2 Chapter Coverage Operations management in important Operations management is about process managementOperations processes have different characteristics
3 Operations Management Operations management is about how organizations produce goods and services.DefinitionsThe 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 servicesMaterialsInformationProducts and servicesCustomersAll types of enterprise have an operations function, even if it isn’t called ‘operations.
5 They are all operations Back office operation in a bankKitchen unit manufacturing operationThey are all operationsTake-out / restaurant operationRetail operation
6 Operations Management is Important Operations management canReduce 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 resourcesEnhance 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 organizationThe 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 1.1The activities of core functions in some organizationCore functional activitiesInternet service providerFastfood chainFurniture manufacturerMarketing and sales- Promotes service to users and get registration- Sell advertising space- Advertise on TV- Device promotional materialsAdvertise in magazinesDetermine pricing policySell to storesProduct/service development- Device new services and commission new information contentDesign hamburgers, pizzas, etc.Design décor for restaurantsDesign new furnitureCoordinate with fashionable coloursOperations- Maintain hardware, software and contentMake burgers, pizzas, etc.Serve customersMaintain equipmentsMake componentsAssemble furnitureDeliver furniture
10 TRANSFORMED RESOURCES Operations Management is About Managing Processes - transformation processesENVIRONMENTTRANSFORMED RESOURCESMATERIALS INFORMATION CUSTOMERSGOODS AND SERVICESTRANSFORMATION PROCESSINPUTOUTPUTFACILITIES STAFFTRANSFORMING RESOURCESENVIRONMENT
11 Inputs to the ProcessTransformed resources – resources that are treated, transformed or converted in the process. They are a mixture ofMaterialsInformationCustomersTransforming resources – these are the resources which act upon the transformed resources. They are two types:FacilitiesStaff
12 Within the ProcessMaterials 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 servicesMost 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 goodsTangibleCan be storedProduction precedes consumptionLow customer contactCan be transportedQuality is evidentCrude oil productionAluminium smeltingSpecialist machine tool manufacturerRestaurantComputer systems servicesIntangibleCannot be storedProduction and consumption are simultaneousHigh customer contactCannot be transportedQuality difficult to judgeManagement consultancyPsychotherapy clinicPure services
15 Process HierarchyAll 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 suppliersInternal 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 outputThe variety of their outputThe variation in the demand for their outputThe degree of visibility which customers have of the production of the product or serviceThe volume dimensionHigh volume means high repeatability – people can specializeHigh volume leads to systemization of work – SOPHigh volume gives lower unit costs
18 The variety dimensionHigh variety of products and services offeredHigh variety increases cost of goods and servicesHigh variety operations must be flexibleStandardization minimizes costThe variation dimensionDemand for goods and services can change depending on the external environment – seasonal factorCreates change in resources neededActivities must be planned effectively – forecastingVariation in demand can increase cost
19 The visibility dimension Visibility means process exposureCustomers in a high visibility operation may judge the operation by their perceptions – customer contact skill is important
20 A Typology of Operations IMPLICATIONSIMPLICATIONSLow repetitionEach staff member performs more of jobLess systemizationHigh unit costsHigh repeatabilitySpecializationSystemizationCapital intensiveLow unit costLowVolumeHighWell definedRoutineStandardizedRegularLow unit costsFlexibleComplexMatch customer needsHigh unit costHighVarietyLowChanging capacityAnticipationFlexibilityIn touch with demandHigh unit costStableRoutinePredictableHigh utilizationLow unit costsHighVariation in demandLowTime lag between production and consumptionStandardizedLow contact skillsHigh staff utilizationCentralizationLow unit costsShort waiting toleranceSatisfaction governed by customer perceptionCustomer contact skills neededReceived variety is highHigh unit costHighVisibilityLow