Operations Management

An operation transformation process which changes inputs to outputs which add value for
customers

Operations Management the planning and organizing of the production of goods and the
delivery of services
- they use processes, inventory, work force, facilities and equipment to determine the
ranking of the following competitive priorities:
- cost, quality, dependability, flexibility, speed
- = short and long term profit, increased market share and increased competitiveness



Activities of Operations Managers:
Direct Responsibility:
- understanding objectives and developing an operations strategy
- designing the operations products, services & processes
- planning & controlling resources (people, materials, processes)
Indirect Responsibility:
- interacting with other departments as part of the management team
Broad Responsibility:
- social responsibility
- environmental protection
- technology awareness
- globalisation issues

System features Short term examples Long term examples
Developing and
maintaining
infrastructure
Equipment
Maintenance schedules
New sites for operation
Invent in new technology
Managing the system
inputs
Ordering stock
Managing warehousing and
logistics
Tendering contracts for new
suppliers
Outsourcing decisions
Controlling material
inputs within the system
Setting stock levels
Scheduling speed of production
Adopting new approaches to
materials flow such as MRPII or
just-in-time
Managing customer
inputs within the system
(i.e. as co-workers)
Monitoring queues
Overseeing self service
technologies (SSTs)
Dealing with service failures
Redesigning Servicescape
Selecting and siting new SSTs
Improving service performance
Managing the rate of flow
through the system
Forecasting days/weeks ahead
Devising work rotas
Taking orders for goods or
reservations for services
Forecasting months/years ahead
Planning manpower needs
Planning scale of production and
width of product range
Assuring the quality of
system outputs
Output vs standards
Monitoring quality performance
Benchmarking standards against
competitors
Adapting and improving processes
Developing and
enhancing the systems
processes
Monitoring system performance
productivity of employees and
efficiency of technology
Planning new systems to improve
productivity and efficiency

Characteristics of Operations Management:
1. Volume of output
2. Variety of product/service offered
3. Variation in demand
4. Variability - can it be customised easily?

Repetition
Low unit cost
Volume Specialisation
High unit cost
Standardisation
Low unit cost
Variety Complexity
High unit cost
Predictability
Low unit cost
Variation Flexible processes
High unit cost
Standard
Low unit cost
Variability Highly customisable
High unit cost


Different types of operation:
Materials Processing Operations
(MPOs) manufacturing
Customer Processing Operations
(CPOs) a service
Information Processing Operations
(IPOs) services

Difference between MPOs and CPOs is that
CPOs have:
Intangibility cannot be seen, tasted,
felt, etc.
Inseparability customer is involved in the
process
Variability (Heterogeneity) quality
dependant on who/when the service happens
Perishability services cannot be stored, no
buffer to cope with unexpected demand








Low

High

High

High
High

Low

Low

Low
CPOs comprise of two elements:
Customer experience which includes:
1. Personalisation of the service
2. Responsiveness
3. Flexibility of service staff
4. Ease of access
5. Friendliness
6. Courtesy of staff
7. The service environment (servicescape)
1.

The Servuction Model:
Blend of service and product
Operations that process
customers can do so in 2 ways:
through infrastructure OR staff OR both


Different types of operation:
B2B eg. transport
B2C eg. food retailers
Internal operations eg. HR, IT etc.
Public services (G2C) eg. police, schools
etc.
Not for profit organizations eg. charities



Types of Market Structure:
Perfect Competition: many buyers and sellers, none being able to influence prices eg: some
commodities, such as sugar/grain/flour
Monopoly: one seller who has total control over prices eg: government backed organisations
Oligopoly: large sellers who have control over prices eg: oil and gas companies, airlines

Market Segmentation:
Bonoma and Shapiro (1984) macro and micro segmentation criteria could be combined into a
multi-step approach
Demographics: industry, company size, customer location
Operating Variables: company technology
Process outcome which includes:
1. Expected outcome
2. Value of service
3. Emotions
4. Judgements
Purchasing Approaches: power structure, buyer-seller relationships, purchasing criteria,
purchasing policies
Situational Factors: urgency of orders, product application, size of order
Buyers Personal Characteristics: character, approach

Order Qualifiers / Order Winners
Hill (2005)
Order Qualifiers: characteristics of a product or service that are required for them to
even be considered by a customer (quality standard, ability to fly directly to holiday
destination)
Does not usually give firms the opportunity to do more business
Order Winners: directly contribute to winning business from customers (speed of
delivery, ability to increase/decrease production to meet demand)
May result in increased business

Neely (2008) OQ and OWs dependant on 5 internal performance priorities
Cost (selling price, manufacturing cost, service cost, value added)
Quality (performance, features, value for money)
Dependability (price performance, safety, delivery performance)
Flexibility (volume, deliverability, new product)
Speed (delivery frequency, delivery speed, production speed)