CHAPTER 1: AN OVERVIEW OF OPERATIONS Finance and operations management personnel

MANAGEMENT cooperate by exchanging information and

expertise in activities such as:
Operations Management
1. Budget
• The management of processes or systems must be periodically prepared to plan
that create goods and/or provide financial requirements.
services.
2. Economic analysis of investment
• It encompasses forecasting, capacity proposals
planning, scheduling and managing evaluation of alternative investment in
inventories, assuring quality, motivating plant and equipment requires input from
employees, deciding where to locate the both operations and finance people.
facilities and more 3. Provision of funds
a. Planning necessary funding of operations and the
b. Organizing amount and timing of funding
c. Staffing
d. Directing Other functions of Business Organization:
e. Controlling
1. Accounting
Business Organization supplies information to management on
cost of labor, materials, and overhead
• Organizations are formed to pursue goals and may provide reposts on items such as
that are achieved more effectively by the scrap, downtime and inventories.
concerted efforts of a group of people 2. Management Information System (MIS)
than by individuals working alone. providing management with the
Three Basic Functions of Business Organization information it needs to effectively
manage.
1. Production / Operations 3. Purchasing
Inputs are used to obtain finished goods responsible for procurement of materials,
using one or more transformation supplies, and equipment.
processes (e.g. storing, transporting, and 4. Personnel or Human Resources
cutting). concerned with recruitment and training
2. Finance of personnel, labor relations, wages and
Comprises of activities related to securing salaries and ensuring health and safety of
resources at favorable prices and employees.
allocating those resources throughout the 5. Public Relations
organization. responsible for building and maintaining a
3. Marketing positive image of the organization.
Focus on selling and/or promoting the 6. Distribution
goods and services of an organization. involves shipping of goods to warehouse,
Responsible for assessing customer wants retail outlets or final consumer.
and needs.
7. Maintenance
responsible for general upkeep and repair
of equipment, building and grounds,
heating and air-conditioning, removing
toxic waste.

OPERATIONS MANAGEMENT & TQM

Differentiating Features of Operations System: Differences Between Goods and Services:

I. Degree of Standardization 1. Customer contact

o Standardized Output 2. Uniformity of input
means that there is a high 3. Labor content of job
degree of uniformity in 4. Uniformity of output
goods or services. 5. Measurement of productivity
o Customized Output 6. Simultaneous
means that the product or production/consumption and
service is designed for delivery
specific case or individual. 7. Quality assurance
II. Types of Operation
General Approaches to Decision Making:
the degree of standardized products
and the volume of output of a I. MODEL
producer or service influence the way an abstraction of reality; a simplified
firm organizes production. version of something
The four Vs of operations: a) Physical Models
1. Volume Look like their real-life
how many products or services counterparts.
are made by the operation? b) Schematic Models
2. Variety More abstract than their
how many different types of physical counterparts (less
products or services are made by resemblance to physical
the operation? reality). There are often
3. Variation relatively simple to construct
how much does the level of and change.
demand change over time? c) Mathematical Models
4. Visibility The most abstract: they do
how much of the operation’s not look at all like their real-
internal working are ‘exposed’ to life counterparts. these are
its customers? usually the easiest to
III. Production of Goods versus Service manipulate and they are
Operation important forms of inputs for
o Production of goods computers and calculators.
results in a tangible product. II. QUANTITATIVE APPROACHES
o Service operation Quantitative approaches to problem
generally, implies an act. solving embody an attempt to obtain
mathematically optimum solutions to
managerial problems.
III. ANALYSIS OF TRADE-OFFS
Manager sometimes deal with
decision by listing the advantages and
disadvantages – pros and cons – of a
course of action to better understand
the decision they must make.

OPERATIONS MANAGEMENT & TQM