<p>Chapter 14: Operations Management</p><p>Section 14.1 - The Importance of Operations Management</p><p>Key Terms  Operations management  Transformation process  Manufacturing organization  Service organization  Productivity</p><p>Summary</p><p>The term operation management refers to the design, operation and control of the transformation process that converts such resources as labor and raw materials into goods and services that are sold to customers. The system takes inputs—people, technology, equipment, materials and information—and transforms them through various processes, procedures and work activities into finished goods and services. </p><p>Operations management is important to organizations and managers for three reasons. First, it encompasses processes in all organizations—services as well as manufacturing. Second, it’s important in effectively and efficiently managing productivity. And third, it lays a strategic role in an organization’s competitive success. </p><p>Every organization has an operations system that creates value by transforming inputs into finished goods and service outputs (transformation process). Manufacturing organizations produce physical goods while service organizations produce nonphysical outputs in the form of services. </p><p>How do we improve productivity? Productivity is closely tied into the transformation process and improving productivity has become a major goal in virtually every organization. Productivity is the overall output of goods and services produced divided by the inputs needed to generate that output. High productivity can lead to economic growth and development and increased productivity lowers costs and allows firms to offer more competitive prices. Productivity is composite of people and operations variables. The truly effective organization will maximize productivity by successfully integrating people into the overall operations system. </p><p>Increasing productivity is critical to global competitiveness. Organizations that hope to succeed globally are looking for ways to improve productivity. In the late 1970s, U.S. executives heavily invested in improving manufacturing technology, increased the corporate authority and visibility of manufacturing executives, and began incorporating existing and future production requirements into the organization’s overall strategic plan. Today, successful manufacturers recognize the crucial role that operations management plays as part of the overall organizational strategy to establish and maintain global leadership. The strategic role that operations management plays in successful organizational performance can be seen clearly, as more organizations move toward managing their operations from a value chain perspective.</p><p>Section Outline I. The Importance of Operations Management II. How Do Service and Manufacturing Firms Differ? A. How do we improve productivity? B. What strategic role does operations management play?</p>