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and testing, oversight of suppliers, risk assessment, and timely response to potential problems.
4. Risk management. Managing risks starts with identifying risks, assessing vulnerability and
potential damage (liability costs, reputation, demand), and taking steps to reduce or share risks.
5. Competing in a global economy. Companies must carefully weigh their options, which include
outsourcing some or all of their operations to low-wage areas, reducing costs internally, changing
designs, and working to improve productivity.
6. Environmental Concerns. Concern about global warming and pollution has had an increasing
effect on how businesses operate. Stricter environmental regulations, particularly in developed
nations, are being imposed. Furthermore, business organizations are coming under increasing
pressure to reduce their carbon footprint (the amount of carbon dioxide generated by their
operations and their supply chains) and to generally operate sustainable processes.
Sustainability refers to service and production processes that use resources in ways that do not
harm ecological systems that support both current and future human existence. Sustainability
measures often go beyond traditional environmental and economic measures to include
measures that incorporate social criteria in decision making.
All areas of business will be affected by this. Areas that will be most affected include product and
service design, consumer education programs, disaster preparation and response, supply chain
waste management, and outsourcing decisions. Note that outsourcing of goods production
increases not only transportation costs, but also fuel consumption and carbon released into the
atmosphere. Consequently, sustainability thinking may have implications for outsourcing
decisions.

Because they all fall within the realm of operations, operations management is central to dealing
with these issues. Sometimes referred to as ―green initiatives,‖ the possibilities include reducing
packaging, materials, water and energy use, and the environmental impact of the supply chain,
including buying locally. Other possibilities include reconditioning used equipment (e.g., printers
and copiers) for resale, and recycling.
7. Ethical Conduct - The need for ethical conduct in business is becoming increasingly obvious,
given numerous examples of questionable actions in recent history. In making decisions,
managers must consider how their decisions will affect shareholders, management, employees,
customers, the community at large, and the environment. Finding solutions that will be in the best
interests of all of these stakeholders is not always easy, but it is a goal that all managers should
strive to achieve. Furthermore, even managers with the best intentions will sometimes make
mistakes. If mistakes do occur, managers should act responsibly to correct those mistakes as
quickly as possible, and to address any negative consequences.
Many organizations have developed codes of ethics to guide employees’ or members’ conduct. Ethics
is a standard of behavior that guides how one should act in various situations. The Markula
Center for Applied Ethics at Santa Clara University identifies five principles for thinking ethically:
 The Utilitarian Principle is that the good done by an action or inaction should outweigh
any harm it causes or might cause. An example is not allowing a person who has had too
much to drink to drive.
 The Rights Principle is that actions should respect and protect the moral rights of others.
An example is not taking advantage of a vulnerable person.
 The Fairness Principle is that equals should be held to, or evaluated by, the same
standards. An example is equal pay for equal work.
 The Common Good Principle is that actions should contribute to the common good of
the community. An example is an ordinance on noise abatement.
 The Virtue Principle is that actions should be consistent with certain ideal virtues.
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Examples include honesty, compassion, generosity, tolerance, fidelity, integrity, and self-
control.
The center expands these principles to create a framework for ethical conduct. An ethical
framework is a sequence of steps intended to guide thinking and subsequent decisions or actions.
 Recognize an ethical issue by asking if an action could be damaging to a group or an
individual. Is there more to it than just what is legal?
 Make sure the pertinent facts are known, such as who will be impacted, and what options
are available.
 Evaluate the options by referring to the appropriate preceding ethical principle.
 Identify the ―best‖ option and then further examine it by asking how someone you
respect would view it.
 In retrospect, consider the effect your decision had and what you can learn from it.
Operations managers, like all managers, have the responsibility to make ethical decisions.
Ethical issues arise in many aspects of operations management, including
 Financial statements: accurately representing the organization’s financial condition.
 Worker safety: providing adequate training, maintaining equipment in good working
condition, maintaining a safe working environment.
 Product safety: providing products that minimize the risk of injury to users or damage to
property or the environment.
 Quality: honoring warranties, avoiding hidden defects.
 The environment: not doing things that will harm the environment.
 The community: being a good neighbor.
 Hiring and firing workers: avoiding false pretenses (e.g., promising a long-term job when
that is not what is intended).
 Closing facilities: taking into account the impact on a community, and honoring
commitments that have been made.
 Workers’ rights: respecting workers’ rights, dealing with workers’ problems quickly and
fairly
8. Managing the supply chain. Supply chain management is being given increasing attention as
business organizations face mounting pressure to improve management of their supply chains. In
the past, most organizations did little to manage their supply chains. Instead, they tended to
concentrate on their own operations and on their immediate suppliers. Moreover, the planning,
marketing, production and inventory management functions in organizations in supply chains
have often operated independently of each other. As a result, supply chains experienced a range
of problems that were seemingly beyond the control of individual organizations. The problems
included large oscillations of inventories, inventory stockouts, late deliveries, and quality
problems. These and other issues now make it clear that management of supply chains is
essential to business success. The other issues include the following:
 The need to improve operations. Efforts on cost and time reduction, and productivity
and quality improvement, have expanded in recent years to include the supply chain.
Opportunity now lies largely with procurement, distribution, and logistics—the supply
chain.
 Increasing levels of outsourcing. Organizations are increasing their levels of
outsourcing, buying goods or services instead of producing or providing them
themselves. As outsourcing increases, organizations are spending increasing amounts
on supply-related activities (wrapping, packaging, moving, loading and unloading, and
sorting). A significant amount of the cost and time spent on these and other related
activities may be unnecessary. Issues with imported products, including tainted food
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products, toothpaste, and pet foods, as well as unsafe tires and toys, have led to
questions of liability and the need for companies to take responsibility for monitoring the
safety of outsourced goods.
 Increasing transportation costs. Transportation costs are increasing, and they need to
be more carefully managed.
 Competitive pressures. Competitive pressures have led to an increasing number of new
products, shorter product development cycles, and increased demand for customization.
And in some industries, most notably consumer electronics, product life cycles are
relatively short. Added to this are adoption of quick-response strategies and efforts to
reduce lead times.
 Increasing globalization. Increasing globalization has expanded the physical length of
supply chains. A global supply chain increases the challenges of managing a supply
chain. Having far-flung customers and/or suppliers means longer lead times and greater
opportunities for disruption of deliveries. Often currency differences and monetary
fluctuations are factors, as well as language and cultural differences. Also, tightened
border security in some instances has slowed shipments of goods.
 Increasing importance of e-business. The increasing importance of e-business has
added new dimensions to business buying and selling and has presented new
challenges.
 The complexity of supply chains. Supply chains are complex; they are dynamic, and
they have many inherent uncertainties that can adversely affect them, such as inaccurate
forecasts, late deliveries, substandard quality, equipment breakdowns, and canceled or
changed orders.