In the late 1970s, Wal-Mart was a niche marketer, with about 200 stores, mostly in the South. At the time, Sears, JC Penney, and Kmart dominated the retail market. Over the years, Wal-Mart gained market share at the expense of the previous market leaders, and it has now become the largest and most profitable retailer in the world! In the 1990s, the Boeing Company ran into trouble when it could not meet production deadlines. As a result, Boeing lost some orders, which had a negative impact on earnings and its stock price. Why do some companies thrive while others struggle or fail? There are a variety of reasons, to be sure. However, an important key in a company’s success or failure is how well it manages its operations. This first chapter presents an introduction and overview of operations management. Among the issues it addresses are: What is operations management? Why is it important? What do operations management professionals do? The chapter also provides a brief description of the historical evolution of operations management and a discussion of the trends that impact operations management. Introduction
Operations management is the management of that part of an organization that is responsible for producing goods and/or services. There are examples of these goods and services all around you. Every book you read, every video you watch, every e-mail you send, every telephone conversation you have, and every medical treatment you receive involves the operations function of one or more organizations. So does everything you wear, eat, travel in, sit on, and access the Internet with. The operations function in business can also be viewed from a more far-reaching perspective: The collective success or failure of companies’ operations functions has an impact on the ability of a nation to compete with other nations, and on the nation’s economy. Business organizations typically have three basic functional areas, as depicted in Figure 1.1: 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. FIGURE 1.1| The three basic functions of business organizations| | |
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. Marketing and operations are the primary, or “line,” functions. 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. To put this into perspective, if a business organization were a car, operations would be its engine. And just as the engine is the core of what a car does, in a business organization, operations is the core of what the organization does. Operations management is responsible for managing that core. Hence, operations management is the management of systems or processes that create goods and/or provide services. The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labor, and information are used to create goods or services using one or more transformation processes (e.g., storing, transporting, cutting). To ensure that the desired outputs are obtained, an organization takes measurements at various points in the transformation process (feedback) and then compares them with previously established standards to determine whether corrective action is needed (control). Figure 1.2 depicts the conversion system. FIGURE 1.2| The operations function involves the conversion of inputs into outputs| | |
Table 1.1 provides some examples of inputs, transformation processes, and...