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St.

Paul University Philippines

Introduction to Operations Management


CHARLENE MAE S. ZAMBALE

Critical Thinking Exercises: This allows you to critically apply information learned to a
practical situation.

1. Many organizations offer a combination of goods and services to the customers.


As you have learned there are some key differences between production of goods
and delivery of services. What are the implications of these differences relative
to managing operations?

In Operations, goods and services are often pronounced in the same breath. These are offered
by the companies to the customers to provide utility and satisfy their wants. At present, the
success of the business lies in the combination of best quality of goods and customer oriented
services. ‘Goods’ are the physical objects while ‘Services’ is an activity of performing work
for others.

Goods implies the tangible commodity or product, which can be delivered to the customer. It
involves the transfer of ownership and possession from seller to the buyer. On the other hand,
services alludes to the intangible activities which are separately identifiable and provides
satisfaction of wants.
One of the main difference between goods and services is that the former is produced and the
latter is performed. To know more differences on the two, take a read of the article presented
to you.
The main difference between these two is the amount of customer interaction that involves.
While the production of goods require a low customer interaction, delivering a service focus
on the customer experience.

First of all the goods are produced, then they are traded and finally consumed, whereas
services are produced and consumed at the same time. Goods are the material items that the
customers are ready to purchase for a price. Services are the amenities, benefits or facilities
provided by the other persons. Goods are tangible items i.e. they can be seen or touched
whereas services are intangible items.
When the buyer purchases the goods by paying the consideration, the ownership of goods
moves from the seller to the buyer. Conversely, the ownership of services is non-
transferable. The evaluation of services is difficult because every service provider has a
different approach of carrying out services, so it is hard to judge whose services are better
than the other as compared to goods.
Goods can be returned to or exchanged with the seller, but it is not possible to return or
exchange services, once they are provided. Goods can be distinguished from the seller. On
the other hand, services and service provider are inseparable.

A particular product will remain same regarding physical characteristics and specifications,
but services can never remain same. Goods can be stored for future use, but services are time
bound, i.e. if not availed in the given time, then it cannot be stored.
There are many implications due to the differences between service and manufacturing
operations. For example, in a service firm, because the degree of customer contact is high, we
have to make sure that employees are better trained in customer service than employees in a
manufacturing industry are. In a pure-service industry firm, we will build a lot of slack in
scheduling because of the uncertainty of input.

2. Why is it important to match supply and demand? If a manager believes that


supply and demand will not be equal, what actions could the manger take to
increase the probability of achieving a match?

Since the 19th century, supply and demand has been a driving factor in the capitalist system.
Since managers are often responsible for organizing and ordering inventory, they need be
vigilant when it comes to popularity versus availability of products and services.

It's important to match supply and demand because it effects cost and how efficient which has
a direct effect on the company's profit. When we have too much supply on hand now we are
paying for storage only. If we are not stock to the customers demand we would lose sales and
profit.

As a manager, it is important to understand how supply and demand can affect your
suppliers. If demand for a product or service decreases, those who provide you with
necessary inventory could suffer financial failure. Losing those sources and the materials they
provide can slow or impair your business' ability to meet consumer needs, causing them to
look elsewhere for the same products or services. To avoid this, you need to assess the
reliability of key suppliers.

Managers need to understand supply and demand to predict the number of units they need to
order from suppliers. By researching sales figures and analyzing market trends, managers
must obtain inventory to avoid surplus -- since it lowers pricing -- but also have enough
available to meet demand. In an ever-changing market, managers have to monitor supply and
demand to determine which products to focus on.

That would depend on whether supply was too large or too small. If there is over capacity, try
to increase demand through advertising and/or price reductions. If output (goods) can be
stored, and future demand is expected to be higher, store excess output for future demand. If
supply is too small, options might be to outsource, work overtime, or hire temporary workers.
If there are few or no competitors, increase prices.

3. One way that organizations compete is through technological innovations.


However, there can be downsides for both the organization and the consumer.
Explain.

Modern technology has had an amazing positive impact on business, from improving
productivity, to opening new markets around the world for even the smallest of
businesses, to creating entirely new business models. But advanced technology has its
negatives as well. While its negative aspects probably shouldn't stop the business from
taking advantage of technology, the business should certainly be aware of the potential
downsides so you can take steps to minimize them.
The internet can be a powerful distraction as well, as employees are faced with the
temptation of checking Facebook, reading the latest tweets on Twitter or watching cute
cat videos on Youtube. By some estimates, almost half of all office employees spend an
hour or more per day on non-work-related internet sites. Of course, there are also darker
distractions, especially pornography. Some employees have been known to spend most of
their working day watching illicit videos for hours on end.

Today’s online devices are a two-way street, giving business and the staff access to the
outside world, but also allowing outsiders into your place of business. Emails routinely
contain malware that can infect computer systems. Personal devices such as USB drives
might get infected with a virus at an employee's home and then plugged in to an office
machine, transferring the virus to the computer systems. Important files can be stolen, as
happened to Sony when sensitive internal emails were revealed to the world, or Equifax,
which had the private information of millions of people stolen through electronic
snooping.
Technological change advances very rapidly, which means that the technology a business
invest in today may seem to be out-of-date almost the moment it is installed and up and
running. Technological churn – new phones, new laptops, the latest software – keeps the
company current with the latest trends. But it's also a sizable outlay of cash, not only for
the technology itself, but for the revamping of related systems. Employees need to be
trained on new systems, IT staff needs to update its certifications and capabilities,
security protocols have to be revised.

The ability to communicate instantly with just about anyone, anywhere can sometimes
interfere with the ordinary dynamics of face-to-face communication. Technology may
mean fewer employees show up in person to meetings. It may also mean fewer people in
the office, period, as employees take advantage of telecommuting options. Although these
capabilities can actually improve productivity in some cases, many people find they miss
the more social aspects of a traditional company where staff and clients showed up in
person to do business.

Innovations might be product or service related, or process related. These


typically involve added cost and time for training and possibly new equipment or
equipment changes, and potential changes for the supply chain (e.g., new suppliers, new
delivery requirements, etc.). Process innovations can be disruptive to the workforce due
to lower labor or machine time requirements, which may result in job loss, retraining,
and/or lower worker morale. New products or services also probably will involve new
advertising campaigns or other promotions, and the need for consumer education.
Consumers will have to adjust to new products or services, and may have some difficulty
if innovations entail increased complexity.

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