Consumers benefit greatly from supply chain management, yet few people think about the planning, cost, or activities involved in getting fuel to the filling station, fresh foods to the store shelf, or essential medical supplies to the hospital emergency room.
Figure illustrates this by showing that the vice president of each of these functions reports directly to the president or CEO of the company. Marketing is responsible for sales, generating customer demand, and understanding customer wants and needs.
Finance is responsible for managing cash flow, current assets, and capital investments. MIS is responsible for managing flows of information. Most of us have some idea of what finance and marketing are about, but what does operations management do? Figure Organizational chart Operations management OM is the business function responsible for managing the process of creation of goods and services.
Because operations management is a management function, it involves managing people, equipment, technology, information, and all the other resources needed in the production of goods and services. Operations management is the central core function of every company. This is true regardless of the size of the company, the industry it is in, whether it is manufacturing or service, or is for-profit or not-for-profit.
Consider a pharmaceutical company such as Merck. The marketing function of Merck is responsible for promoting new pharmaceuticals to target customers and bringing customer feedback to the organization.
Marketing is essentially the window to customers. However, it is the operations function that plans and coordinates all the resources needed to design, produce, and deliver the various pharmaceuticals to hospitals, pharmacies, and other locations where needed.
Without operations, there would be no products to sell to customers. The Transformation Role of Operations Management We say that operations management performs a transformation role in the process of converting inputs such as raw materials into finished goods and services.
These inputs include human resources, such as workers, staff, and managers; facilities and processes, such as buildings and equipment; they also include materials, technology, and information.
In the traditional transformation model outputs are the goods and services a company produces. This is shown in Figure Figure The transformation role of operations management At a manufacturing plant the transformation is the physical change of raw materials into products, such as transforming steel into automobiles, cloth into jackets, or plastic into toys.
This is equally true of service organizations. At a university OM is involved in organizing resources, such as faculty, curriculum, and facilities, to transform high school students into college graduates. At an airline it involves transporting passengers and their luggage from one location to another.
As a result it is directly responsible for many decisions and activities that give rise to product design and delivery problems. The design and management of operations strongly influence how much material resources are consumed to manufacture goods or deliver a service, making sure that there is enough inventory to produce the quantities that need to be delivered to the customer, and ensuring that what is made is in fact what the customer wants.
Many of these decisions can be costly. It is for this reason that OM is a function companies go to in order to improve performance and the financial bottom line. Differences in Manufacturing Versus Service Operations All organizations can be broadly divided into two categories: Although both categories have an OM function, these differences pose unique challenges for the operations function as the nature of what is being produced is different.
There are two primary distinctions between these categories of organizations. First, manufacturing organizations produce a physical or tangible product that can be stored in inventory before it is needed by the customer.
Service organizations, on the other hand, produce intangible products that cannot be produced ahead of time. Second, in manufacturing organizations customers typically have no direct contact with the process of production. Customer contact occurs through distributors or retailers. For example, a customer buying a computer never comes in contact with the factory where the computer is produced.
However, in service organizations the customers are typically present during the creation of the service. Customers here usually come in contact with some aspect of the operation. Consider a restaurant or a barber shop, where the customer is present during the creation of the service. The differences between manufacturing organizations and service organizations are typically not as clear-cut as they might appear in the preceding example.
Usually there is much overlap between them, and their distinctions are increasingly becoming murky. Most manufacturers provide services as part of their business, and many service firms manufacture physical goods they use during service delivery.Michael Dell is the chairman of the board of directors of Dell Inc., the world's largest computer-systems company.
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