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Chapter 1 What is operations management?.

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Presentation on theme: "Chapter 1 What is operations management?."— Presentation transcript:

1 Chapter 1 What is operations management?

2 Operations management defined
Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.

3 The operations function is fashionable!
The consultancy services market – % of world revenues of 40 largest consultancy firms Marketing / sales 2 Operations and process management 31 Corporate strategy 17 IT strategy Benefits / actuarial 16 Organizational design 11 Financial 6 The operations function is fashionable!

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

5 Creating Customer Value

6 Operations management at IKEA
Design a store layout which gives smooth and effective flow Design elegant products which can be flat-packed efficiently Ensure that the jobs of all staff encourage their contribution to business success Site stores of an appropriate size in the most effective locations Continually examine and improve operations practice Monitor and enhance quality of service to customers Maintain cleanliness and safety of storage area Arrange for fast replenishment of products

7 The three basic functions at Prêt a Manger
Nutritional ‘mechanical’ and aesthetic design of the sandwiches and snacks Product / Service Development Design, location and management of stores and in-store processes and the network that supplies them Marketing Operations Promotional activities, market research, etc.

8 All operations are transformation processes …
Inputs that transform inputs … Outputs into outputs Transformation process

9 Some inputs are transformed resources
Some inputs are transforming resources Transformed resources … Output products and services Input resources Transformation process Customers Transforming resources … Outputs are products and services that add value for customers

10 Served and satisfied customers
At Prêt a Manger Transformed resources … ? Served and satisfied customers Input resources Transforming resources … ?

11 The output from most operations is a mixture of products and services
Pure products – Outputs that are exclusively tangible Crude oil production Acme Whistles Aluminium smelting Specialist machine tool production Prêt a Manger Mixture of products and services – Outputs that are a mixture of the tangible and the intangible Restaurant IKEA Information systems provider Management consultancy Mwagusi Safari Lodge Pure services – Outputs that are exclusively intangible Psychotherapy clinic

12 Characteristics of Goods v Services
Contrast the characteristic differences between Manufacturing and Services over the following factors:- Manufacturing <> Service Product Inventory Customer Contact Response times Markets Facilities Capital Labour Quality

13 Furniture manufacturing
Differences within sectors are often greater than the differences between sectors Financial services An account management centre at a large retail bank Financial analyst advising a client at an investment bank Furniture manufacturing Mass production of kitchen units Craft production of reproduction ‘antique’ furniture Hotels Value-for-money hotel Lobby of an international luxury hotel

14 A Typology of Operations
High Volume Low Variety High Low Variation in demand High Low Visibility High Low

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

16 4 V’s profile of two operations
Low Volume High Mwagusi Safari Lodge Formule 1 Hotel High Variety Low High Variation Low High Visibility Low Important to understand how different operations are positioned on the 4 V’s. Is their position where they want to be? Do they understand the strategic implications?

17 Decisions in Operations
Five major decision areas: Process Quality Work force Inventory Capacity Schroeder Section page 16 Operations Management R G Schroeder, Operations Management, 4th edition,1993, McGraw Hill

18 Product/service development function
Some interfunctional relationships between the operations function and other core and support functions Engineering/ technical function Accounting and finance function Human resources function Information technology (IT) function Marketing function Product/service development function Operations function Micro Environment

19 Case : Too Short The Day Analysis Recommendations
What is Giles trying to do ? What is Giles actually doing ? What are the problems within the organisation ? Recommendations What should Giles do ? What changes if any should the organisation make ? Identify the functions of a manager Identify the levels of management

20 Case : The Glastonbury Festival
1 What is the role of an operations manager such as Michael Eavis in this situation? How does this change at different stages of the festival organisation? List the different types of transformation processes involved in the festival activities within the classifications: Materials/Information/Customer 3 Relate the 5 decision areas as outlined in R G Schroeder’s Operations Management, to the Glastonbury case.

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