the facility in a logical fashion
Scheduling: When is your facility open? Many services are “high contact”. Services cannot be stored.

Principal Topics Covered in this Lecture
Operations defined - making the good or service
Production vs. Operations - why we call it "operations"
Producing "goods" vs. "services" - why services more difficult to provide
What Operations Managers do

The Importance of Operations Management
Remember definition of business:
"An organised effort to produce something that customers will buy.... " Definition of "business" implies: ability to make / produce / provide / supply the things people want. Customers will pay money if product or service you offer provides benefits. But:
You must manage business in way that the product you claim to be offering is indeed what you offer. Trivial example: A coffee shop must be able to make coffee have it available around coffee time. Therefore:
Business must be able to make / produce / provide / supply good or services: on time, (when people want it) on budget, (at a price they can afford) on specification, (according to customers' needs).

Production management, or "operations" management is function of business concerned with producing things: as quickly, as cheaply, as reliably, as possible, to provide value or benefit to customers.

Operations Management - 2 useful definitions
The systematic direction and control of the processes that transform resources into finished goods
The management of the creation of goods and services using the factors of production: land, labour, capital, entrepreneurship Operations Create Value
Business is a "box" that takes factors of production (raw material, labour, capital) and transforms them into products or services which customers value.
Operations involve taking raw materials/other factors of production and adding value or utility.
Here's how you turn barley, and water, into beer: HOW TO MAKE BEER

Examples of operations
Fabrication: Cut something in half, bend it. Make a tree into paper.
Assembly: Put pieces/different ingredients together. Make bread and cheese into a sandwich.
Transport: Moving products/raw material from A to B. Move furniture from Halifax to Winnipeg.
Clerical: Add information/advice/packaging knowledge. Turn financial data into an investment analysis.
Chemical: Through heat/cold/mixture change material's composition.

Production" vs. "Operations" Management
"Production" implies "products" i.e. manufacturing.
"Operations" also applies to services.
Canada is service-oriented economy.
Approx. 80% of Canadian work force provide services.
Examples of services: financial services: providing loans, taking deposits, managing investments legal services: writing contracts, purchasing houses, consulting services: marketing consulting, head-hunting, software development