OM Chap01

Chapter 1 What is operations management?
Slack, Chambers and Johnston, Operations Management 5th Edition Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management defined

Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.
three core functions of any organization

' the marketing (including sales) function which is responsible for communicating the organizations products and services to its markets in order to generate customer requests for service; ' the product/service development function which is responsible for creating new and modified products and services in order to generate future customer requests for service; ' the operations function which is responsible for fulfilling customer requests for service through the production and delivery of products and services.
'
Example for three core functions of any organization
Some interfunctional relationships between the operations function and other core and support functions
Engineering/ technical function
Understanding of the capabilities and constraints of the operations process
Product/service development function
Analysis of new technology options Understanding of process technology needs New product and Accounting service ideas Provision and finance Understanding of the of relevant function capabilities and data Operations p constraints of the Financial analysis operations process function for performance Market and decisions requirements Understanding of human resource needs Recruitment development and training Understanding Provision of systems for design, planning and of infrastructural control, and improvement and system needs
Marketing function
Human resources function
Information technology (IT) function
Back office operation in a bank
Kitchen unit manufacturing operation
They are all

Retail operation
operations
Take-out / restaurant operation
The best way to start understanding the nature of operations is to look around you Everything you can see around you (except the flesh and blood) has been processed by an operation Every y service y you consumed today y( (radio station, bus service, lecture, etc.) has also been produced by an
operation
Operations Managers create everything you buy, sit on, wear, eat, throw at people, and throw away
Operations management uses resources to appropriately create outputs that fulfil defined market requirements
The new operations agenda
Operations management at IKEA

Design elegant products which can be flat-packed efficiently Design a store layout which gives smooth and effective flow 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
Maintain cleanliness and safety of storage area
Arrange for fast replenishment of products
Monitor and enhance quality of service to customers
Prt a Manger
High-end sandwich and snack retailer Uses only wholesome ingredients All shops have own kitchens, which make fresh sandwiches every y day y Fresh ingredients delivered early every morning The same staff who serve you at lunch made the sandwiches that morning
We dont work nights, we wear jeans, we party
The three basic functions at Prt a Manger

Nutritional mechanical and aesthetic design of the sandwiches and snacks
Product / Service Development
Promotional activities, market research, etc.
Marketing
Operations
Design, location and d management t of f stores and in-store processes and the network that supplies them
All operations are transformation processes
Inputs
Transformation process
Outputs
that transform inputs into outputs
Some inputs are transformed resources Some inputs are transforming resources
Transformed resources
Materials Information Customers Input resources
Transformation process
Output products and services
Customers
Transforming resources
Facilities Staff
Outputs are products and services that add value for customers
At Prt a Manger
Ingredients Packaging Customers Input resources Served and satisfied customers t
Equipment Fittings Staff
Transformed and transforming resources
One set of inputs to any operations processes are transformed resources. These are the resources that are treated, transformed or converted in the process
The other set of inputs to any operations process are transforming resources. These are the resources which act upon the transformed resources. There are two types which form the building blocks of all operations: ' facilities the buildings, equipment, plant and process technology of the operation; p ' staff the people who operate, maintain, plan and manage the operation. (Note that we use the term staff to describe all the people in the operation, at any level.)
Outputs from the process

Although products and services are different, the distinction can be subtle. The most obvious difference is in their respective tangibility. Products are usually tangible. Services are usually intangible. Also, services may have a shorter stored life. Products can usually be stored, at least for a time. The life of a service is often much shorter. For example, the service of accommodation in a hotel room for tonight will perish if it is not sold before tonight accommodation in the same room tomorrow is a different service
The output from most operations is a mixture of products and services

Crude oil production Acme Whistles Pure products Outputs that are exclusively tangible
Aluminium smelting Specialist machine tool production Restaurant Information systems provider IKEA
Prt a Manger
Mixture of products and services Outputs that are a mixture of the tangible and the intangible
Management consultancy Mwagusi Safari Lodge Psychotherapy clinic Pure services Outputs that are exclusively intangible
Operations can be analyzed at three levels

Flow between operations
The level of the supply network
Flow between processes
The level of the operation
The level of the process

Flow between resources
Operations can be analyzed at three levels
Some operations described in terms of their processes
Operations management is relevant to all parts of the business
All managers should have something to learn from the principles, concepts, approaches and techniques of operations management. we must distinguish operations: between two meanings of
' Operations as a function, meaning the part of the organization which produces the products and services for the organizations external customers; ' Operations as an activity, meaning the management of the processes within any of the organizations functions.
Operations management is relevant to all parts of the business Some examples of processes in non-operations functions
Business processes
Satisfying customers needs is accomplished through using many processes, in both operations and other functions. Each of the processes contributes some part to fulfilling customer needs. A company may re-organize i its operations tions so that each h product is produced from start to finish by a dedicated process that contains all the elements necessary for its production. Customer needs for each product are entirely fulfilled from within what is called an end-to-end business process.
Business process Reengineering

end-to-end BP often organizational boundaries. cut across conventional
Reorganizing (or re-engineering) process boundaries and organizational responsibilities around these business processes is the philosophy behind business process reengineering (BPR).
A Typology of Operations
Low
Volume of output
High High
High Variety of output Low
High
Variation in demand
Low
High
Visibility for customers
Low
Implications
Low repetition Each staff member performs more of job Less systemization High unit costs
Implications
High repeatability Specialization Capital intensive Low unit costs
Low
Volume
High High
a local cafeteria vs. McDonald
Implications Implications
Well defined Routine Standardized Regular Low unit costs
Flexible Complex Match customer needs High unit costs
High
Variety
Low
Taxi agency vs. bus services
Implications Implications
Changing capacity Anticipation Flexibility In touch with demand High unit costs
High
Variation in demand
Low
Stable Routine Predictable High utilization Low unit costs
Summer resort hotel vs. a hotel in business center
Implications
Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs
Implications
Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs
High
Visibility
Low
R t iler vs. e Retailer e-biz biz
How much of the operations activities its customers experience, or how much the operation is exposed to its customers customer-processing operations are more exposed to their customers than material- or information-processing operations
implications of the four Vs

All four dimensions have implications for the cost of creating the products or services. high volume, low variety, low variation and low customer contact all help to keep processing costs down. low volume, high variety, high variation and high customer t contact t t generally lly carry some kind of f cost t penalty lty for the operation. The position of an operation in the four dimensions is determined by the demand of the market it is serving. Most operations have some discretion in moving themselves on the dimensions.
4 Vs profile of two operations

Low High High High
Mwagusi Safari Lodge
Volume Variety Variation Visibility
High Low Low Low

Formule 1 Hotel
Important to understand how different operations are positioned on the 4 Vs. Is their position where they want to be? Do they understand the strategic implications?
The activities of operations management

' Understanding the operations strategic performance objectives: to understand what it is trying to achieve. This means understanding how to judge the performance of the operation at different levels, from broad and strategic to more operational performance objectives. (Chapter 2) ' Developing an operations strategy for the organization: operations management involves hundreds of minute-by-minute decisions, so it is vital that there is a set of general principles which can guide decision-making towards the organizations longer-term goals. This is an operations strategy (Chapter 3) ' Designing the operations products, services and processes: Design is the activity of determining the physical form, shape and composition of products, services and processes. It is a crucial part of operations managers activities (Chapters 4 to 9).
The activities of operations management

' Planning and controlling the operation: the activity of deciding what the operations resources should be doing, then making sure that they really are doing it. (Chapters 10 to 17) ' Improving the performance of the operation: to improve the performance of their operation. (Chapters 18 to 20) ' The social responsibilities of operations management: It is increasingly recognized by many businesses that operations managers have a set of broad societal responsibilities and concerns beyond their direct activities. The general term for these aspects of business responsibility is corporate social responsibility or CSR. It should be of particular interest to operations managers, because their activities can have a direct and significant effect on society. (Chapter 21).
A general model of operations management

Materials Information Customers Design Input resources Operations management Planning and control Operations strategy
The operations strategic objectives Operations strategy The operations competitive role and position
Improvement Output products and services Customers
Facilities Staff
Key Terms Test

Operations management The activities, decisions and responsibilities of managing the production and delivery of products and services. Operations function The arrangement t of f resources that are devoted d t d to t the production and delivery of products and services. Operations managers The staff of the organization who have particular responsibility for managing some or all of the resources which comprise the operations function.
Key Terms Test

Support functions The functions that facilitate the working of the core functions, for example, accounting and finance, human resources, etc. Broad definition of operations All the activities necessary for the fulfilment of customer requests. Transformation process model Model that describes operations in terms of their input resources, transforming processes and outputs of goods and services.
Key Terms Test

Transformed resources The resources that are treated, transformed or converted in a process, usually a mixture of materials, information and customers. Input resources The transforming and transformed resources that form the input to operations. Transforming resources The resources that act upon the transformed resources, usually classified as facilities (the buildings, equipment and plant of an operation) and staff (the people who operate, maintain and manage the operation).
Key Terms Test

Tangibility The main characteristic that distinguishes products (usually tangible) from services (usually intangible). Facilitating services Services that are produced by an operation to support its products. Facilitating products Products that are produced by an operation to support its services.
Key Terms Test

Processes An arrangement of resources that produces some mixture of goods and services. Supply network The network of supplier and customer operations that have relationships with an operation. Hierarchy of operations The idea that all operations processes are made up of smaller operations processes. End-to-end business processes Processes that totally fulfil a defined external customer need.
Key Terms Test

Business process reengineering The philosophy that recommends the redesign of processes to fulfil defined external customer needs. Volume The level or rate of output from a process, a key characteristic that determines process behaviour. Variety The range of different products and services produced by a process, a key characteristic that determines process behaviour.
Key Terms Test

Systemization The extent to which standard procedures are made explicit. Standardization The degree to which processes, products or services are prevented t df from varying i over time. Customer contact skills The skills and knowledge that operations staff need to meet customer expectations.
Key Terms Test

Front-office The high-visibility part of an operation. Back-office The low-visibility part of an operation.

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Chapter 1 What is operations management?

Operations management defined

three core functions of any organization

Example for three core functions of any organization

Product/service development function

Human resources function

Information technology (IT) function

Back office operation in a bank

Kitchen unit manufacturing operation

They are all

The new operations agenda

Operations management at IKEA

Site stores of an appropriate size in the most effective locations

Continually examine and improve operations practice

Maintain cleanliness and safety of storage area

Arrange for fast replenishment of products

Monitor and enhance quality of service to customers

We dont work nights, we wear jeans, we party

The three basic functions at Prt a Manger

Product / Service Development

Promotional activities, market research, etc.

All operations are transformation processes

that transform inputs into outputs

Output products and services

Transformed and transforming resources

Outputs from the process

The output from most operations is a mixture of products and services

Operations can be analyzed at three levels

The level of the supply network

Flow between processes

The level of the operation

The level of the process

Operations can be analyzed at three levels

Some operations described in terms of their processes

Operations management is relevant to all parts of the business

Business process Reengineering

High Variety of output Low

Visibility for customers

a local cafeteria vs. McDonald

Flexible Complex Match customer needs High unit costs

Taxi agency vs. bus services

Stable Routine Predictable High utilization Low unit costs

Summer resort hotel vs. a hotel in business center

R t iler vs. e Retailer e-biz biz

implications of the four Vs

4 Vs profile of two operations

Volume Variety Variation Visibility

High Low Low Low

The activities of operations management

The activities of operations management

A general model of operations management

Improvement Output products and services Customers

Key Terms Test

Key Terms Test

Key Terms Test

Key Terms Test

Key Terms Test

Key Terms Test

Key Terms Test

Key Terms Test

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