Page 583 - Introduction to Business

CHAPTER 16 Managing Business Operations 557

Operations Management Is a Powerful
Competitive Weapon

oyota Motor Corporation, one of the most successful companies in the
world, is scrambling to overhaul itself. After nearly doubling its revenue
Tin the past decade and redefining competition in key parts of the auto
industry, Toyota suddenly finds itself confronting mushrooming quality
problems. At the same time, Toyota has launched a worldwide campaign to
simplify its production systems.
Toyota’s next big goal is to expand its share of the global market from
10 percent now to 15 percent over the next decade. That would make Toyota
roughly the same size as the current number-one automaker, General Motors.
But there are signs that the company’s ambitious growth agenda is straining
human and technical resources and undercutting one of Toyota’s most critical
strategic advantages: operations management in general and quality in
particular. The marriage of efficient production to an obsessive concern for
quality has helped Toyota establish a reputation for bullet-proof reliability that
remains a huge competitive advantage.
Source: The Wall Street Journal, August 4, 2004, pp. A1 and A2.

Introduction

In this chapter we take a look at operations, the business function responsible for
the production of goods and services. We first define operations management, list
the similarities and differences between producing goods and producing services,
motivate the competitive impact of good operations management (as in the case of
Toyota Motor Corporation), and provide the historical evolution of operations
management. Then, we explore the decisions that operations managers make in
regard to designing, planning, and controlling production operations. Next we
describe in detail the nature and challenges of these decisions. We close the chap-
ter with an overview of jobs in operations management.

What Is Operations Management?

LEARNING OBJECTIVE 1
Explain what operations management is.
Production is the creation of goods or services. Examples of goods are automobiles, production The creation of goods or
televisions, and computers. Examples of services are health care, entertainment, services
and consulting. For convenience and when appropriate, in this chapter we will use
the word product to encompass goods or services. A production system is the sys- production system The system that
tem that businesses use to produce products. When the company produces mostly businesses use to produce products
goods, the production system is typically called a manufacturing system. When the
company produces mostly services, the production system is commonly called a
service system. For example, the production system of DaimlerChrysler would be
called a manufacturing system, and the production system of the M.D. Anderson
Cancer Center, a service system.

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