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 firmsMarketing / sales2Operations and process management31Corporate strategy17IT strategyBenefits / actuarial16Organizational design11Financial6The operations function is fashionable!
4 They are all operations Back office operation in a bankKitchen unit manufacturing operationThey are all operationsRetail operationTake-out / restaurant operation
6 Operations management at IKEA Design a store layout which gives smooth and effective flowDesign elegant products which can be flat-packed efficientlyEnsure that the jobs of all staff encourage their contribution to business successSite stores of an appropriate size in the most effective locationsContinually examine and improve operations practiceMonitor and enhance quality of service to customersMaintain cleanliness and safety of storage areaArrange for fast replenishment of products
7 The three basic functions at Prêt a Manger Nutritional ‘mechanical’ and aesthetic design of the sandwiches and snacksProduct / Service DevelopmentDesign, locationand management of stores and in-store processes and the network that supplies themMarketingOperationsPromotional activities, market research, etc.
8 All operations are transformation processes … Inputsthat transform inputs …Outputsinto outputsTransformation process
9 Some inputs are transformed resources Some inputs are transforming resourcesTransformed resources …Output products and servicesInput resourcesTransformation processCustomersTransforming resources …Outputs are products and services that add value for customers
10 Served and satisfied customers At Prêt a MangerTransformed resources …?Served and satisfied customersInput resourcesTransforming resources …?
11 The output from most operations is a mixture of products and services Pure products – Outputs that are exclusively tangibleCrude oil productionAcme WhistlesAluminium smeltingSpecialist machine tool productionPrêt a MangerMixture of products and services – Outputs that are a mixture of the tangible and the intangibleRestaurantIKEAInformation systems providerManagement consultancyMwagusi Safari LodgePure services – Outputs that are exclusively intangiblePsychotherapy clinic
12 Characteristics of Goods v Services Contrast the characteristic differences between Manufacturing and Services over the following factors:-Manufacturing <> ServiceProductInventoryCustomer ContactResponse timesMarketsFacilitiesCapitalLabourQuality
13 Furniture manufacturing Differences within sectors are often greater than the differences between sectorsFinancial servicesAn account management centre at a large retail bankFinancial analyst advising a client at an investment bankFurniture manufacturingMass production of kitchen unitsCraft production of reproduction ‘antique’ furnitureHotelsValue-for-money hotelLobby of an international luxury hotel
14 A Typology of Operations HighVolumeLowVarietyHighLowVariation in demandHighLowVisibilityHighLow
15 A Typology of Operations ImplicationsImplicationsHighLow repetitionEach staff member performs more of jobLess systemizationHigh unit costsHigh repeatabilitySpecializationCapital intensiveLow unit costsVolumeLowFlexibleComplexMatch customer needsHigh unit costsWell definedRoutineStandardizedRegularLow unit costsVarietyHighLowChanging capacityAnticipationFlexibilityIn touch with demandHigh unit costsStableRoutinePredictableHigh utilizationLow unit costsVariation in demandHighLowVisibilityHighLowShort waiting toleranceSatisfaction governed by customer perceptionCustomer contact skills neededReceived variety is highHigh unit costsTime lag between production and consumptionStandardizationLow contact skillsHigh staff utilizationCentralizationLow unit costs
16 4 V’s profile of two operations LowVolumeHighMwagusi Safari LodgeFormule 1 HotelHighVarietyLowHighVariationLowHighVisibilityLowImportant 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:ProcessQualityWork forceInventoryCapacitySchroeder Section page 16Operations 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 functionsEngineering/ technical functionAccounting and finance functionHuman resources functionInformation technology (IT) functionMarketing functionProduct/service development functionOperations functionMicro 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 ?RecommendationsWhat should Giles do ?What changes if any should the organisation make ?Identify the functions of a managerIdentify 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/Customer3 Relate the 5 decision areas as outlined in R G Schroeder’s Operations Management, to the Glastonbury case.