Chapter 1: Introduction to Operations Management

In a business organization, the organization can be thought of as a system composed of subsystems

(e.g., marketing subsystem, operations subsystem, finance subsystem), which in turn are composed of lower subsystems.

Degree of customer contact

*) Many services involve a high degree of customer contact, although services such as Internet providers, utilities, and mail service do not. *) When there is a high degree of contact, the interaction between server and customer becomes a "moment of truth" that will be judged by the customer every time the service occurs.

Amount of inventory

*) Many services tend to involve less use of inventory than manufacturing operations, so the costs of having inventory on hand are lower than they are for manufacturing. *) However, unlike manufactured goods, services cannot be stored. Instead, they must be provided "on demand."

Scope of Operations Management

*) Operations management people are involved in product and service design, process selection, selection and management of technology, design of work systems, location planning, facilities planning, and quality improvement of the organization's products or services. *) The operations function includes many interrelated activities, such as forecasting, capacity planning, scheduling, managing inventories, assuring quality, motivating employees, deciding where to locate facilities, and more. *) example: airline

Information technology (IT)

*) Refers to the science and use of computers and other electronic equipment to store, process, and send information. *) Information technology is heavily ingrained in today's business operations. *) This includes electronic data processing, the use of bar codes to identify and track goods, obtaining point-of-sale information, data transmission, the Internet, e-commerce, e-mail, and more.

Uniformity of output

*) Service are often subject to a higher degree of variability of output. *) Manufacturing operation have a greater ability to control the variability of output.

WHY LEARN ABOUT OPERATIONS MANAGEMENT?

*) This is because every aspect of business affects or is affected by operations. *) Many service jobs are closely related to operations Financial services Marketing services Accounting services Information services *) Working together successfully means that all members of the organization understand not only their own role, but they also understand the roles of others. *) There is a significant amount of interaction and collaboration amongst the functional areas. *) It provides an excellent vehicle for understanding the world in which we live.

Process Variation

*) Variation occurs in all business processes. It can be due to variety or variability. 1. The variety of goods or services being offered. The greater the variety of goods and services, the greater the variation in production or service requirements. 2. Structural variation in demand. These variations, which include trends and seasonal variations, are generally predictable. They are particularly important for capacity planning. 3. Random variation. This natural variability is present to some extent in all processes, as well as in demand for services and products, and it cannot generally be influenced by managers. 4. Assignable variation. These variations are caused by defective inputs, incorrect work methods, out-of-adjustment equipment, and so on. This type of variation can be reduced or eliminated by analysis and corrective action. *) Variations can be disruptive to operations and supply chain processes. They may result in additional costs, delays and shortages, poor quality, and inefficient work systems.

Goods

*) are physical items that include raw materials, parts, subassemblies, and final products. Example: 1. Automobile 2. Computer 3. Oven 4. Shampoo

The systems approach

*) emphasizes interrelationships among subsystems *) but its main theme is that the whole is greater than the sum of its individual parts. *) the output and objectives of the organization as a whole take precedence over those of any one subsystem. *) A systems approach is essential whenever something is being designed, redesigned, implemented, improved, or otherwise changed.

System Design Decisions

*) involves decisions that relate to system capacity, the geographic location of facilities, arrangement of departments and placement of equipment within physical structures, product and service planning, and acquisition of equipment. *) These are typically strategic decisions that usually require 1. long-term commitment of resources 2. determine parameters of system operation

Historical Evolution of OM

1. Industrial Revolution 2. Scientific Management 3. Human Relations Movement 4. Decision Models and Management Science 5. Influence of Japanese Manufacturers

Production of Goods versus Delivery of Services "Goods"

1. 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.

Supply chain sequences

1. The sequence begins with basic suppliers of raw materials and extends all the way to the final customer. 2. Facilities might include warehouses, factories, processing centers, offices, distribution centers, and retail outlets. 3. Functions and activities include forecasting, purchasing, inventory management, information management, quality assurance, scheduling, production, distribution, delivery, and customer service. *) Notice that the value of the product increases as it moves through the supply chain.

Three categories of business processes:

1. Upper-management processes. These govern the operation of the entire organization. Examples include organizational governance and organizational strategy. 2. Operational processes. These are the core processes that make up the value stream. Examples include purchasing, production and/or service, marketing, and sales. 3. Supporting processes. These support the core processes. Examples include accounting, human resources, and IT (information technology).

Production of Goods versus Delivery of Services "Services"

1. intangible output.

Supply Chain

A sequence of activities and organizations involved in producing and delivering a good or service.

Input such as

Capital, labor, and information are used to create goods or services

E-commerce

Consumer-to business transactions.

Output

Goods or Services

Process

One or more actions that transform inputs into outputs.

Interchangeable parts

Parts of a product made to such precision that they do not have to be custom fitted.

Lean system

System that uses minimal amounts of resources to produce a high volume of high quality goods with some variety.

Agility

The ability of an organization to respond quickly to demands or opportunities.

Conversion system

The operations function involves the conversion of inputs into outputs

What is operations?

The part of a business organization that is responsible for producing goods or services.

System Operation Decisions

These are generally tactical and operational decisions *) Management of personnel *) Inventory management and control *) Scheduling *) Project management *) Quality assurance # Operations managers spend more time on system operation decision than any other decision area. 1. They still have a vital stake in system design.

Feedback

To ensure that the desired outputs are obtained, an organization takes measurements at various points in the transformation process.

Locating facilities

according to managers' decisions on which cities to provide service for, where to locate maintenance facilities, and where to locate major and minor hubs.

A system

can be defined as a set of interrelated parts that must work together

Control

compares them with previously established standards to determine whether corrective action is needed.

Marketing is responsible

for assessing consumer wants and needs, and selling and promoting the organization's goods or services.

Operations is responsible

for producing the goods or providing the services offered by the organization. *) Operations management is responsible for managing that core.

Scheduling

of planes for flights and for routine maintenance; scheduling of pilots and flight attendants; and scheduling of ground crews, counter staff, and baggage handlers.

Managing inventories

of such items as foods and beverages, first-aid equipment, inflight magazines, pillows and blankets, and life preservers.

Marketing's focus is on

on selling and/or promoting the goods or services of an organization. Marketing is also responsible for assessing customer wants and needs, and for communicating those to operations people (short term) and to design people (long term).

In profit organizations, the value of outputs is measured by

the prices that customers are willing to pay for those goods or services.

Evaluation of work - Wage

*) Manufacturing jobs are often well paid, and have less wage variation than service jobs, which can range from highly paid professional services to minimum-wage workers.

Quantitative Methods

*) A decision making approach that frequently seeks to obtain a mathematically optimal solution *Linear programming* and related mathematical techniques are widely used for optimum allocation of scarce resources. *Queuing techniques* are useful for analyzing situations in which waiting lines form. *Inventory models* are widely used to control inventories. *Project models* such as PERT (program evaluation and review technique) and CPM (critical path method) are useful for planning, coordinating, and controlling large-scale projects. *Forecasting techniques* are widely used in planning and scheduling. *Statistical models* are currently used in many areas of decision making.

Influence of Japanese Manufacturers

*) A number of Japanese manufacturers developed or refined management practices that increased the productivity of their operations and the quality of their products, due in part to the influence of Americans W. Edwards Deming and Joseph Juran. *) Their approaches emphasized quality and continual improvement, worker teams and empowerment, and achieving customer satisfaction. *) The Japanese can be credited with spawning the "quality revolution" that occurred in industrialized countries, and with generating widespread interest in lean production. *) The influence of the Japanese on U.S. manufacturing and service companies has been enormous and promises to continue for the foreseeable future. *) Credited with fueling the "quality revolution *) Just-in-Time production.

Services

*) Activities that provide some combination of time, location, from, and psychological value. *) Example: Every book you read, every video you watch, every e-mail you send, every telephone conversation you have, and every medical treatment you receive. 1. Air travel 2. Education 3. Haircut 4. Legal counsel

Performance Metrics

*) All managers use metrics to manage and control operations. *) There are many metrics in use, including those related to profits, costs, quality, productivity, flexibility, assets, inventories, schedules, and forecast accuracy.

4. Competitive pressures.

*) Competitive pressures have led to an increasing number of new products, shorter product development cycles, and increased demand for customization. *) And in some industries, most notably consumer electronics, product life cycles are relatively short. *) Added to this are adoption of quick-response strategies and efforts to reduce lead times.

1. The need to improve operations.

*) During the last decade, many organizations adopted practices such as lean operation and total quality management (TQM). *) As a result, they were able to achieve improved quality while wringing much of the excess costs out of their systems. *) Although there is still room for improvement, for many organizations, the major gains have been realized. *) Opportunity now lies largely with procurement, distribution, and logistics—the supply chain.

Business organizations have three basic functional areas

*) Finance, Marketing, and Operations. It doesn't matter whether the business is a retail store, a hospital, a manufacturing firm, a car wash, or some other type of business; all business organizations have these three basic functions.

Innovating

*) Finding new or improved products or services are only two of the many possibilities that can provide value to an organization. *) Innovations can be made in processes, the use of the Internet, or the supply chain that reduce costs, increase productivity, expand markets, or improve customer service.

Scientific Management - contributors

*) Frank Gilbreth was an industrial engineer who is often referred to as the father of motion study. He developed principles of motion economy that could be applied to incredibly small portions of a task. *) Henry Gantt recognized the value of nonmonetary rewards to motivate workers, and developed a widely used system for scheduling, called Gantt charts. *) Harrington Emerson applied Taylor's ideas to organization structure and encouraged the use of experts to improve organizational efficiency. He testified in a congressional hearing that railroads could save a million dollars a day by applying principles of scientific management. *) Henry Ford, the great industrialist, employed scientific management techniques in his factories.

Managing a Process to Meet Demand

*) Ideally, the capacity of a process will be such that its output just matches demand. *) Excess capacity is wasteful and costly; too little capacity means dissatisfied customers and lost revenue. *) Having the right capacity requires having accurate forecasts of demand, the ability to translate forecasts into capacity requirements, and a process in place capable of meeting expected demand.

5. Increasing globalization.

*) Increasing globalization has expanded the physical length of supply chains. *) A global supply chain increases the challenges of managing a supply chain. *) Having far-flung customers and/or suppliers means longer lead times and greater opportunities for disruption of deliveries. *) Often currency differences and monetary fluctuations are factors, as well as language and cultural differences. *) Also, tightened border security in some instances has slowed shipments of goods.

8. The need to manage inventories.

*) Inventories play a major role in the success or failure of a supply chain, so it is important to coordinate inventory levels throughout a supply chain. *) Shortages can severely disrupt the timely flow of work and have far-reaching impacts, while excess inventories add unnecessary costs. *) It would not be unusual to find inventory shortages in some parts of a supply chain and excess inventories in other parts of the same supply chain.

Managing Services is Challenging

*) Jobs in services are often less structured than in manufacturing. *) Customer contact is generally much higher in services compared to manufacturing. *) In many services, worker skill levels are low compared to those of manufacturing employees. *) Services are adding many new workers in low-skill, entry-level positions. *) Employee turnover is high in services, especially in low-skill jobs. *) Input variability tends to be higher in many service environments than in manufacturing. *) Service performance can be adversely affected by many factors outside of the manager's control (e.g., employee and customer attitudes).

Competing in a global economy

*) Low labor costs in third-world countries have increased pressure to reduce labor costs. *) Companies must carefully weigh their options, which include outsourcing some or all of their operations to low-wage areas, reducing costs internally, changing designs, and working to improve productivity.

Key Issues for Operations Managers Today

- Economic conditions - Innovating - Quality problems - Risk management - Competing in a global economy

Measurement of productivity

*) Measurement of productivity can be more difficult for service jobs due largely to the high variations of inputs. *) Thus, one doctor might have a higher level of routine cases to deal with, while another might have more difficult cases. *) Unless a careful analysis is conducted, it may appear that the doctor with the difficult cases has a much lower productivity than the one with the routine cases.

2. Increasing levels of outsourcing.

*) Organizations are increasing their levels of outsourcing, buying goods or services instead of producing or providing them themselves. *) As outsourcing increases, organizations are spending increasing amounts on supply-related activities (wrapping, packaging, moving, loading and unloading, and sorting). *) A significant amount of the cost and time spent on these and other related activities may be unnecessary. Issues with imported products, including tainted food products, toothpaste, and pet foods, as well as unsafe tires and toys, have led to questions of liability and the need for companies to take responsibility for monitoring the safety of outsourced goods.

Models are sometimes classified as physical, schematic, or mathematical:

*) Physical models look like their real-life counterparts. Examples include miniature cars, trucks, airplanes, toy animals and trains, and scale-model buildings. @ The advantage of these models is their visual correspondence with reality. *) Schematic models are more abstract than their physical counterparts; that is, they have less resemblance to the physical reality. Examples include graphs and charts, blueprints, pictures, and drawings. The advantage of schematic models is that they are often relatively simple to construct and change. @ Moreover, they have some degree of visual correspondence. *) Mathematical models are the most abstract: They do not look at all like their real-life counterparts. Examples include numbers, formulas, and symbols. @ These models are usually the easiest to manipulate, and they are important forms of inputs for computers and calculators.

Ability to patent design

*) Product designs are often easier to patent than service designs, and some services cannot be patented, making them easier for competitors to copy.

A number of other areas are part of, or support, the operations function. They include purchasing, industrial engineering, distribution, and maintenance.

*) Purchasing has responsibility for procurement of materials, supplies, and equipment. Close contact with operations is necessary to ensure correct quantities and timing of purchases. The purchasing department is often called on to evaluate vendors for quality, reliability, service, price, and ability to adjust to changing demand. Purchasing is also involved in receiving and inspecting the purchased goods. *) Industrial engineering is often concerned with scheduling, performance standards, work methods, quality control, and material handling. *) Distribution involves the shipping of goods to warehouses, retail outlets, or final customers. *) Maintenance is responsible for general upkeep and repair of equipment, buildings and grounds, heating and air-conditioning; removing toxic wastes; parking; and perhaps security.

Quality assurance

*) Quality assurance is usually more challenging for services due to the higher variation in input, and because delivery and consumption occur at the same time. *) Unlike manufacturing, which typically occurs away from the customer and allows mistakes that are identified to be corrected, services have less opportunity to avoid exposing the customer to mistakes.

Process technology

*) Refers to methods, procedures, and equipment used to produce goods and provide services. *) They include not only processes within an organization but also supply chain processes.

Sustainability

*) Refers to service and production processes that use resources in ways that do not harm ecological systems that support both current and future human existence. *) Sustainability measures often go beyond traditional environmental and economic measures to include measures that incorporate social criteria in decision making.

Product and service technology

*) Refers to the discovery and development of new products and services. *) This is done mainly by researchers and engineers, who use the scientific approach to develop new knowledge and translate that into commercial applications.

Uniformity of input

*) Service operations are often subject to a higher degree of variability of inputs. *) Each client, patient, customer, repair job, and so on presents a somewhat unique situation that requires assessment and flexibility. *) Conversely, manufacturing operations often have a greater ability to control the variability of inputs, which leads to more-uniform job requirements.

Production and delivery

*) Services deliver and consume at the same time. *) Unlike manufacturing

Labor content of jobs

*) Services often have a higher degree of labor content than manufacturing jobs do, although automated services are an exception.

Role of the Operations Manager

*) The Operations Function consists of all activities directly related to producing goods or providing services. *) A primary function of an operations manager is to guide the system by decision making. *) Certain decisions affect the design of the system, and others affect the operation of the system.

OPERATIONS MANAGEMENT AND DECISION MAKING

*) The chief role of an operations manager is that of planner/decision maker. *) Most decisions involve many possible alternatives that can have quite different impacts on costs or profits. *) Consequently, it is important to make informed decisions.

Supply chains are both external and internal to the organization.

*) The external parts of a supply chain provide raw materials, parts, equipment, supplies, and/or other inputs to the organization, and they deliver outputs that are goods to the organization's customers. *) The internal parts of a supply chain are part of the operations function itself, supplying operations with parts and materials, performing work on products and/or services, and passing the work on to the next step in the process.

Immediate suppliers which led to numerous problems:

- Oscillating inventory levels - Inventory stockouts - Late deliveries - Quality problems

Decision Models & Management Science

*) The factory movement was accompanied by the development of several quantitative techniques. *) F. W. Harris developed one of the first models in 1915: a mathematical model for inventory order size. *) In the 1930s, three coworkers at Bell Telephone Labs, H. F. Dodge, H. G. Romig, and W. Shewhart, developed statistical procedures for sampling and quality control. *) In 1935, L.H.C. Tippett conducted studies that provided the groundwork for statistical-sampling theory. *) At first, these quantitative models were not widely used in industry. *) After the war, efforts to develop and refine quantitative tools for decision making continued, resulting in decision models for forecasting, inventory management, project management, and other areas of operations management. *) During the 1960s and 1970s, management science techniques were highly regarded; in the 1980s, they lost some favor. However, the widespread use of personal computers and user friendly software in the workplace contributed to a resurgence in the popularity of these techniques.

The Human Relations Movement

*) The human relations movement emphasized the importance of the human element in job design. *) Lillian Gilbreth, a psychologist and the wife of Frank Gilbreth, worked with her husband, focusing on the human factor in work. Many of her studies in the 1920s dealt with worker fatigue. *) Elton Mayo - Hawthorne studies on worker motivation, 1930 *) Abraham Maslow - motivation theory, 1940s; hierarchy of needs, 1954 *) Frederick Hertzberg - Two Factor Theory, 1959 *) Douglas McGregor - Theory X and Theory Y, 1960s William Ouchi - Theory Z, 198 > "Read more from the book"

Risk management.

*) The need for managing risk is underscored by recent events that include the crisis in housing, product recalls, oil spills, and natural and man-made disasters, and economic ups and downs. *) Managing risks starts with identifying risks, assessing vulnerability and potential damage (liability costs, reputation, demand), and taking steps to reduce or share risks.

Quality problems

*) The numerous operations failures mentioned at the beginning of the chapter underscore the need to improve the way operations are managed. *) That relates to product design and testing, oversight of suppliers, risk assessment, and timely response to potential problems.

Henry Ford also introduced

*) the moving assembly line: which had a tremendous impact on production methods in many industries. *) mass production: to the automotive industry, a system of production in which large volumes of standardized goods are produced by low-skilled or semiskilled workers using highly specialized, and often costly, equipment.

Benefits of Models

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. 3. Increase understanding of the problem. 4. Enable managers to analyze what-if questions. 5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem. 6. Enable users to bring the power of mathematics to bear on a problem.

Finance and operations management personnel cooperate by exchanging information and expertise in such activities as the following:

1. Budgeting. Budgets must be periodically prepared to plan financial requirements. Budgets must sometimes be adjusted, and performance relative to a budget must be evaluated. 2. Economic analysis of investment proposals. Evaluation of alternative investments in plant and equipment requires inputs from both operations and finance people. 3. Provision of funds. The necessary funding of operations and the amount and timing of funding can be important and even critical when funds are tight. Careful planning can help avoid cash-flow problems.

Elements of Supply Chain Management

1. Customers - what products/services do customers want 2. Forecasting - predicting timing and volume of customer demand 3. Design - incorporating customer wants, manufacturability, and time to market 4. Capacity planning - matching supply and demand 5. Processing - controlling quality, scheduling work 6. Inventory - meeting demand requirements while managing costs 7. Purchasing - evaluating potential suppliers, supporting the needs of operations on purchased goods and services 8. Suppliers - monitoring supplier quality, on-time delivery, and flexibility; maintaining supplier relations 9. Location - determining the location of facilities 10. Logistics - deciding how to best move information and materials

Manufacturing vs. Service

1. Degree of customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5.Measurement of productivity 6. Production and delivery 7. Quality assurance 8. Amount of inventory 9. Evaluation of work 10. Ability to patent design

All areas of business will be affected

1. Product and service design 2. Consumer education programs 3. Disaster preparation and response 4. Supply chain waste management 5. Outsourcing decisions

The following are three of the more important limitations:

1. Quantitative information may be emphasized at the expense of qualitative information. 2. Models may be incorrectly applied and the results misinterpreted. The widespread use of computerized models adds to this risk because highly sophisticated models may be placed in the hands of users who are not sufficiently knowledgeable to appreciate the subtleties of a particular model; thus, they are unable to fully comprehend the circumstances under which the model can be successfully employed. 3. The use of models does not guarantee good decisions.

Here is the one developed by the Markula Center for Applied Ethics:

1. Recognize an ethical issue by asking if an action could be damaging to a group or an individual. Is there more to it than just what is legal? 2. Make sure the pertinent facts are known, such as who will be impacted, and what options are available. 3. Evaluate the options by referring to each of the preceding five ethical principles. 4. Identify the "best" option and then further examine it by asking how someone you respect would view it. 5. In retrospect, consider the effect your decision had and what you can learn from it.

Supply and Demand

1. The ideal situation for a business organization is to achieve a match of supply and demand. 2. Supply > Demand is wasteful and means lost opportunity. 3. Supply < Demand is costly and possible customer dissatisfaction.

Supply Chain Issues

1. The need to improve operations 2. Increasing levels of outsourcing 3. Increasing transportation costs 4. Competitive pressures 5. Increasing globalization 6. Increasing importance of e-business 7. The complexity of supply chains 8. The need to manage inventories

Common features of models:

1. They are simplifications of real-life phenomena 2. They omit unimportant details of the real-life systems they mimic so that attention can be focused on the most important aspects of the real-life system

Six sigma

A process for reducing costs, improving quality, and increasing customer satisfaction.

Ethical framework

A sequence of steps intended to guide thinking and subsequent decision or action.

Ethics

A standard of behavior that guides how one should act in various situations.

Outsourcing

Buying goods or services instead of producing or providing them in-house.

Transformation processes

Converting inputs into outputs. *) it could be storing, transporting, repairing

It is important to note that goods and services often occur jointly.

For example, having the oil changed in your car is a service, but the oil that is delivered is a good. Similarly, house painting is a service, but the paint is a good.

The Industrial Revolution

In the earliest days of manufacturing, goods were produced using @ craft production: highly skilled workers using simple, flexible tools produced goods according to customer specifications *) Craft production had major shortcomings. Because products were made by skilled craftsmen who custom fitted parts, production was slow and costly. And when parts failed, the replacements also had to be custom made, which was also slow and costly *) Another shortcoming was that production costs did not decrease as volume increased; there were no economies of scale, which would have provided a major incentive for companies to expand.

The Need for Supply Chain Management

In the past, organizations did little to manage the supply chain beyond their own operations and

The goods-service combination is a continuum.

It can range from primarily goods, with little service, to primarily service, with few goods. *) companies usually sell product packages, which are a combination of goods and services which makes operations more interesting, and also more challenging.

Scientific Management

Movement was led by efficiency engineer, Frederick Winslow Taylor *) Believed in a "science of management" based on observation, measurement, analysis and improvement of work methods, and economic incentives *) Management should be responsible for planning, carefully selecting and training workers, finding the best way to perform each job, achieving cooperation between management and workers, and separating management activities from work activities. *) Emphasis was on maximizing output

7. The complexity of supply chains.

Supply chains are complex; they are dynamic, and they have many inherent uncertainties that can adversely affect them, such as inaccurate forecasts, late deliveries, substandard quality, equipment breakdowns, and canceled or changed orders.

Technology

The application of scientific discoveries to the development and improvement of goods and services.

Division of labor

The breaking up of a production process into small tasks, so that each worker performs a small portion of the overall job.

Value Added

The difference between the cost of inputs and the value or price of outputs. *) the greater the value-added, the greater the effectiveness of these operations. *) The greater the degree of customer involvement, the more challenging it can be to design and manage the operation. *) Technology choices can have a major impact on productivity, costs, flexibility, and quality and customer satisfaction.

6. Increasing importance of e-business.

The increasing importance of e-business has added new dimensions to business buying and selling and has presented new challenges

Economic conditions

The lingering recession and slow recovery in various sectors of the economy has made managers cautious about investment and rehiring workers that had been laid off during the recession.

Operations Management

The management of systems or processes that create goods and/or provide services. *) Convert RM, and Lapro (input) to product either goods or services.

3. Increasing transportation costs.

Transportation costs are increasing, and they need to be more carefully managed.

E-business

Use of the Internet to transact business.

Operations management professionals make a number of key decisions that affect the entire organization. These include the following:

What: What resources will be needed, and in what amounts? When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? When is corrective action needed? Where: Where will the work be done? How: How will the product or service be designed? How will the work be done (organization, methods, equipment)? How will resources be allocated? Who: Who will do the work?

Similarities between managing the production of products and managing services:

a. Forecasting and capacity planning to match supply and demand. b. Process management. c. Managing variations. d. Monitoring and controlling costs and productivity. e. Supply chain management. f. Location planning, inventory management, quality control, and scheduling.

Marketing and Operations

are the primary, or "line," functions.

Capacity planning

essential for the airline to maintain cash flow and make a reasonable profit. (Too few or too many planes, or even the right number of planes but in the wrong places, will hurt profits.)

Assuring quality

essential in flying and maintenance operations, where the emphasis is on safety, and important in dealing with customers at ticket counters, check-in, telephone and electronic reservations, and curb service, where the emphasis is on efficiency and courtesy.

Finance is responsible

for securing financial resources at favorable prices and allocating those resources throughout the organization, as well as budgeting, analyzing investment proposals, and providing funds for operations

Facilities and layout

important in achieving effective use of workers and equipment.

Motivation and training employees

in all phases of operations.

lead time

in order to give customers realistic estimates of how long it will take to fill their orders.

Model

is an abstraction of reality, a simplified representation of something. For example, a child's toy car is a model of a real automobile. *) Other examples of models include automobile test tracks and crash tests; formulas, graphs and charts; balance sheets and income statements; and financial ratios.

In non-profit organizations, the value of outputs is measured by

is their value to society

Forecasting

such things as weather and landing conditions, seat demand for flights, and the growth in air travel.

Operations managers, like all managers, have the responsibility to make ethical decisions. Ethical issues arise in many aspects of operations management, including:

• Financial statements: accurately representing the organization's financial condition. • Worker safety: providing adequate training, maintaining equipment in good working condition, maintaining a safe working environment. • Product safety: providing products that minimize the risk of injury to users or damage to property or the environment. • Quality: honoring warranties, avoiding hidden defects. • The environment: not doing things that will harm the environment. • The community: being a good neighbor. • Hiring and firing workers: avoiding false pretenses (e.g., promising a long-term job when that is not what is intended). • Closing facilities: taking into account the impact on a community, and honoring commitments that have been made. • Workers' rights: respecting workers' rights, dealing with workers' problems quickly and fairly.

Five principles for thinking ethically:

• The Utilitarian Principle is that the good done by an action or inaction should outweigh any harm it causes or might cause. An example is not allowing a person who has had too much to drink to drive. • The Rights Principle is that actions should respect and protect the moral rights of others. An example is not taking advantage of a vulnerable person. • The Fairness Principle is that equals should be held to, or evaluated by, the same standards. An example is equal pay for equal work. • The Common Good Principle is that actions should contribute to the common good of the community. An example is an ordinance on noise abatement. • The Virtue Principle is that actions should be consistent with certain ideal virtues. Examples include honesty, compassion, generosity, tolerance, fidelity, integrity, and self-control.