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Business Fundamentals was developed by the Global Text Project, which is working to create open-content electronictextbooks that are freely available on the website http://globaltext.terry.uga.edu. Distribution is also possible viapaper, CD, DVD, and via this collaboration, through Connexions. The goal is to make textbooks available to the manywho cannot afford them. For more information on getting involved with the Global Text Project or Connexions email us atdrexel@uga.edu and dcwill@cnx.org.
Editor: Dr John Burnett (Daniels College of Business, University of Denver, USA)
Editor: Michael J Pesch (St Cloud University, USA) Reviewer: Ronald F Farina (Daniels College of Business, University of Denver, USA)
Operations management is the management of processes that transform inputs into goods and services that add value for the customer. The goal of operations management is to maximize efficiency while producing goods and services that effectively fulfill customer needs. For example, if an organization makes furniture, some of the operations management decisions involve the purchasing of wood and fabric, the hiring and training of workers, the location and layout of the furniture factory, and the purchase of cutting tools and other fabrication equipment. If the organization makes good operations decisions, it will be able to produce affordable, functional, and attractive furniture that customers will purchase at a price that will earn profits for the company.
In another example, the owners of a restaurant must make important decisions regarding the location, layout, and seating capacity of the restaurant, the hiring, training, and scheduling of chefs and servers, the suppliers of fresh food at the right prices, and the purchase of stoves, refrigerators, and other food preparation equipment. If the restaurant owners make good operations decisions, they will be able to meet their customers’ needs for delicious and affordable food that is served in a pleasing atmosphere. The owners in turn will be able to charge a price that earns a profit and allows the restaurant to stay in business.
Operations is one of the three strategic functions of any organization. This means that it is a vital part of accomplishing the organization’s strategy and ensuring its long-term survival. The other two areas of strategic importance to the organization are marketing and finance . For example, a company that makes team jerseys for sport teams must have strong marketing ability to identify groups of customers, understand their needs, and communicate with them to win their business. The company must also manage its finances so it can pay for building and equipment expenses, bank loans, worker wages, and supplies. Finally, the company must have strong operations skills so it can provide customized team jerseys that are attractive, durable, affordable and delivered on time to the customer.
The operations strategy should support the overall organization strategy. For example, JetBlue airlines is a successful airline that has an organization strategy of providing high-value air transportation service to travelers. JetBlue strives to provide fun, comfortable, and safe air service to popular destinations at a price that middle-income passengers can afford. Given JetBlue’s organization strategy, JetBlue features an operations strategy that focuses on low costs, competent and service-oriented employees, and reliable aircraft.
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