REVIEWER IN OPERATION MANAGEMENT
product and each of the supplementary services.
CHAPTER 1:
• Production – process of converting or transforming
resources
• Operations – broadly describe the set of all
activities
• Management - knowing exactly what you want
your men to do
• Goods – tangible
• Service - intangible
IPO MODEL
• INPUT (cost) – materials
• PROCESS / THRUPUT (value-added) –
manufacturing services
• OUTPUT (price) – continuous development
GOOD SERVICE CONTINUUM
 Organizing Ideas - underscores the core service that
the customers are purchasing.
 Service provided - reflects the entire service process
and outcomes designed by the operations.
 Service received - includes customer's experience
and service outcome.
 Service Profit Chain - explains the link between
customer satisfaction and customer loyalty to a
service firm's growth and profitability.
DIMENSIONS OF SERVICES
1. Service process - captures the relationships
2. Service nature – characterizes how a service
acts upon an object
3. Service delivery – relates to timing of service
delivery
4. Service availability – relates to the service
setting
5. Service demand – factor for a customer
demand for a service
 SERVICE CONCEPT - identifies the “what” and the
“how” of the service nature. It is the way in which
service firms want their customers, staff, and
shareholders to perceive the service.
CHAPTER 2
 Core Product - central component that supplies the
principal, problem-solving benefits customers seek.
 Supplementary Services - augment the core
product, facilitating its use and enhancing its value
and appeal.
 Delivery Processes - used to deliver both the core
 Flowcharting Service Delivery - offers a way to
understand totality of the customer's service
experience
• Restaurants: Food and beverage (core)
• Reservations (supplementary services)
Designing a Service Concept - service concept design
must address the following issues:
1. How the different service components are delivered
to the customer
2. The nature of the customer's role in those processes
3. How long delivery lasts
4. The recommended level and style of service to be
offered
CHAPTER 3
Service Environments - an important element of the
service marketing mix
What Is the Purpose?
The physical service environment that
customers experience plays a key role in shaping the
service experience and enhancing (or undermining)
customer satisfaction, especially in high-contact people-
processing services.
Designing the service environment is an art
that involves a lot of time and effort, and it can be
expensive to implement.
Service environments, also called
servicescapes, relate to the style and appearance of the
physical surroundings and other experiential elements
encountered by customers at service delivery sites.
Dimensions of Affect: Pleasure and Arousal
DIMENSIONS OF THE SERVICE ENVIRONMENT
 Impact of Ambient Conditions
- the ambient environment is composed of
hundreds of design elements and details that
must work together to create a desired service
environment
- ambient conditions are perceived both
separately and holistically, and include: Lighting
and colour schemes
 Impact of Ambient Conditions
• Size and shape perceptions
• Sounds such as noise and music
• Temperature
• Scents
Clever design of these conditions can elicit desired
behavioural responses among consumers Eg Dental spa
 Impact of Music
- In service settings, music can have a powerful
effect on perceptions and behaviors, even if
played at barely audible levels
- Structural characteristics of music-such as
tempo, volume, and harmony-are perceived
holistically
 - Fast tempo music and high volume music
increase arousal levels
 Impact of Scent
- An ambient smell is one that pervades an
environment
- May or may not be consciously perceived by
customers
- Not related to any particular product
- Scents have distinct characteristics and can be
used to solicit emotional, physiological, and
behavioural responses
- In service settings, research has shown that
scents can have significant effect on customer
perceptions, attitudes, and behaviors
 Impact of Colour
- Colours can be stimulating, calming, expressive,
disturbing, impressional, cultural, exuberant,
symbolic
- Colour pervades every aspect of our lives,
embellishes the ordinary, gives beauty and
drama to everyday objects
- Colors have a strong impact on people's feelings
Colors can be defined into three dimensions:
• Hue is the pigment of the colour
• Value is the degree of lightness or darkness
of the colour
 Impact of Signs, Symbols, and Artifacts
- Guide customers clearly through process of
service delivery
- Customers will automatically try to draw
meaning from the signs, symbols, and artifacts
- Unclear signals from a servicescape can result in
anxiety and uncertainty about how to proceed
and obtain the desired service
- For instance, signs can be used to reinforce
behavioral rules
BEHAVIOURAL CONSEQUENCE OF AFFECT
• If the environment is unpleasant, increasing
arousal levels will move customers into the
"distressed" region.
• Feelings during service encounters are an
important driver of customer loyalty
• Holiday season- loud fast music- could increase
stress levels.
CHAPTER 4
Forecasting - is a way of analyzing past trends and data
to predict future behavior. With this approach, we
prepare for the uncertainty laying ahead.
 Operational Forecast: staff-based decisions, such as
the number of receptionists needed on a particular
day, the number of tables required in the
restaurant, etc.
 Financial Forecast: to determine end-of-fiscal
results and set financial goals accordingly.
 Revenue Management Forecast: the goal is to
determine the hotel’s future demand in order to set
the strategy to maximize revenue.
IMPORTANCE OF ACCURATE FORECASTING
 It helps businesses to anticipate demand and
optimize pricing to maximize revenue.
 It enables businesses to make informed
decisions about inventory and capacity
management.
 It allows businesses to identify trends and
patterns in customer behavior and
preferences, and to develop effective
marketing strategies.
 It provides businesses with a competitive
advantage by enabling them to react quickly
and effectively to changes in the market.
- Forecasts involve the future.
- Forecasts rely on historical data.
- Forecasts are best utilized as a “guide”
TYPES OF DATA USED IN FORECASTING
1. Historical Data includes data on past demand,
revenue, and customer behavior.
This data is used to identify trends and patterns,
and to create forecasts for future demand and
revenue.
2. Market Data includes data on industry trends,
competitor activity, and economic factors that
may impact demand and pricing.
3. Customer Data includes data on customer
behavior and preferences, such as booking
patterns, length of stay, and room preferences.
This data is used to create customer segments
and to develop targeted marketing strategies.
PROCESS OF FORECASTING
STEP 1: DEVELOP THE BASIS OF FORECASTING
STEP 2: ESTIMATE THE FUTURE OPERATIONS OF THE
BUSINESS
STEP 3: REGULATE THE FORECAST
STEP 4: REVIEW THE PROCESS
TECHNIQUES AND TOOLS FOR PREDICTIVE ANALYSIS
 Regression analysis is a statistical technique used to
estimate the relationship between two or more
variables. In the hospitality industry, regression
analysis is used to predict demand and revenue
based on historical data and market trends.
 Time series analysis is a statistical technique used
to analyze data over time. In the hospitality industry,
time series analysis is used to identify trends and
patterns in demand and revenue, and to create
forecasts for future demand.
 Machine Learning is a type of artificial intelligence
that uses algorithms and statistical models to
analyze and predict future outcomes. In the
hospitality industry, machine learning is used to
create personalized recommendations for
customers, optimize pricing and inventory
management, and improve operations.
 Revenue management systems are software tools
that use predictive analytics to optimize pricing,
inventory management, and marketing strategies.
These tools are used by hotels and other businesses
in the hospitality industry to maximize revenue
CHAPTER 5
COMPONENTS OF INVENTORY AND ITS OBJECTIVES
 Raw Materials - are those inputs that are converted
into finished goods through a manufacturing or
conversion process. These form a major input for
manufacturing a product.
 Work-in-process - is a stage of stocks between raw
materials and finished goods. They represent
products that need to undergo some other process
to become finished goods.
 Finished products - are those products, which are
completely manufactured and ready for sale.
 Stores & spares - inventory include office and plant
cleaning materials like soap. brooms, oil, fuel, light,
bulbs, etc.) are purchased and stored for the
purpose of maintenance of machinery.
OBJECTIVES OF INVENTORY MANAGEMENT
 To maintain a large size of inventories of raw
material and work-in-process for efficient and
smooth production and of finished goods for
uninterrupted sales operations.
 To maintain a minimum investment in inventories to
maximize profitability.
NEED FOR BALANCED INVESTMENT IN INVENTORY
a) Dangers of Excessive (over) Investment in
inventory:
The excessive level of a inventory consumes
funds for the company, they cannot be used for
any purpose since they have locked in inventory,
and they involve opportunity costs. Carrying
excessive inventory over a long period leads to
the loss of liquidity. It may not be possible to
sell the inventories in times without loss,
b) Dangers of inadequate Investment in
Inventories Inadequate raw materials and work-
in-progress inventories will disturb production:
When firm is not able to produce goods without
interruption, that leads inadequate of storage of
finished goods. if finished goods are not
sufficient to meet customer demand, the
customers demand, the customer demand, the
customers may shift to the competitors, which
will lead to loss of customers permanently.
inventory at which the total cost of inventory is
minimum.
- EOQ also known as Economic Lot Size.
 ABC ANALSIS
It is a very effective and useful tool for
classifying, monitoring and control inventories.
 JUST IN TIME (JIT)
In a JIT system, material or the manufactured
components and parts arrive to the
manufacturing sites or stores just few hours
before they are put to use.
APPROACHES TO INVENTORY SYSTEMS:
Two general approaches to inventory system,
a) Fixed order Quantity system ('Q' system)
Fixed quantity of materials is ordered
whenever the stock level researches to the
reorder level!!
b) Fixed order Periodic System ('P' system)
Stock position of each item of material is
reviewed periodically
AN EFFECTIVE INVENTORY MANAGEMENT SHOULD:
- Ensure a continuous supply of raw materials, to
facilitate uninterrupted production
- Maintain sufficient stocks of raw materials in
periods of short supply and anticipate price
changes
- Maintain sufficient finished goods inventory for
smooth sales operation, and efficient customer
service.
- Minimize the carrying cost and time, and
- Control investment in inventories and keep it at
an optimum level.
WHAT IS FIFO? First In, First Out

BENEFITS OF HOLDING INVENTORY

 Inventory management ensures an

adequate supply of materials and stores,
minimizes stock outs and shortages and
avoids costly interruptions in operations.
 It keeps down investment in inventories;
inventory carrying costs, and obsolescence
losses to the minimum.
 It facilitates purchasing economies through
the measurement of requirements on the
basis of recorded experience.

TOOLS AND TECHNIQUES OF INVENTORY

MANAGEMENT/CONTROL

 ECONOMIC ORDER QUANTITY (EOQ);

- Economic order quantity refers to that level of