What is production and operations management, and why is it important?

"10.1 Production and Operations Management—An Overview 1. Why is production and operations management important in both manufacturing and service firms? Production , the creation of products and services, is an essential function in every firm. Production turns inputs, such as natural resources, raw materials, human resources, and capital, into outputs, which are products and services. This process is shown in Exhibit 10.3 . Managing this conversion process is the role of operations management . Belt,” https://www.caterpillar.com, accessed February 20, 2018. Chapter 10 Achieving World-Class Operations Management 371\n\nExhibit 10.2 With new oil reserves now available through “fracking,” the United States is challenging Saudi Arabia and is set to become a vast supplier of oil worldwide. Unlike the smooth petroleum that gushes from Arabian wells, however, America’s black gold in the Marcellus, Bakken, and other shale regions has to be drilled horizontally through new technology. The process is rigorous: oil and gas companies drill into the ground to extract crude oil and natural gas from the shale rock that lies thousands of feet under the ground. Once the formation is reached, gallons of water, sand, and an extensive list of man-made chemicals are injected into the well under high pressure. This combination inserted in the well will fracture the rock and release crude oil and natural gas. It is estimated that the gas within these rock formations could supply the United States for generations to come as technologies evolve to drill below the earth’s surface. What are key inputs in the fracking process? (Credit: Mark Dixon/ Flickr/ Attribution 2.0 Generic (CC BY 2.0)) The goal of customer satisfaction is an important part of effective production and operations. In the past, the manufacturing function in most companies was inwardly focused. Manufacturing had little contact with customers and didn’t always understand their needs and desires. In the 1980s, many U.S. industries, such as automotive, steel, and electronics, lost customers to foreign competitors because their production systems could not provide the quality customers demanded. As a result, today most American companies, both large and small, consider a focus on quality to be a central component of effective operations management. 372 Chapter 10 Achieving World-Class Operations Management This OpenStax book is available for free at http://cnx.org/content/col25734/1.7\n\nExhibit 10.3 Production Process for Products and Services (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.) Stronger links between marketing and manufacturing also encourage production managers to be more outwardly focused and to consider decisions in light of their effect on customer satisfaction. Service companies find that making operating decisions with customer satisfaction in mind can be a competitive advantage. Operations managers, the people charged with managing and supervising the conversion process, play a vital role in today’s firm. They control about three-fourths of a firm’s assets, including inventories, wages, and benefits. They also work closely with other major divisions of the firm, such as marketing, finance, accounting, and human resources, to ensure that the firm produces its goods profitably and satisfies its customers. Marketing personnel help them decide which products to make or which services to offer. Accounting and human resources help them face the challenge of combining people and resources to produce high-quality goods on time and at reasonable cost. They are involved in the development and design of goods and determine what production processes will be most effective."