Chapter 1
Introduction to OperationsNOW.com
Chapter Overview
Operations management is the management of productive resources that are used to create saleable products or services. Through the creation of processes from these resources, the firm can add value to various inputs. The addition of value, at a level that exceeds the cost of adding it, provides the potential for profitability.
For many firms, operations decisions are set aside to be made by an operations function. For others, operations decisions are interspersed with other decisions within marketing, finance, and information technology. Wherever the decisions are made, they have a major impact on the financial success of the firm through their influence on the use of the firm's productive assets. Chapter 1 presents an overview of operations management and an organizational model utilized throughout the text: the Resource/Profit model, presented below. The Resource/Profit model also provides organizational and navigational assistance here in the OperationsNow.com website. Clicking on any of the operations concepts will take you to the website support for that concept.
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Chapter Resources |
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Esources |
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| Esource 1.1 | Chapter 1 describes how products and services frequently merge to create more value. For the model of speed and flexibility in a customizing a consumer product on line, visit Dell to explore how easy it is to configure a product to meet your specifications. This capability exemplifies customization and service integrated with high volume manufacturing. Read Dell's view of why they are different and successful in What sets Dell apart: The direct-to-customer model. |
| Esource 1.2 | The increase in the power of the customer is discussed in Chapter 2 as a trend that is enhanced through technology. The demand collection model basically receives price "bids" from customers and then seeks suppliers that are willing to provide the good or service at that price. Through its patents, Priceline.com owns the demand collection system business model. Read their description of how it works and why it is so effective at Priceline.com's explanation of their business. |
| Esource 1.3 | Amazon.com provides an example of the Chapter 1 concept of bringing resources together to create processes and capabilities. It continues to differentiate itself and expand beyond books, music, and videos by creating partnerships with companies that have specific market expertise in such areas as toys, electronics, kitchenware, and computers. The Amazon approach to doing business, as well as its latest innovations, are described in About Amazon.com. |
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Reel Operations Video Clips |
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| Reel Operations 1.1 | Manufacturers of products differ from services in many ways. At the root of many of these differences, as discussed in Chapter 1, is that fact that products are tangible. The Reel Operations Video 1.1 focuses on Federal Signal's production of a light bar used on emergency vehicles. In Federal Signal: A Manufacturing Operations Tour the important characteristics of manufacturing operations are shown quite clearly. |
| Reel Operations 1.2 | Services often struggle with the intangible nature of their business outputs. For many, however, removing processes from the customer can enable them to become more productive and more like those typical of manufacturing operations. this concept, discussed in Chapter 1, is exemplified by the "behind the scenes" business activities of a large bank.First Chicago: A Blend of Service and Manufacturing Operations provides a tour of these activities to demonstrate their importance. |
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Supplementary Readings |
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| Supplementary Reading 1.1 |
In Chapter 1, the role of the customer is said to be gaining in importance. In Customer Service: Commerce Bank, Fast Company, May 2002, that trend is documented. The article describes how a 185-branch bank in New Jersey and surrounding states has modeled itself after the superstars or retailing to provide a very unconventional level of service for its customers. |
| Supplementary Reading 1.2 |
Chapter 1 describes different ways businesses utilize processes to convert resources into value. As customer values change, their expectations of businesses change as well, and businesses must adapt. For a period of time a business may find itself "out of sync" with its customers' desires, and must move quickly to catch up, or it will lose market share. Most businesses go through these cycles. "Can Wendy's Sizzle Again?" (Business Week, November 1, 1999) describes how Wendy's tried to match their capabilities to changing customer expectations by adapting their resources and processes. |
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Links to Operations On Site Companies |
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| Operations On Site 1.1 | Read about Paypal's services in their description of their business. |
| Operations On Site 1.2 | Borders has teamed up with Amazon.com for its online business. |
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OM Exploration |
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Check it out: Internet Reference Sites |
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| In this, the introductory chapter, the "Check it out" resources have been selected to provide exposure to some excellent general resource sites related to operations management. A quick visit to several of these sites will give you an idea of the variety of resources available on operations management and related topics. | |
| Operations Management Center | Management and Technology Dictionary |
| Ross L. Finks Operations Management Page | |
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OM in Action |
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| OM in Action 1.1 | All of the automakers now offer online automobile customization capabilities.
The
practice of adding a direct purchase service to a traditional manufacturer has grown
quite common. Select a pair for companies for comparison out of
Ford, GM, Daimler-Chrysler, Toyota,
or Honda and walk through their ordering process. a. What are their strengths and weaknesses? b. Which company makes the process easier? c. Did each of the sites offer you the ability to compare their models to competitor's models? d. Why do you think this type of comparison is a common service offered at these sites? |
| OM in Action 1.2 | Despite the fact that Dell
started
the computer "buy direct" rage, Gateway and
Compaq also offer that service. Visit each. a. How do the three systems compare? Which is easiest? b. Which offers the most value to a customer? c. Is it easy to compare models that are exactly the same but made by a competitor? Why or why not? |
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Online Business Tours |
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| Online Business Tour 1.1 | A product such as bottled water (arguably, a
"commodity) leaves little room for differentiation by adding value. Take the tour of
Canadian
Springs Bottled Water. The production processes are certainly not complicated, but
quality expectations are very high, nonetheless. a. What would you consider to be the operations tasks completed by Canadian Springs? b. What specifically make up the components of value for Canadian Springs products? c. What resources does Canadian Springs use to add value? |
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A Letter from the Top |
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| Letters from the Top 1.1 | General Electric has proven to be one of the best-performing
companies in the world. Go to General Electric's online 1999 annual report and read
the Letter to Share Owners. a. How has General Electric embraced the shift in the U.S. economy from a product-oriented manufacturing economy to a service-oriented economy? b. Have their efforts successful? How do you know? General Electric, like many other companies, did not fair as well in
2001. In one segment of the 2001
Letter to Share Owners, new CEO Jeff Immelt describes how GE is
"different" and able to succeed even in tough economic times. |
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Putting It All Together: Virtual Case Studies |
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| Putting it All Together 1.1: Carsdirect | Carsdirect.com claims to be the best over-all car buying website. It provides an
excellent example of how a service can "inject" itself into a product-oriented
market by offering what manufacturers haven't offered. In late 1999, for example, it
had high hopes of huge profits (see "CarsDirect: That's One Slick
Showroom" Business Week, 9/27/99). Explore the site at Carsdirect.com. a. Is it really a "slick showroom"? How does it compare to the manufacturer's sales sites at Ford, GM, Daimler-Chrysler, Toyota, or Honda? b. From a shopper's perspective, why would you purchase your car through Carsdirect.com rather than from a "brick and mortar" dealer? c. Given that the product is going to be the same no matter whom you buy it from, how is buying through Carsdirect different from the dealer's websites? |
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Additional Reading |
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| Additional Reading 1.1 | Chapter 1 makes it clear that value is defined by the customer. New technologies have given customers an even greater role in defining value. In "Customers Move Into the Driver's Seat", (Business Week, October 4, 1999), we're given an image of what the future was thought to hold for buying an automobile. |