Managing Operations
Module
Every organization “produces” something, whether it’s a good or a service. This module
focuses on how organizations do that through a process called operations management.
We also look at the important role that managers play in managing those operations.
As your students have learned throughout this course, organizational success in today’s
highly competitive marketplace is based on effective and efficient management of all
available resources. The opening case describes the challenges faced by Hyundai
Heavy Industries Inc. at their ship building plant in South Korea. The facility, which
covers miles and can build over 30 ships at a time, relies on a steady stream of data
This module examines the topics of operations management including productivity,
value chain management, e-manufacturing, and quality. The concepts in this module
could be applied to almost every company, from the gigantic operations of Hyundai
Industries, to your local McDonalds.
1. THE ROLE OF OPERATIONS MANAGEMENT
Operations management is the design, operation, and control of the
transformation process that converts resources into finished goods or services.
Exhibit MO-1 illustrates a simplified operations system. Operations
management is important for three key reasons:
A. Services and Manufacturing. Operations management encompasses
both manufacturing and services.
a. Manufacturing organizations are organizations that
B. Managing Productivity
a. Productivity is the overall output of goods or services
produced divided by the inputs needed to generate that
productivity.
C. Strategic Role of Operations Management. Through mistakes learned
in the 1970’s when the U.S. lost their position as the dominant force in
manufacturing, organizations today realize the importance of operations
management to the overall strategy of the organization.
2. WHAT IS VALUE CHAIN MANAGEMENT AND WHY IS IT IMPORTANT?
This section of the module examines several aspects of value chain
management, including its definition, goals, benefits, and potential obstacles to
successful implementation.
A. What is value chain management?
In order to understand the term value chain management, students must
first grasp the meaning of several individual terms.
1. Value is the performance characteristics, features and attributes,
2. The value chain is the entire series of organizational work
3. Value chain management, then, is the process of managing the
sequence of activities and information along the entire product
chain.
B. Goal of Value Chain Management
Ultimately, customers possess the power in the value chain. The goal of
C. Benefits of Value Chain Management. Value chain management offers
several benefits, including:
2. Improved logistics
4. Enhanced customer order management
3. MANAGING OPERATIONS USING VALUE CHAIN MANAGEMENT
Today’s dynamic competitive environment demands new solutions from global
organizations. Understanding how and why value is determined by the
marketplace has led some organizations to experiment with a new business
model, a concept we introduced in Chapter 9.
A. Value Chain Strategy
See Exhibit MO-2 for a summary of the six main requirements for
effective value chain management.
2. Investment in information technology
3. Organizational processes, which are the ways that
organizational work is done. Changes must be made, as
illustrated below:
a. Improved demand forecasting is necessary and is enabled
through closer ties between customers and suppliers.
various activities along the value chain.
5. An organization’s employees play an important role as well.
a. Traditional, functional job roles are inadequate in a value
6. Supportive organizational culture and attitudes are important as
well.
E. Obstacles to Value Chain Management
In successfully implementing value chain management, organizations
face several potential obstacles.
1. Organizational barriers. These barriers are among the most
2. Cultural attitudes. Unsupportive cultural attitudes—especially trust
and control—are also obstacles. In addition, organizations are
3. Required capabilities. A number of capabilities are required,
4. An organization’s people must be committed and willing to do
4. CURRENT ISSUES IN OPERATIONS MANAGEMENT
Three issues currently on top of managers’ lists for improving operations
management: capitalizing on e-manufacturing technology and successfully
implementing quality initiatives.
A. Technology’s Role in Manufacturing
Savvy companies are exploring ways to harness technology to improve
operations management.
B. Quality Initiatives
According to many experts, organizations that do not produce high-quality
products will be unable to compete successfully in the global
marketplace.
1. Quality is the ability of a product or service to reliably do what it’s
supposed to do and to satisfy customer expectations.
C. Quality Goals
Numerous organizations worldwide have pursued challenging quality
goals. Two of the most widely recognized quality goals are ISO 9000 and
Six Sigma.
1. ISO 9000 is a series of international quality management
than 3.4 defects per million parts or procedures.
3. In summary, the key benefit of implementing value chain
management comes from the quality improvement journey itself,
rather than the achievement of a particular quality certification.
D. Mass Customization
Mass customization provides consumers with a product when, where, and
ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
MO-1. What is operations management?
MO-2. Do you think that manufacturing or service organizations have the greater need
for operations management? Explain.
Both manufacturing and service organizations have a great need for operations
MO-3. What is a value chain and what is value chain management? What is the goal of
value chain management? What are the benefits of value chain management?
MO-4. What is required for successful value chain management? What obstacles exist
to successful value chain management?
The six main requirements for successful value chain management include coordination
and collaboration, investment in technology, organizational processes, leadership,
MO-5. How could you use value chain management in your everyday life?
MO-6. How does technology play a role in manufacturing?
MO-7. What are ISO 9000 and Six Sigma?
MO-8. Describe lean management and explain why it’s important.
Mass customization provides customers with a product when, where, and how they want
MO-9. How might operations management apply to other managerial functions besides
control?
Successful operations management is essential in the planning, organizing, and leading
MO-10. Which is more critical to success in organizations: continuous improvement or
quality control? Support your position.