8.1 How do we define operations management?
Nearly every type of business organization needs to find the most efficient and effective methods of producing the goods or services it sells to its customers. Technological advances, ongoing competition, and consumer expectations force companies to rethink where, when, and how they will produce products or services.
Manufacturers have discovered that it is no longer enough to simply push products through the factory and onto the market. Consumers demand high quality at reasonable prices. They also expect manufacturers to deliver products in a timely manner. Firms that can’t meet these expectations often face strong competition from businesses that can. To compete, many manufacturers are streamlining how they make their products—by automating their factories, developing new production processes, focusing on quality-control techniques, and improving relationships with suppliers.
Service organizations also face challenges. Their customers are demanding better service, shorter waiting periods, and more individualized attention. Like manufacturers, service companies are using new methods to deliver what their customers need and want. Banks, for example, are using technology such as online banking and mobile apps to make their services more accessible to customers. Colleges offer online courses to accommodate the schedules of working students. Tax services file tax returns via the cloud.
This chapter examines how manufacturers and service firms manage and control the creation of products and services. We’ll discuss production planning, including the choices firms must make concerning the type of production process they will use; the location where production will occur; the design of the facility; and the management of resources needed in production. Next, we’ll explain routing and scheduling, two critical tasks for controlling production and operations efficiency. Then we will look at how firms can improve production and operations by employing quality management and lean-manufacturing techniques. Finally, we will review some of the trends affecting production and operations management.
Forms of Utility Operations Management Provides
The following information on the purpose and different types of utility has been inspired by Business Essentials: Ninth Edition, pg. 218.
As we have already discussed, the purpose of operations management is to find the most efficient and effective methods of producing the goods and services it sells to its customers. In doing so, operations management provides four main types of utility that their customer is able to benefit from.
Time
One of the main roles of operations management is to ensure the product or service is available to the customer when they require it. Both service and manufacturing companies place a large emphasis on their supply chain, scheduling, and production to ensure they are able to deliver the product or service at the correct time. Later in this chapter, we will discuss specific examples of scheduling, explain how the supply chain operates, and provide a proper glimpse into how organizations are able to deliver the utility of time to their customers.
Place
Operations managers must consider the placement of their product or service in order to deliver a convenient option to their customers. Organizations will place a large emphasis on the location of their production, stores, and offices in order to provide customers with an easily accessible option.
Ownership
Customers also benefit from owning the products and services operation managers are able to deliver. This is called ownership or possession utility. For instance, customers benefit from owning a cellphone as it allows them to connect with others in order to live a more convenient and enjoyable lifestyle.
Form
The final utility operations management delivers is form utility. Form utility benefits the consumer since operations have transformed a product from a raw material to a finished good.
