1. OPERATIONS MANAGEMENT
Introduction
OPERATIONS MANAGEMENT

2. Chapter Coverage Operations management in important
Operations management is about process management
Operations processes have different characteristics

3. Operations Management
Operations management is about how organizations produce goods and services.
Definitions
The operations function of the organization is the arrangement of the resources which are devoted to the production and delivery of its products and services.
Operations managers are the staff of the organization who have particular responsibility for managing some, or all, of the resources which comprise the operations function.
Operations management is the term used for the activities, decisions and responsibilities of operation managers

4. Operations Management – Basic Principles
Operations management is concerned with producing and delivering products and services
Materials
Information
Products and services
Customers
All types of enterprise have an operations function, even if it isn’t called ‘operations.

5. They are all operations
Back office operation in a bank
Kitchen unit manufacturing operation
They are all operations
Take-out / restaurant operation
Retail operation

6. Operations Management is Important
Operations management can
Reduce costs of producing products and service by being efficient.
Increase revenue by increasing customer satisfaction through good quality and service.
Reduce need for investment by increasing the effective capacity of the operation and by being innovative in how it uses its physical resources
Enhance innovation by building a solid base of operations skills and knowledge within the business.

7. Operations in the Organization
The operations function is key to an organization because it produces the goods and services, but it is neither the only, nor necessarily the most important, function. The three core functions of any organization are:
The marketing function – responsible for communicating the organization’s product and services to its markets in order to generate customer request for goods and services.
The product/service development function – responsible for creating new and modified products and services in order to generate future customers requests.
The operations functions – responsible for fulfilling customer requests for service throughout the production and delivery of goods and services.

8. The support functions of any organization are:
The accounting and finance function – provides the information to help economic decision making and manages the financial resources of the organization
The human resources function - recruits and develops the organization’s staff as well as looking after their welfare.
In practice, functional names, boundaries and responsibilities do vary significantly between organizations.

9. The activities of core functions in some organization
Table 1.1
The activities of core functions in some organization
Core functional activities
Internet service provider
Fastfood chain
Furniture manufacturer
Marketing and sales
- Promotes service to users and get registration
- Sell advertising space
- Advertise on TV
- Device promotional materials
Advertise in magazines
Determine pricing policy
Sell to stores
Product/service development
- Device new services and commission new information content
Design hamburgers, pizzas, etc.
Design décor for restaurants
Design new furniture
Coordinate with fashionable colours
Operations
- Maintain hardware, software and content
Make burgers, pizzas, etc.
Serve customers
Maintain equipments
Make components
Assemble furniture
Deliver furniture

10. TRANSFORMED RESOURCES
Operations Management is About Managing Processes - transformation processes
ENVIRONMENT
TRANSFORMED RESOURCES
MATERIALS INFORMATION CUSTOMERS
GOODS AND SERVICES
TRANSFORMATION PROCESS
INPUT
OUTPUT
FACILITIES STAFF
TRANSFORMING RESOURCES
ENVIRONMENT

11. Inputs to the Process
Transformed resources – resources that are treated, transformed or converted in the process. They are a mixture of
Materials
Information
Customers
Transforming resources – these are the resources which act upon the transformed resources. They are two types:
Facilities
Staff

12. Within the Process
Materials processing –transforms material’s physical properties, location, possession or materials are stored.
Information processing– transforms information properties, possession, location or information is stored.
Customer processing – transforms customer’s physical properties, location, physiological state, psychological state or store (accommodate) customers.

13. Outputs from the Process
Outputs from process can be differentiate between products and service based organization – tangibility of products and intangibility of services
Most operations produce both products and services – (slide 1.13)
Services and products are merging – all operations are service providers who may produce products as a means of serving customers.

14. The output from most types of operation is a mixture of goods and services
Pure goods
Tangible
Can be stored
Production precedes consumption
Low customer contact
Can be transported
Quality is evident
Crude oil production
Aluminium smelting
Specialist machine tool manufacturer
Restaurant
Computer systems services
Intangible
Cannot be stored
Production and consumption are simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
Management consultancy
Psychotherapy clinic
Pure services

15. Process Hierarchy
All macro operations are made up many micro operations.
Micro operations have inputs.
Each micro operation produces outputs of goods and services for the benefit of customers.
Within each micro operation there might be sections or groups.
Internal customers and internal suppliers
Internal customers take outputs from other micro operations.
Internal suppliers take give inputs to other micro operations.
Each micro operations is an internal customer and internal supplier.
By treating their internal customers with care the effectiveness of the operation is improved.

16. All parts of the organization are operations
All micro operations are similar to macro operations – they have inputs transformed to outputs.
Each functions have its ‘technical’ knowledge.
Every managers in a micro operations is an operations manager.
The two meanings of operations must be differentiated:
Operations as a function – the part of the organization which produces the products and services for the external customers.
Operations as an activity – any processing of input resources in order to produce products and services for internal or external customers.

17. Operations Processes Have Different Characteristics
Operations processes differ in four distinctive ways:
The volume of their output
The variety of their output
The variation in the demand for their output
The degree of visibility which customers have of the production of the product or service
The volume dimension
High volume means high repeatability – people can specialize
High volume leads to systemization of work – SOP
High volume gives lower unit costs

18. The variety dimension
High variety of products and services offered
High variety increases cost of goods and services
High variety operations must be flexible
Standardization minimizes cost
The variation dimension
Demand for goods and services can change depending on the external environment – seasonal factor
Creates change in resources needed
Activities must be planned effectively – forecasting
Variation in demand can increase cost

19. The visibility dimension
Visibility means process exposure
Customers in a high visibility operation may judge the operation by their perceptions – customer contact skill is important

20. A Typology of Operations
IMPLICATIONS
IMPLICATIONS
Low repetition
Each staff member performs more of job
Less systemization
High unit costs
High repeatability
Specialization
Systemization
Capital intensive
Low unit cost
Low
Volume
High
Well defined
Routine
Standardized
Regular
Low unit costs
Flexible
Complex
Match customer needs
High unit cost
High
Variety
Low
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit cost
Stable
Routine
Predictable
High utilization
Low unit costs
High
Variation in demand
Low
Time lag between production and consumption
Standardized
Low contact skills
High staff utilization
Centralization
Low unit costs
Short waiting tolerance
Satisfaction governed by customer perception
Customer contact skills needed
Received variety is high
High unit cost
High
Visibility
Low