Chapter 1

Introduction to
Operations Management
IE 443 Production Systems
Definition
• Operations Management - the design, operation, and improvement of
productive systems.

• Operations - a function or system that transforms inputs into outputs

of greater value.

• Value Chain - a series of activities from supplier to customer that add

value to a product or service.
The Operations Function
Why Study OM?
• How people organize themselves for productive enterprise
• How goods and services produced
• Understand what operations manager do
• It is such a costly part of an organization
What Operations Managers Do
• Management Process (P-O-S-D-C)
• Decision Areas of OM
• Design of Goods and Services
• Managing Quality
• Process and Capacity Design
• Location Strategy
• Layout Strategy
• Human resource and Job Design
• Supply Chain Management
• Inventory, MRP, JIT
• Intermediate and Short-term Scheduling
• Maintenance
Significant Events in OM
• Early Concepts (1776 - 1880)
• Labor Specialization (Smith, Babbage)
• Standardized Parts (Whitney)

• Scientific Management Era (1880 – 1910)

• Gantt Chart (Gantt)
• Motion and Time Studies (Gilbreth)
• Process Analysis (Taylor)
• Queuing Theory
Significant Events in OM
• Mass Production Era (1910 – 1980)
• Moving Assembly Line (Ford, Sorensen)
• Statistical Sampling (Shewhart)
• Economic Order Quantity (Harris)
• Linear Programming, Pert/CPM (DuPont)
• MRP
Significant Events in OM
• Lean Production Era (1980 – 1995)
• JIT
• CAD
• Electronic Data Interchange
• TQM
• Baldrige Award
• Empowerment
• Kanbans
Significant Events in OM
• Mass Customization Era (1995 – 2015)
• Globalization
• Internet/E-Commerce
• Enterprise Resource Planning
• ISO
• Finite Scheduling
• SCM
• Build-to-Order
• Sustainability
Production vs Services
• Production – creation of goods and services
• Services – economic activities that produce an intangible products.
• Intangible
• Produced and consumed simultaneously
• Unique
• High customer interaction
• Inconsistent product definition
• Knowledge based
• Dispersed
Trends in OM
• Ethics
• Global Focus
• Rapid Product Development
• Environmentally Sensitive Production
• Mass Customization
• Empowered Employees
• Supply Chain Partnering
• JIT Performance