What Is Operations Management?
Operations management (OM) is a discipline that applies to restaurants like Hard Rock Cafe
as well as to factories like Ford and Whirlpool. The techniques of OM apply throughout the
world to virtually all productive enterprises. It doesn’t matter if the application is in an office,
a hospital, a restaurant, a department store, or a factory—the production of goods and services
requires operations management. And the efficient production of goods and services
requires effective applications of the concepts, tools, and techniques
Production is the creation of goods and services. Operations management (OM) is the set of
activities
that creates value in the form of goods and services by transforming inputs into outputs.
Activities creating goods and services take place in all organizations. In manufacturing firms,
the production activities that create goods are usually quite obvious.
In an organization that does not create a tangible good or product, the production function
may be less obvious. We often call these activities services . The services may be “hidden”
from the public and even from the customer. The product may take such forms as the transfer
of funds from a savings account to a checking account, the transplant of a liver, the filling of
an empty seat on an airplane, or the education of a student. Regardless of whether the end
product is a good or service, the production activities that go on in the organization are often
referred to as operations, or operations management .
Organizing to Produce Goods and Services
1. Marketing , which generates the demand, or at least takes the order for a product or service
(nothing happens until there is a sale).
2. Production/operations , which creates, produces, and delivers the product.
3. Finance/accounting , which tracks how well the organization is doing, pays the bills, and
collects the money.
The Supply Chain
Through the three functions—marketing, operations, and finance—value for the customer is
created. However, firms seldom create this value by themselves. Instead, they rely on a variety
of suppliers who provide everything from raw materials to accounting services. These suppliers,
when taken together, can be thought of as a supply chain. A supply chain (see Figure 1.2 ) is
a global network of organizations and activities that supply a firm with goods and services.
As our society becomes more technologically oriented, we see increasing specialization.
Specialized expert knowledge, instant communication, and cheaper transportation also foster
specialization and worldwide supply chains. It just does not pay for a firm to try to do everything
itself. The expertise that comes with specialization exists up and down the supply chain,
