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CHAPTER 1
THE OPERATIONS FUNCTION
Teaching Notes
This chapter is aimed at providing an overall framework for the textbook and the
operations management field. The decision framework serves as a convenient way of organizing
students' thinking about major operations management decisions (process, quality, capacity, and
inventory). The cross-functional view of operations management is also introduced in this
chapter to provide relevance for the course. When operations management is related to
marketing and finance, as a major business function, the students more easily understand the role
of operations in business.
In teaching this chapter, I try to highlight the different approaches to the OM field and the
importance of cross-functional decision making. I also spend some time discussing the relative
importance of services and manufacturing. Finally, I illustrate major OM decisions in Pizza
U.S.A. and other types of businesses. Students may find the typical jobs in OM from
Monster.com interesting.
Some of the references that might be particularly helpful for different perspectives of the
field are the books by Chase, Aquilano and Jacobs (2006), Heizer and Render (2004), and
Stevenson (2005). The book by Wren (1993) provides a historical background of the evolution
of management thought.
Answers to Questions
1.
Operations management is ubiquitous, that is, ever present. Daily we come in contact
with various goods and services produced by the transformation of inputs to outputs
under the control of operations managers. Operations is a basic function along with
marketing and finance. Through the excellent operations, wealth can be created,
productivity improved and standard of living raised.
2.
Operations management is a broader term than production management, encompassing
service organizations as well as manufacturing. Operations management is also a more
recent term replacing the earlier term production management.
3.
Responsibilities differ among operations, marketing and finance managers. A marketing
manager identifies demand for goods or services and develops the market, whereas the
operations manager assures supply of the product. The finance manager acquires and
allocates the capital resources for the other functions. Similarities in the three functions
include managerial decision making and shared organizational goals.
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4.
Operations, marketing, and finance are primary functions of the organization. Human
recourses, information systems, and accounting are supporting functions that provide
support for the three primary functions. The operations manager applies analysis and
information provided by supporting functions and integrates them into an overall
framework of management. The focus of the operations manager, however, is on
decision problems rather than on the analytic methods.
5.
a.
The purpose of a college library is to make information available for research and
study to students and faculty. The product is the bundle of services provided
along with facilitating goods: Internet, books, microfilms, catalogs and indices.
Process -- facility layout considering book stacks, reference rooms, shelf access
vs. microfilm, computer access from off site, degree of computer use and
procedures for accessing and circulating information; job design and performance
evaluation are handled by senior librarians and supervisors within departments:
circulation, reference, acquisitions, documents.
Quality -- standards of the college library profession are adopted; quality measures
include: consulting staff hours to students ratio, rate of new book purchases,
number of complaints, student satisfaction.
Capacity -- forecasting of library user needs contributes to decisions on building
size, volume of space for study and materials, print acquisitions, staff hiring and
scheduling of shifts.
Inventory -- decisions concerning the number of books, microfilms, periodicals,
etc. to stock.
b.
The purpose of a hotel is to attract and satisfy overnight guests and
conventioneers. The product is the bundle of services and goods provided: maid
service, room service, television, pool, bar, coffee shop.
Process -- a set of processes for booking and payment of rooms, housekeeping,
restaurant, recreation services, and ongoing study of service methods; the people
who implement these processes including receptionists, accountants,
housekeepers, and maintenance workers.
Quality -- hotel industry standards and the market positioning of the hotel (first
class vs. budget) determine standards; quality measures include number of return
visitors, conventions booked, and ratings by industry evaluators.
Capacity -- number of units and beds; appropriate size for restaurant, bar and
convention halls; staffing for housekeeping, restaurant and office.
Inventory -- dependent demand inventories to meet requirements for room
upkeep, convention catering, restaurant and bar.
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c.
The purpose of a small manufacturing firm is to provide customers with a quality
product at a reasonable price. The product consists of not only the physical good
but also the service package, the utility it provides the consumer and the service it
performs.
Process -- usually job shop; the process of securing the raw materials,
transforming and assembling them into a finished good and packaging the
product; job design and establishment of employee benefits.
Quality -- definition of quality standards, measurement of deviations from design
standards, inspection and control of quality of input materials, prevention of
defects.
Capacity -- number of units the facility is capable of producing per unit time, size
of inventory storage, hiring of workers and scheduling of shifts.
Inventory -- finished goods, work-in-process, and raw materials to smooth
production and meet customer needs.
6.
a.
Operation -- college library
Inputs -- librarians, staff, library facilities and equipment, energy, capital.
Transformation process -- organizing information, arranging materials for access,
interacting with library users.
Outputs -- students and faculty provided with research and study materials.
b.
Operation -- hotel
Inputs -- facilities, staff, materials for housekeeping and food preparation,
communications equipment, energy, capital.
Transformation process -- taking reservations, check-in and check-out procedures,
providing other services.
Outputs -- customers satisfied with lodging and related services.
c.
Operation -- small manufacturing firm
Inputs -- raw material, workers, supervisors, management, warehouse,
manufacturing facilities and equipment, energy, capital.
Transformation process -- ordering raw materials, transforming and assembling
raw materials into final product, packaging product, taking supply orders.
Outputs – the product and customers satisfied with the way the product appears
and operates.
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7.
The decision-making view of operations management categorizes and defines decision
making for the operations function according to a given framework. The framework used
here, which conforms quite closely to the assignment of management responsibilities
within an operations organization includes the decision areas of Process, Quality,
Capacity, and Inventory.
The process view defines operations management as the management of a transformation
system. This system converts inputs, such as energy, materials, labor, capital, and
information, into outputs, in the form of goods and services, via the process technology.
Both views are useful as both include services as well as goods and both assign to
management the responsibility for managing the transformation process in the firm. The
difference in the views is one of emphasis: decision making versus process design.
8.
Answers will depend on the specific sources obtained by students.
9.
Answers will vary depending on the specific WSJ issue or Internet site.
10.
Because the operations system is in constant interaction with its environment, changes in
the environment may necessitate adaptations by the transformation system. Management
may alter the inputs, outputs, controls, or the transformation system itself.
Demand changes may cause operations managers to hire or lay off staff, initiate or restrict
overtime, change facilities capacity, increase or decrease equipment capacity, or expand
or tighten inventories.
New pollution control laws may cause operations managers to change process
technologies, facilities location decisions, or quality standards.
The changing value of the dollar may cause operations managers to expand or decrease
production of various product lines, change facilities location decisions, increase or
decrease inventories, or change capacity decisions. This is particularly true of product
lines subject to foreign competition or raw materials that are affected by currency
changes.
Price changes may cause operations managers to increase or decrease production volume,
change product mix, increase or decrease inventories, or change quality levels.
11.
Answers will vary depending on the specific sources used.
12.
Students are expected to choose one or two themes from contemporary operations
themes: service and manufacturing, customer-directed operations, lean operations,
integration of operations with other functions, environmental concerns, globalization of
operations, or supply chain management. Then they need to provide some critical
characteristics of these trends and to explain what their impact is on operations. Answers
will vary widely among students.
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