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Chapter 14: Operations Management

Section 14.1 - The Importance of Operations Management

Key Terms

Operations management

Transformation process

Manufacturing organization

Service organization

Productivity

Summary

The term operation management refers to the design, operation and control of the

transformation process that converts such resources as labor and raw materials into goodsand services that are sold to customers. The system takes inputspeople, technology,e!uipment, materials and informationand transforms them through various processes,

procedures and work activities into finished goods and services.

Operations management is important to organizations and managers for three reasons.

"irst, it encompasses processes in all organizationsservices as well as manufacturing.

Second, it#s important in effectively and efficiently managing productivity. $nd third, it

lays a strategic role in an organization#s competitive success.

%very organization has an operations system that creates value by transforming inputs

into finished goods and service outputs &transformation process'. Manufacturingorganizationsproduce physical goods while service organizations produce nonphysical

outputs in the form of services.

(ow do we improve productivity) Productivity is closely tied into the transformation

process and improving productivity has become a ma*or goal in virtually every

organization. Productivityis the overall output of goods and services produced divided

by the inputs needed to generate that output. (igh productivity can lead to economicgrowth and development and increased productivity lowers costs and allows firms to

offer more competitive prices. Productivity is composite of people and operations

variables. The truly effective organization will ma+imize productivity by successfully

integrating people into the overall operations system.

ncreasing productivity is critical to global competitiveness. Organizations that hope tosucceed globally are looking for ways to improve productivity. n the late -/0s, 1.S.

e+ecutives heavily invested in improving manufacturing technology, increased the

corporate authority and visibility of manufacturing e+ecutives, and began incorporatinge+isting and future production re!uirements into the organization#s overall strategic plan.

Today, successful manufacturers recognize the crucial role that operations management

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plays as part of the overall organizational strategy to establish and maintain global

leadership. The strategic role that operations management plays in successful

organizational performance can be seen clearly, as more organizations move towardmanaging their operations from a value chain perspective.

Section Outline

. The mportance of Operations Management

. (ow 2o Service and Manufacturing "irms 2iffer)$. (ow do we improve productivity)

3. 4hat strategic role does operations management play)