CHAPTER 1
INTRODUCTION TO OPERATIONS MANAGEMENT

KEY IDEAS
1. Three Basic Business Functions. Operations is that part of an organization responsible for the creation of value in the form of goods and/or services, ideally balancing the supply of these items with customer demand. Operations works in conjunction with the complementary business functions of finance, responsible for securing and allocating the financial resources necessary to maintain the organization, and marketing, responsible for evaluating and enhancing customer demand.
2. Input, Output and Value-added. Any operation can be described as a set of inputs (i.e. labor and materials) that are transformed into a set of outputs (i.e. goods and/or services), as illustrated in Figure 1.4 of page 6 of the textbook. The essence of operations management is value-added, or the degree to which the value of all outputs of an operation exceed the value of its inputs.
3. Goods vs. Services. Goods imply tangible products, those that can handled and/or stored in some fashion, such as manufactured items or food. Services are intangible products, such as health care or education. Material goods often require a distribution system to get them into the hands of consumers, while service industries tend to deal directly with consumers. Other important points on which the production of goods and services differ are summarized in Table 1.3 on page 9 of the textbook.
4. Process Management. A process is any action involved in the transformation of an input to an output. Process management, therefore, focuses on these value-adding activities. Variability in process, or process variation, can be particularly problematic for operations management.
5. Scope of Operations Management. Operations management people are involved in product and service design, process selection, the management of technology, the