Cambridge University Press© Hickey et al 2016 Topic 1: Operations Chapter 1 Role of operations management

Cambridge University Press© Hickey et al 2016 The creation of goods and the provision of services. The transformation of inputs into outputs. This involves: planning activities purchasing inputs managing inventory selecting and implementing manufacturing processes developing strategies to gain a sustainable competitive advantage. Role of operations management

Cambridge University Press© Hickey et al 2016 Gaining a long-term competitive advantage over its competitors, both local and overseas. May use a cost leadership or product differentiation strategy. Strategic role of operations

Cambridge University Press© Hickey et al 2016 Strategic operations decisions: how to organise inputs and equipment in operations what combination of human and technological resources what new products are to be created how big, the capacity of operations how to produce products where to locate level of quality. Strategic role of operations (cont.)

Cambridge University Press© Hickey et al 2016 A strategy where a business aims to obtain an advantage over its competitors by being the lowest cost manufacturer within its industry. If it can be made cheaper it can be sold for less. Cost leadership operations strategy

Cambridge University Press© Hickey et al 2016 Low cost through operations may be achieved by: increasing size of operations to reduce the average cost of making each item – called economies of scale maximising productivity by producing more outputs from less inputs maximising efficiency by minimising waste and saving time using less expensive inputs having lower quality outputs using technology producing faster Cost leadership operations strategy (cont.)

Cambridge University Press© Hickey et al 2016 Aims to obtain an advantage over competitors by having outputs that are different to its competitors, unique or use leading edge technology. This is achieved through having: better quality outputs quicker supply of outputs custom-designed outputs and/or more varieties to suit different customer wants more features, applications and versatility new technology incorporated. Good/service differentiation operations strategy

Cambridge University Press© Hickey et al 2016 Goods outputs: physical, tangible can be reused more capital intensive (machinery) can be stored hard to modify once manufactured. Goods and services in different industries

Cambridge University Press© Hickey et al 2016 Services: intangible can only be used by one customer once more labour intensive more interaction with customers easier to change and customise. Goods and services in different industries (cont.)

Cambridge University Press© Hickey et al 2016 Mining industry Retailing Education Banking and finance Construction Tourism Goods and services in different industries (cont.)

Cambridge University Press© Hickey et al 2016 Specialisation – where the business is separated into different functions, each of which is highly skilled at its specific task or role. Interdependence – where the different parts of a business must rely on each other to perform their task or role. Interdependence of operations with the other key business functions

Cambridge University Press© Hickey et al 2016 As a result of specialisation, there will be interdependence between the key business functions and a constant flow of information between operations, marketing, finance and human resources. Interdependence of operations with the other key business functions (cont.)