Lecture Outline Chapter 17

Chapter 17
Operations Management: Putting It All Together

Slide 1

Operations management is concerned with converting inputs into outputs to maximize profits for an
organization. However, business experts say that operations are managed depending on the nature of the
products or services that an organization provides. This chapter will cover Operations Management:
Putting It All Together.

Slide 2

Operations Management is managing all of the activities involved in creating value by producing
goods and services and distributing them to customers. The decisions taken by an operations
manager have a direct impact on the firm’s overall profitability. In addition to that a good operations
manager is able to get the right goods and services to reach the right customers at the right time. In
this way, the costs can be lowered and high quality can be maintained.

Slide 3

According to our text, operations management has changed from a focus on efficiency to a focus on
effectiveness. To operations manager, efficiency means producing a product at the lowest cost.
Effectiveness means producing products that create value by providing customers with goods and
services that offer a better relationship between price and perceived benefits. In other words,
effectiveness means finding ways to give customers more for their money—while still making a
profit. This slide summarizes the key points related to the changes experienced by operations
management over the past few years from 1962 to 2012. In those 50 years operations management
went from a focus on minimizing costs to focus on creating value; from goods to services; from mass
production to mass customization; from simple supply chains to complex value chains and from
exploiting the environment to sustaining the environment.

There were several factors that caused this change:

Improvements in production and information technologies, rise of global competition and global
opportunities; recognition of quality as a source of completive advantage; adoption of marketing
perspective and customer focus, and recognition of serious environmental problems.

Slide 4

An operations manager is often called an “efficiency whisperer.” His primary objective is to enhance
the efficiency of operations and has an impact on various other departments in the business. The
duties of an operations manager are extremely important and the decisions made directly impact
the growth and functioning of a business.

During the product-design process, operations managers provide important information and advice.
It is related to constraints and challenges faced while creating the product on time and staying
within the budget. The main responsibilities of the operation’s manager include, , l, , and.

Slide 5

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 Lecture Outline Chapter 17

Let’s look at each of these individually. First, is process selection and facility layout. Operations
managers need to determine the processes that are required to produce the product and reach the
customers once it has been designed.

Slide 6

After the product is designed operations managers need to determine the best possible way to
produce it. This process involves the design of the product layout, process layout, cellular layout, and
fixed position layout. Processes that are well-designed help firms produce products that have high
quality that can be produced in an effective and efficient manner. It gives firms a competitive edge
over others. On the other hand, processes that are poorly designed tend to produce delays,
problems related to quality, and increase costs.

Slide 7

The second main responsibility is the facility location. This slide shows the various factors that affect
decisions related to location. Land, labor market conditions, and transportation factors are a few
factors that affect location decisions.

Slide 8

The third main responsibility is inventory control. Usually, manufacturing firms use inventories to
keep track of the work in progress, raw material, and finished goods. However, retail firms use
inventories of its finished goods and basic supplies.
There are a number of costs and benefits that are related to the amount of inventory. For this
reason, it is essential that operations managers need to determine the best amount of inventory
while comparing costs and relate it to the various inventory levels.

Slide 9

The next responsibility is project scheduling. Project scheduling is vital as it helps avert cost
overruns or any major delays. An important tool that helps operations managers handle projects is
the critical path method (CPM).
Activities that have to be completed before the commencement of new activities are referred to as
immediate predecessors.
The longest path taken to complete a sequence of activities is referred to as the critical path.

Slide 10

As an operations manager, it is imperative you are able to schedule the projects effectively. One of
the most important tools that operations managers use to manage projects is critical path method
or CPM. Let’s take a look at CMP. This slide shows the various activities that are involved while
presenting a play.

Slide 11

This slide shows a CPM network that is used for staging a play. It also illustrates some of the basic
concepts that have been used in CPM analysis. This shows the items that must be completed before
the next step can be done. The arrows indicate the predecessors for the next activity. You see the
arrows show the links that require one step to be completed before you can move to the next step.
The path that will take the longest amount of time to complete is the critical path. This path must

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 Lecture Outline Chapter 17

remain on schedule for the project to be completed according to the deadline. The other paths have
some flexibility, but not the critical path.
Looking at the play example, you can see that the first step is to select the play. Then you have the
next 3 items occurring that the same time. The cast is selected, the set is designed, and the
costumes are designed. To complete C (design set) you must continue on to buy set materials and
then to build sets. These align with buy costumes. Do you see how you can see the paths and if one
does not happen, it causes the next step to be started late. On the critical path line, if something is
delayed the play will not be ready to go to at the desired time.

Slide 12

Another responsibility of the operation’s manager is designing and managing value chains. This is
probably the most important function of operations management. It is because it includes all the
activities right from the raw material stage to when it reaches the customer. A value chain is the
network of relationships that channels the flow of inputs, information, and financial resources
through all of the processes directly or indirectly involved in producing goods and services and
distribution them to customers. A vertical integration is the performance of processes internally
that were previously performed by other organizations within a supply chain.
Operations managers need to examine the trade-off between outsourcing and vertical integration
when value chains are designed.

Slide 13

The opposite function of vertical integration is referred to as outsourcing, where a firm’s value chain
functions are performed by another organization.
When processes that were performed domestically are shifted to foreign locations, it is referred to
as offshoring.
Enterprise resource planning focuses on integrating information from all aspects of an organization’s
operations helping the entire value or supply chain.

Slide 14

“One customer well taken care of could be more valuable than $10,000 worth of advertising.” – Jim
Rohn, American entrepreneur, author, and motivational speaker. The quote focuses on how
important good service is to a business. We have discussed the differences between goods and
services in a previous chapter, but here is a nice condensed table.

Slide 15

It is essential that firms should have well-designed servicescapes as it has a positive influence on the
customer’s perceptions and attitudes as well as on the service provider. Servicescape is a concept
that many students don’t understand. Servicescape is the environment in which a customer and
service provider interact. There are three main factors that need to be considered when looking at
the servicescape: ambience, functionality, signs, symbols, and artifacts.
The ambience includes factors such as décor, background, music, lighting, noise levels, and even
more. The functionality refers to how easy it is for the customer to move through the facility and
find what they are looking for. Signs, symbols, and artifacts convey information to customers and
create impressions.

Slide 16

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 Lecture Outline Chapter 17

That completes Chapter 17 Part 1. You are now ready to go complete the self-check and then
continue viewing Chapter 17 Part 2 video.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part