Page 611 - Introduction to Business

CHAPTER 16 Managing Business Operations 585

Summary

LEARNING OBJECTIVE 1 LEARNING OBJECTIVE 5
Explain what operations management is. Discuss what operations managers do.
Operations management is the management of the Operations managers make decisions regarding the
direct resources in the production system of a business design, planning, and control of the production system.
organization. Production is the creation of goods or Design decisions deal with the creation of products and
services, and a production system is the system that the production system itself. Planning decisions involve
businesses use to produce products. The production preparing the production system for production.
system of a company that produces mostly goods is Control decisions are made once the production system
called a manufacturing system, and the production is producing.
system of a company that produces mostly services is
called a service system. Operations management is LEARNING OBJECTIVE 6
naturally positioned to help companies maximize the Identify the design decisions about product, process,
value that they add to their products. capacity, location, and layout.
Products should be designed with manufacturing,
LEARNING OBJECTIVE 2
assembly, recycling, and modularity considerations,
Compare manufacturing operations and service
operations. among others. Process designs include job, batch, line,
and continuous processes. Capacity decisions should
Most business organizations produce and sell products lead to a level that is neither too high nor too low.
that entail a combination of goods and services. Capacity can be added by leading, matching, or lagging
However, from an operations management perspective, demand. Decision trees are widely used tools in
considering customer contact, customer participation, capacity decisions. The location decision typically is
inventory, and tangibility can differentiate goods and influenced by factors such as a favorable labor climate,
services. proximity to markets, quality of life, proximity to
suppliers and resources, and proximity to the parent
LEARNING OBJECTIVE 3
company’s other facilities. The layout decision entails
Evaluate the impact of operations management on configuring and placing activity centers to optimize
the competitiveness of a business organization.
their operation. The operations manager may adopt a
Good operations management can help businesses fixed-position, process-oriented, or product-oriented
compete along the dimensions of price, quality, and layout.
time. Good operations management leads to
production costs that allow firms to set competitive LEARNING OBJECTIVE 7
prices that attract customer demand. Since products Illustrate the planning decisions about production
are created by the production system, good operations rate, material requirements, purchasing, and
management yields quality products that will satisfy inventory.
customers’ requirements. Good operations
One of the fundamental challenges that all businesses
management is conducive to getting new products to
face is matching production and demand rates for the
market quickly and to delivering current products
product that they offer. Pricing, advertising and
promptly and reliably.
promotion, and back ordering can modify the demand
rate pattern. The production rate can be modified by
LEARNING OBJECTIVE 4
hiring or firing workers, by using overtime or
Describe the historical development of operations undertime, and by subcontracting. The chase strategy
management.
and the level strategy are two extreme production rate
The history of operations management is rich and strategies; the most successful strategies are called
inspiring. From craft production, to division of hybrid strategies and incorporate elements of the chase
labor, to the Industrial Revolution, to scientific and level strategies. Material requirements planning
management, to assembly lines, to operations research (MRP) is a computer-based technique that is used to
and management science, to the quality revolution estimate the materials that are required to support the
and time-based management, human ingenuity has selected production rate strategy. Concepts utilized by
always been present in efforts to organize for MRP are bill of material and master production
production. schedule. The purchasing decision includes whether to

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