OPERATIONS MANAGEMENT PRELIM Business organizations have three basic
REVIEWER functional areas: finance, marketing, and
Operations management
- management of systems or processes
that create goods and/or provide
services.
- planning, coordination, and execution of
all activities within an organization that
create goods and services.
- The operations function consists of all
activities that are related directly to
producing goods or providing services.
- It is the core of most business
organizations because it is responsible
for the creation of an organization’s
goods or services.
- “The control of the activities involved in
producing goods and providing services,
and the study of the best ways to do this.”
(Cambridge Dictionary)
Supply chain
- sequence of organizations, including:
facilities, functions, and activities, that are
involved in producing and delivering a
product or service
Goods
- physical items that include raw materials,
parts, subassemblies such as
motherboards that go into computers,
and final products such as cell phones
and automobiles.
Services
- are activities that provide some
combination of time, location, form, or
psychological value.
Value-added
- describe the difference between the cost
of inputs and the value or price of
outputs.
In nonprofit organizations, the value of
outputs is their value to society.
. to manage costs is no less important.
In for-profit organizations, the value of
outputs is measured by the prices that
customers are willing to pay for those goods
or services.
operations.
What operation managers do:
- Planning
- Organizing
- Staffing
- Leading
- Controlling
Roles of operations manager
Direct responsibilities
managing operations process, embracing
design, planning, control, performance
improvement, and operations strategy.
Indirect responsibilities
interacting with those managers in other
functional areas (marketing, finance,
accounting, personnel, and engineering)
Operations managers' responsibilities
include:
1. Human resource management – the
people employed by an organization
either work directly to create a good
or service or provide support to those
who do. People and the way they are
managed are key resource of all
organizations.
2. Asset management – an
organization's buildings, facilities,
equipment, and stock are directly
involved in or support the operations
function.
3. Cost management – most of the
costs of producing goods or services
are directly related to the costs of
acquiring resources, transforming
them or delivering them to
customers. For many organizations
in the private sector, driving down
costs through efficient operations
management gives them a critical
competitive edge. For organizations
in the not-for-profit sector, the ability
Decision making is a central role of all
operations managers.
Decisions need to be made in:
- designing the operations system
- managing the operations system
- improving the operations system
The five main kinds of decision in each of
these relate to:
1. processes which goods and services
are produced
2. the quality of goods or services
3. the quantity of goods or services (the
capacity of operations)
4. the stock of materials (inventory)
needed to produce goods or services
5. the management of human
resources.
Manufacturing operations vs.
Service operations
Degree of customer contact
- Interaction between server and customer
becomes a “moment of truth” that will be
judged by the customer every time the
service occurs.
Labor content of jobs
- Services often have a higher degree of
labor content than manufacturing jobs
Uniformity of inputs
- Service operations are often subject to a
higher degree of variability of inputs.
Conversely, manufacturing operations
often have a greater ability to control the
variability of inputs, which leads to more-
uniform job requirements.
Measurement of productivity
- can be more difficult for service jobs due
largely to the high variations of inputs.
Unless a careful analysis is conducted
Quality assurance
- more challenging for services due to the
higher variation in input, and because
delivery and consumption occur at the
same time. Unlike manufacturing, which
typically occurs away from the customer
and allows mistakes that are identified to
be corrected
Inventory
Many services tend to involve less use of
inventory than manufacturing operations, so
the costs of having inventory on hand are
lower than they are for manufacturing.
However, unlike manufactured goods,
services cannot be stored. Instead, they must
be provided “on demand.”
Wages
Manufacturing jobs are often well paid, and
have less wage variation than service jobs
Ability to patent
Product designs are often easier to patent
than service designs, and some services
cannot be patented, making them easier for
competitors to copy.
Similarities between managing the
production of products and services.
a. Forecasting and capacity
planning to match supply
and demand
b. Process management
c. Managing variations
d. Monitoring and controlling
costs and productivity
e. Supply chain management
f. Location planning, inventory
management, quality
control, and scheduling
Differences Between Goods and Services:
Goods
- Materials that are customer ready to
purchase.
- Tangible items
- can be stored for future use
- Produced, traded and finally consumed
Services
- amenities, benefits, or facilities provided
- Intangible items
- Time bounded
- Produced and consumed at the same
time.