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THE DOMAIN OF OPERATIONS MANAGEMENT

OBJECTIVES
At the end of the chapter, the learner should be able to:
1. define operations management;
2. explain the distinction between goods and services;
3. explain the difference between production and productivity; and
4. identify the critical variables enhancing productivity

INTRODUCTION
Production and operations managers carry on their work in a social and economic environment. Society
put restrictions on them as they thrive to produce products and services. Their jobs require managing
the organization’s resources, people, money, physical property, and the production of products of
services.
We typically use the term “production’’ to denote the process of converting and transforming resources-
materials, machines, employees, time-into goods or services. The goods and the services might be
automobiles, computers, health care, or financial transactions. Many people equate the term
“production” with manufacturing; however, it applies equally to the creation of services and to “quasi-
manufacturing” activities such as the development of computer software. The term “operations”
broadly describes the set of all activities associated with the production of goods and services.
Operations involve not only the production but also transportation, whereby the location of something
or someone is changed; supply, whereby the ownership or possession of goods is changed; and service,
the principal characteristic of which is the treatment or accommodation of those activities of something
or someone. A typical example is Pizza Hut. The basic tasks preparing, cooking, and packaging pizzas are
essentially production functions. Delivering pizzas to customers’ homes involves transportation, supply,
and services. Providing food for pickup and dining in involves both supply and service. Therefore,
Production is the intentional act of creating something useful according to the quantity demanded,
quality specifications, and delivery schedule. It is the process of converting or transforming resources
into products.
“Operations is a set of all the activities associated with the production of a product.”
A system provides an efficient and effective framework of activities necessary to attain an objective. The
system may be viewed as a purposeful grouping of element or objects that, as a whole, perform some
specific and meaningful function. It is a dynamic arrangement of elements, each designed to interact
harmoniously with the others.
The elements of a production system consist of a physical network of men, materials, machines, and
processes, and an information network so planned and built as to interact harmoniously. Two sub-
systems within the production system are easily identified: the physical system, which acts in the
transformation of inputs to product outputs, and the information system. Which coordinates and
controls the action of the physical system.
The production system is characterized by:
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1. A material transformation process.

2. A certain amount of repetition.
3. An information system is superimposed on the physical system.
4. A material processing flow.
The transformation process consists of inputs, activities, and outputs. Some degree of repetitiveness
exists in the production system. Repetition, to some extent, results in economic and efficient
production. Coordination and effective control through and information network ensure a smooth flow
of inputs through various stages of operations, resulting in the final product. The information system
includes the organizational structure, derivatives, reports, and a network of mechanized or economic
servo-systems. The material process flow is dependent on the nature of the product or service rendered
by the firm. We will discuss the classification of the various materials during our subsequent meetings.
Managing the resources needed to produce goods and services is called production and operations
management (P&OM), or simply operations management.
Frederick Taylor, often called the “father of scientific management,” said that management is knowing
exactly what you want men to do and then seeing to it that they do it in the best and cheapest way. This
reflects Taylor’s dominant interest in efficiency. A more contemporary definition of management is the
accomplishment of desired objectives by establishing an environment favorable to performance by
people operating in organized groups. Emphasis is placed on achieving performance rather than on the
economic aspects of attainment, but managers are concerned both with the money and with the
people. Management is often described as consisting of:
1. Planning and establishing goals and objectives. It is the process of establishing guidelines
and actions should be pursued and when they should be completed in order to meet the
goals of the organization.
2. Organizing input resources and staffing. It is the process of bringing together all the
resources necessary to complete a task.
3. Directing or motivating people to perform to attain these goals. It is the process of turning
plans into realities by assigning the responsibilities to employees.
4. Controlling the performance or comparing actual progress with planned performance. It is
the process of monitoring and evaluating performances and correcting any problems as
necessary.
SCOPE OF OPERATIONS MANAGEMENT
Production and operations management activities are confined to the manufacturing of products. It is
true that the production activities carried on in manufacturing companies from the backbone of opur
consumer society through the production of a broad array of products. But people also perform
production activities in the organizations that provide services. In fact, in recent years, more and more
effort has been directed toward the management of productive effort in the service sector of our
economy.
Service organizations, such as banks, hotels, restaurants, and transportation and insurance companies,
produce services much as manufacturing companies produce automobiles, furniture, and
microcomputers. Furthermore, within the service sector, the management of the operations of
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governmental organizations is receiving more and more attention. The cost of municipal services for
schools, police protection, fire protection, trash collection, and so on is outspring cities’ revenues. The
cost of health services is also increasing rapidly and is receiving much attention.
In general, however, production and operations management deal with the supply side of the work of
organizations, and marketing deals with the demand side. Other functional areas of responsibility
include finance, which is concerned with the supplying enough equity and debt capital at the right time
to pay for labor, materials, and facilities. Other functional specialists are accountants, who are more or
less “scorekeepers,” controllers, and budget makers; personal specialists, who recruit and train workers,
develop pay plans for them, and aid in their performance evaluation; and engineers, who design
products and services, determine the best ways to manufacture them, and control their quality. Yet the
work of all of these functional specialists is intertwined, and a great deal of communication and
coordination are required.
The production manager’s aim is to create the end product in the market in the right quantity, at the
right quality, at the right time, and economically. To achieve this objective, he must involve himself in
product planning, process planning, production planning and control, and quality control. To meet the
economic objective, the manager is concerned with such things as methods improvement and work
measurement, physical facilities management, materials management, and personal management.
Product Planning
This naturally comes after product design. It involves determining required machines, tools, men, and
methods. The determination of the general flow of work, materials, and specific work content and
methods are essential to process planning.
Process Planning
This is often a top management work involving all sectors of the firm, that is, the finance, marketing,
production and technical departments. Production performs a stellar role in the development of the
product.
Physical Facilities Management
The production manager must consider the heavy investment in manufacturing facilities. Aside from the
fact that the cost of plant facilities can considerably deplete the firm’s financial reserves, the
arrangement of these facilities in a manner that will result in the most efficient handling of materials
directly affects the fiscal cost of the product. Olant location, engineering economics, plant layout, plant
engineering, and materials handling comprise this area of activity.
Production Planning and Control
Production planning involves forecasting the demand for the company’s product and converting the
forecast in terms of the need for the various factors of production. Sometimes this process if referred to
as “loading” or “routing.” Schedules of the factors of production are adjusted to eliminate wide
fluctuations and permit manufacturing and purchasing in economic batches.
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The aspect of the production manager’s work referred to as production control includes:
1. scheduled the required work
2. giving the go signal to start and providing the necessary instructions to the different
manufacturing sector (dispatching)
3. checking on the progress and initiating corrective measures to ensure the effective and
efficient use of the various factors of the production and the delivery of the product on the
stipulated date.

Quality Control
Quality control is responsible for the provision of the correct product quality to the consumer,
consistent with the minimum resources used. This includes the determination and specification of
quality standards as well as maintenance.
Methods Improvement
There are ten ways of skinning a cat, so the saying goes. There are many ways of producing a product,
but not all of these are equally attractive and economical. Scientific management has been in constant
pursuit of the best way of doing a job. Consequently, analysts must develop alternate methods and
choose the most efficient one. This is a never-ending search. New materials, new machines, and new
knowledge evolving in explosive proportions keep the manager awake and sensitive to change.
Work Measurement
Labor is one of the most important resources that the production manager employs. It is one of the
costs associated with the production activity. To control labor cost, one must know how much he can
expect from a worker. To answer the question, he may employ
Work Measurement which is the application of techniques designed to establish the time for a qualified
worker to carry out a specified job at a defined level of performance. It is a way of establishing labor
time standards.
Material Management
Inventories serve to decouple successive operations in the process of making a product and getting it to
the consumer. They make it unnecessary to gear production directly to consumption. Too much
inventory on hand or too little of it can both have a crippling effect on the company’s operation. The
essential question then is: what is the level of inventory that will be the most economical? The
production manager is expected to schedule production activities so that manufacturing can be done in
economical lot sizes and so that goods will be on hand when needed. He is also expected to purchase
raw materials and parts in economical quantities and make them available on time when they are
needed.
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Personnel Management
This is the application of different management functions to the personnel engaged by the enterprise to
optimize their contribution toward the realization of corporate activities. The functions related to
personnel management are:
1. manpower planning
2. manpower procurement
3. manpower development
4. wage administration
5. personal relations
6. maintaining personnel safety, health and benefits

INTERRELATIONSHIP
Production and operations managers have a great variety of activities. In order to do this, they assemble
appropriate resources and direct the use of these resources-be they people, machines, or processes-to
transform materials and labor into products or services. They direct the inputs so that they produce
outputs.
Successful organizations also have reporting systems that provide current feedback information so that
the managers can see whether or not they are meeting customer demands. If they are not then, at least
in the private sector, they will lose customers. Consequently, order to survive, they must redesign their
products and services. Such changes are likely, in turn, to necessitate changes in internal operations and
in the way resources are used.
Managers also have the to respond to forces from the external environment, such as government
regulations, labor union demands, and local, regional, national, and world economic conditions. Keeping
in tune with the current conditions is a continuous and dynamic process.
EVOLUTION OF OPERATIONS MANAGEMENT
In the last century, OM has undergone more changes than any other functional area of business and is
the most important factor in competitiveness. That is one of the reasons why every business student
needs to have a basic understanding of the field. To better understand the challenges facing modern
businesses and the role of OM in meeting them, let us first briefly trace the history and evolution of the
field.
Contemporary OM has its roots in the industrial Revolution that occurred during the late 18 th and early
19th centuries in England. Until that time, goods had been produced in small shops by artisans (craft
people) and their apprentices without the aid of mechanical equipment. The “production system” was
not complex. Workers were autonomous and self-employed, with the deep knowledge of their work and
broad skills that enabled them to do a job from start to finish. During the Industrial Revolution, however,
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many new inventions came into being that allowed goods to be manufactured with greater ease and
speed. These inventions reduced the needs for individual artisans and led to the development of
modern factories.
Factories developed into complex systems of interrelated processes that required different methods of
management. Adam Smith’s concept of the division of labor-that is, different workers perform different
tasks rather than having one worker acquire the skills necessary to perform the entire job-and similar
ideas by Charles Babbage in the early 19th century. Babbage believed that the total cost of the product
could be lowered by hiring workers with different skills and paying them according to their product
development, and price-volume-profit relationships in the marketplace.
Those ideas, along with the changes of interchangeable parts, introduced by Eli Whitney in 1798, paved
the way for the modern manufacturing. Henry Ford put them into practice by introducing the modern
assembly line in the early 1900s, greatly reducing the cost of manufacturing, which paved the way for
mass production and made a wide variety of products affordable to the average consumer.
The era of scientific management, emphasizing the refinement of mass production, was led by Frederick
W. Taylor, often called the ‘father of scientific management.” Taylor had progressed from a laborer to
chief engineer. That experience enabled him to study production at the most detailed level, focusing on
workers, method of work, and the wages paid for productivity. He believed that the responsibilities for
production should differ between management and labor; managers should be responsible for planning,
directing, and organizing work, whereas workers should be concerned only with carrying out their
assigned tasks. Taylor also believed in fostering a spirit of cooperation between management and labor
and in selecting the best workers for the job. His “science of management” was based on observation,
measurement, and analysis of work, improvement in work methods, and economic incentives. It had a
huge impact on how people did their jobs,,,,, because they were given small, repetitive tasks that only
required a few specific skills.
Many of Taylor’s contemporaries extended and enriched his thinking. Henry Gantt recognized the use of
rewards other than wages to promote morale, he developed the now famous Gantt Chart for scheduling
and monitoring work. Frank and Lillian Gilbreth investigated work planning and employee training. Some
of their more important contributions were the development of the motion study and job-
improvements methods.
In the 1930s, Elton Mayo conducted a series of studies at Western Electric ‘s Hawthorne Works. Mayo,
influenced by Taylor, sought to determine whether a set of working conditions could be created within a
factory environment that would maximize worker productivity. One experiment involved changing light
intensity and measuring the effect on workers productivity. Mayo found out that an increase in light
intensity led to higher productivity. However, trying to replicate the experiments, he discovered that
even when light intensity was reduced to previous settings, worker productivity continued to increase. It
seemed that the extra attention the workers received by being part of the experiment was what led to
their increased productivity. Unfortunately, the implications of the Hawthorne studies and some of
Taylor’s ideas on fostering cooperation between managers and workers were not fully integrated into
management practices until much later, and for many years, managers continued to focus solely on cost
and efficiency.
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During WW II, a new discipline arose that had a significant influence on business and industry. Known as
operations research and management science, it recognizes that many physical situations can be
adequately represented a mathematical model. Among the first applications of that approach to
operations management was determination of the optimum size of convoys for transporting military
supplies to Europe. It got better as computing technology got better. Management science became a
powerful tool for solving complex OM problems.
During the years following WW II, the USA was in dominant position in manufacturing. The world was
hungry for American products, and managers of manufacturing firms had only one goal: to keep the
production lines running and reap more profits.
As an international trade grew in the 1960s, the emphasis on cost reduction and operational efficiency
increased. However, unlike today, in the 1960s to 1970s, technology was viewed primarily as a method
of reducing costs; it distracted the managers from the important goal of improving the quality of
products and the processes that they produce. American businesses were soon to face a rude
awakening.
As Japan was rebuilding from devastation of World War II, two US consultants, W. Edwards Deming and
Joseph Juran, were sought extensively by Japanese industry. This gave rise to the Quality Revolution.
Deming and Juran told Japanese executives that continual improvement in quality would open world
markets and improve their economy. The Japanese eagerly embraced that message. By 1970s, the world
discovered the Japanese goods had fewer defects, were more reliable, and better met consumer needs
in American goods. As a result, Japanese firms captured major shares of world markets in many different
industries.
Facing a crisis, US businesses began to take notice. The “quality revolution” began in the US in the 1980
when NBC television a program entitled “Japan Can… Why Can’t We?” featuring W. Edwards Deming
and his role in transforming Japanese industry. As a result of that program, Food Motor Company, and
then many companies, sought to understand Deming’s message and transform their management by
emphasizing quality. Quality has now become an obsession with the top managers of nearly every major
company. The focus of production has changed from cost and efficiency to better satisfying the needs of
customers through continual improvement of products and product systems. It changed the concept of
quality to mean much more than defect reduction-quality meant offering consumers new and innovative
products that only met their expectations, but surprised and delighted them.
The production system had to change. New approaches for managing manufacturing systems-called
lean production-emerged in Japan that enabled companies to manufacture products better, cheaper,
and faster than their competitors, while facilitating innovation and increasing product variety.
In recent years, information technology has driven manufacturing capability to new heights. Soft
manufacturing, also called the agile manufacturing, blends computation and computing technology,
allowing companies to customize and produce single-quantity products at mass-production speeds.
Quick response is an outcome of lean production and an important source of competitive advantage.
Speed to market not only increases sales, but can also increase profits through lower costs. Companies
therefore focus on total cycle time, the time needed to meet the customer’s requirements. Products are
what we produce; services are how we provide them.
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Quality coupled with price defines the notion of value. The decision to buy a product or service is made
based on how good it is thought to be and how much it costs.
WHY STUDY ABOUT OPERATIONS MANAGEMENT
Questions occasionally asked by students with little business experience are: “Why do I need to know
about production and operations management since I am an accounting (or finance or marketing or
personnel or information system) major?” Wouldn’t my time be better spent studying more about my
specialization?” These are goods questions and deserve a good response, as education is expensive and
time-consuming.
1. OM deals with the supply side of organizations.
All organizations exist to meet demand through their production functions. With a basic understanding
of what it takes to build and operate a production system,
a. Marketing managers can better serve their markets and manage their sales forces if they
understand the capabilities and limitations of their demand-supply system.
b. Financial managers will be able to better plan for capacity expansion and will be more
effective. They are able to understand the purposes of inventories before they demand their
wholesale reduction. Financial managers can also utilize modern requirement planning
systems forecasting cash requirements to pay for new machines, labor, materials, energy,
and overhead-just as though cash were another raw material.
c. Accountants and controllers need to learn about the capabilities of modern computer-
based production and inventory control systems. These systems can provide accounting
information, capacity utilization ratios, inventory valuations, cost of goods sold, and other
internal control, auditing, and financial reporting.
d. Personnel managers can also gain an appreciation for the complexities of job design. This
understanding can aid in the design of training programs, compensation systems, and
recruiting and selection functions.
e. Computer and information systems specialists will be changed with the developing job
scheduling and order control, customer order entry, automated bills of materials, and labor
cost reporting.
f. Engineers will learn to appreciate the difficulty of translating their designs into production
and the complexity of the coordination of materials, labor, and machine capacity to produce
finished output.

2. Asset concentration is controlled by OM.

Approximately 70% of the assets in the manufacturing and processing organizations are inventories,
plants, and equipment, which are directly or indirectly under the control of production or operations
managers, materials managers, maintenance, managers, and production supervisors---all members of
the OM organization. In service organizations, direct labor often accounts for the majority of operating
expenses. Scheduling of this resource is the responsibility of operations.

3. career opportunities in OM and purchasing are excellent for creative individuals.

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people well educated and experienced in purchasing procedures, contract negotiation, legal aspects of
purchasing, value and make-or-buy analysis, international trade, and inventory control, as well as
purchasing’s interfaces with production, marketing, engineering, and finance, will find that they are in
high demand by businesses and public organizations.

4. an understanding of OM and strategic business decision-making is necessary since the product and
service strategies have a large impact on the design of the production process.

There are six basic strategies that have to be addressed for the manufacturing company to determine if
it is on the right track.

a. Positioning of the production system. The production system must be flexible.in such a way that
it can adapt to changing customer’s demands, tastes, fads.
b. Capacity and location factors
Capacity factors:
Product demand forecasts over a period of time
Cost of money (lower cost enables designs for long period) vs. penalties for expansion,
penalties for shutdowns, prices

Types of expansion:
grassroot-building a new plant
debottlenecking-identifying bottlenecks and relieving these bottlenecks.

Location factors:
Transportation costs
Labor availability, costs trainability
City ordinances, taxes
Power supply and costs
Weather conditions
Peace and order
Government incentives
Real state value
Political stability
Infrastructures---roads, bridges, communication systems
Social environment
Economic
Technical requirement-Ex. Refineries need to be built in deep water to allow VLCCs

c. Product and process technology. The technology should be based on applicability,

appropriateness, producible capabilities and low costs.

d. Work force and job design

Prepare detailed inventory of all process equipment which will be operated
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Determine departmentation of operations, maintenance, engineering and

administration
Determines manning
Write a job description (qualifications, skills)
Perform job evaluation (levels)
Establish salary sales
Recruit required personnel

e. Strategic implications of operating decisions to reduce costs and control quality

5S’ Seiri sort Proper arrangement
Seiton systematize Orderliness
Seiso sweep cleanliness
Seikatsu sanitize clean-up
Shitsuke self-discipline discipline

KISS Keep It Simple Stupid

Don’t use P1,000 approach to a P10 program
Distinguish between the forests and woods.

f. Strategy regarding supplies

Reduction/minimization of inventory costs
Avoid being at the supplier’s mercy by being flexible in sourcing your materials
Vertical integration

backward Expand operations to include source/supply activities

forward Supplier expands operations to manufacturing

5. OM and Social Responsibility

High-level production and operations managers are in a dual position. They try to serve their
employers, who are a company’s stockholders or legislative bodies. At the same time, they
operate in a social system and have certain obligations to society. Many of these obligations to
society are written in laws, but in the production area, such as trying to maintain stable
employment, paying fair wages, producing quality and safe products, service customers well,
and maintaining and increasing productivity, are less formal.

Social obligations are rarely stable and are often quite dynamic. Recent years have seen a shift
and the emergence of a strong consumer consciousness, particularly as it concerns the design
of products and services so that they are safe for customers to use and so that working
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conditions are safe for employees. Besides this, environmental considerations have also
become very important.

6. OM and our “Productivity Crisis”

Productivity is a measure of the effectiveness with which an organization uses its resources in
transforming inputs to outputs; in other words, the ratio of the output of a production system
to input.

The organization needs to streamline the way it manages the supply side. Meeting this
challenge is clearly the job of everybody in manufacturing and service organizations. Much of
the burden for increasing the productivity is paced on production and operations managers.
Everyone in the organization should have the empathy for this challenge.

Major factors affecting productivity:

1. Government policy
a. Integrated planning and infrastructure
b. Price stability
c. Tax base
d. Licensing
e. Small scale industries promotion
f. Import substitution
2. Resource endowment
a. Natural resources
b. Human resources
c. Financial resources
3. Cultural|social values and institutions
a. Attitudes of people
b. Local social values

PRODUCT SAFETY AND CONSUMER PROTECTION

The majority of organizations provide us with the goods and services that perform as expected,
are of good value, and are safe in use. However, there will always be some goods and services
that are unsatisfactory and possible unsafe in certain applications.
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In the 1960s, people became increasingly concerned about injuries resulting from automobile
accidents. As a result, new safety laws were passed that required a considerable redesign of
automobiles.

This interest in consumer safety quickly spread in directions. Soon, people were calling
attention to hazards in the use of any number of other products. Instances were found where
toys that children often put in their mouths chewed on were painted with lead-based paint,
which could give them lead poisoning. Other toys were found to have sharp edges, which could
cause cuts, and realistic toy cook-stoves were found hot surfaces that could burn children.

The food industry also came under fire. Questions were raised over the possible health hazards
of artificial coloring matter, of sweeteners, and of preservatives put into foods. Ecologists and
environmentalists joined in with their interest in reducing air and water pollution and in the
preservation of wildlife.

The point of these examples is that the design of products and services is no longer a matter of
an organization’s managers responding to the needs of the marketplaces they see them. They
have to manage within the framework of the other requirements that society imposes on them
through government regulations and pressures from consumer and environmental group.

From a managerial point of view, there are two serious negative aspects to the consumer
protection movement.

1. The cost of complying with the regulations. The price of automobiles increased because
of all extras required by emission and safety regulations. Electric Companies spend
many millions of dollars on “scrubbers” to keep smoke out of the atmosphere. All of
these costs are, of course, passed on to consumers-and increase the cost of living.

2. Increase in lawsuits claiming damages from injuries from products and services which
are claimed to be faulty. These have multiplied in recent years and juries and judges
have been awarding large claims that were not awarded before the consumer
protection wave.

People do not get their brakes fixed and then have accidents from faulty brakes; they drive
their cars too fast or after drinking too much alcohol; they smoke in bed; they leave open
bottles of aspirin around children; they go and leave the iron turned on; people ski on unsafe
ways; people misuse a product, or use it for a purposes for which it was never intended, and
then if it fails or injures them, they blame the manufacturer of the server.
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None of these acts of carelessness, however, excuse organizations from providing the safest
product or service that they can. In some cases, this means that cheaply made products will
have to be discontinued even if they are in demand since such products are likely to be
dangerous in use. Thus, manufactures need to do their best to be sure that their products are
safe to use, just as service people must render good service.

ENVIRONMENTAL CONSIDERATIONS

The 1970s developed into a decade of concern over developed into a decade of concern over
the impact of our industrialized nation upon our environmental protective measures than in
earlier years. These concerns also continue in the 1980s.

Everything comes at cost, and sometimes two or more desirable goals conflict with each other.
For example, automobile engines that minimize harmful air pollutants use gasoline wastefully t
a time when we are trying to reduce gasoline consumption. “Scrubbers” on smokestacks to
reduce air pollution are costing electric utility companies (and subsequently their customers,
the public) many millions of money. Filtering equipment for clearing liquid waste is also costly.
Cities, as well as companies, have to spend large amounts of money to meet new regulations.
Furthermore, much of this extra activity requires extra energy.

Undoubtedly, these socially desirable goals conflict with resource scarcity will continue to have
important effects on the design of products and services. And again, the burden of achieving
the goals falls largely on production and operations managers in both industry and government.
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CHAPTER 2 EXERCISE
MODIFIED TRUE OR FALSE. Write TRUE if the statement is correct, and if it is incorrect,
underline the word or words that make the statement false then write the correct answer on
the space provided.

1. ___________. Some of the operations-related activities of Hard Rock Café include

designing meals and analyzing them for ingredient cost and labor requirement.
2. ___________. Because Hard Rock Cafes are themed restaurants, operations managers
focus their layout design efforts on attractiveness while paying little attention to
efficiency.
3. ___________. All organizations, including service firms such as banks and hospitals,
have a production function.
4. ___________. Operations management is the set of activities that creates value in the
form of goods and services by transforming inputs into outputs.
5. ___________. An example of “hidden” production function is money transfers at banks.
6. ___________. One reason to study operations management is to learn how people
organize themselves for productive enterprises.
7. ___________. The operations manager performs the management activities of planning,
organizing, staffing, leading, and controlling of the OM function.
8. ___________. “How much inventory of this item should we have?” is within the critical
decision area of managing quality.
9. ___________. In order to have a career in operations management, one must have a
degree in statistics or quantitative methods.
10. ___________. Ethical and social dilemmas arise because stakeholders of a business
have conflicting perspectives.
11. ___________. A knowledge society is one that has migrated from work based on
knowledge to one based on manual work.
12. ___________. Customer interaction is often high for manufacturing processes, but low
for services.
13. ___________. Productivity is more difficult to improve in the service sector.
14. ___________. Manufacturing now constitutes the largest economic sector in
postindustrial societies.
15. In the past half-century, while the number of people employed in manufacturing in the
United States has decreased slightly, the output per worker has increased significantly.
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MULTIPLE CHOICE. Encircle the letter of the correct answer.

1. Which of the following is not one of the Ten Critical Decisions of Operations Management?
a. location strategy
b. human resource and job design
c. managing quality
d. design of goods and services
e. determining the financial leverage position
2. Operations management is applicable_____.
a. mostly to the service sector
b. to services exclusively
c. mostly to the manufacturing sector
d. to all firms, whether manufacturing or service
e. to the manufacturing sector exclusively
3. Which of the following are the primary functions of all organizations?
a. production/operations, marketing, and human resource
b. marketing, human resources, and finance/ accounting
c. sales, quality control, and production/operations
d. marketing, production/operations, and finance/accounting
e. research and development, finance/accounting, and purchasing
4. Which of the following would not be an operations function in a commercial bank?
a. Auditing
b. teller scheduling
c. maintenance
d. collection
e. check clearing
5. The marketing function’s main concern is with_____
a. producing good or providing services
b. producing materials, supplies, and equipment
c. building and maintaining a positive image
d. generating the demand for the organization’s products of services
e. security monetary resources
6. Which of the following tasks within an Airline Company related to Operations?
a. Crew Scheduling
b. International Monetary Exchange
c. Sales
d. Advertising
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e. Accounts Payable
7. Resources to study Operations Management include_____
a. studying how people organize themselves for productive enterprise
b. knowing how goods and services are consumed
c. understanding what huma resource managers do
d. learning about a costly part of the enterprise
e. all of the above
8. Reasons to study Operations Management include learning about_____
a. how people organize themselves for productive enterprise
b. how goods and services are produced
c. what operation managers do
d. a costly part of the enterprise
e. all of the above
9. The five elements in the management process are_____
a. plan, direct, update, lead, and supervise
b. accounting, finance, marketing. operations, and management
c. organize, plan, control, staff, and manage
d. plan, organize, staff, lead, and control
e. plan, lead, organize, manage, and control
10. Which of the following is not an element of the management process?
a. Controlling
b. Leading
c. Planning
d. Pricing
e. Staffing
11. An operations manager is not likely to be involved in_____
a. the design of the goods and services to satisfy customer’s wants and needs
b. the quality of the goods and services to satisfy customer’s wants and needs
c. the identification of customer’s wants and needs
d. work scheduling to meet the due dates promised to customers
e. maintenance schedules
12. All of the following decisions fall within the scope of operations management except for___
a. creating the company income statement
b. design of goods and processes
c. location of facilities
d. managing quality
e. All of the above fall within the scope of operations management.
13. The Ten Critical Decisions of Operations Management include_____
a. layout strategy
b. maintenance
 CHAPTER 2
THE DOMAIN OF OPERATIONS MANAGEMENT

c. process and capacity

d. managing quality
e. all of the above
14. Which of the following is not one of The Ten Critical of Operations Management?
a. layout strategy
b. maintenance
c. process and capacity design
d. mass customization
e. supply-chain management
15. The Ten Critical Decisions of Operations Management include_____
a. financing/accounting
b. advertising
c. process and capacity design
d. pricing
e. all of the above

ESSAY. Write your answers on a separate sheet of paper.

1. Briefly describe the term operations management. Identify the three major functional
areas of business organizations and briefly describe how they interrelate.
2. List five important differences between goods production and service operation.
3. Why are services important? Why is manufacturing important? What are non-
manufactured goods.
4. Why is it important for the various functional areas of a business organization to
collaborate?
5. Why do people do things that are unethical?