Nature Of Operation
subtopic
23.1: The Production
(Transformational) Process
23.2: Efficiency,
Effectiveness, Productivity,
simplified
• Operations
management: resources
(land, labor, capital,
enterprise) for goods and
services.
• Factors of
production: land, labor,
capital, enterprise.
• outputs efficiently.
Transformational process:
convert inputs to achieve
added value.
• Operations
contribute to added value:
manage efficiency, quality,
flexibility, innovation.
• Operations aim for
efficient input-to-output
detailed
• Operations
management involves
strategically using
resources—land, labor,
capital, and enterprise—to
produce goods and
services, emphasizing the
conversion of inputs into
• Factors of
production include:
• Land:
Essential for business
operations, varying from
small spaces to large sites.
• Labor:
Manual or mental skills
contribute to operational
success; quality can be
improved through training.
• Capital:
Tools, machinery, and
intellectual capital play a
crucial role in efficient
operations; intellectual
capital is gaining importance
in knowledge-based
economies.
• Enterprise:
Decision-making skills and
risk-taking qualities of
entrepreneurs are vital for
new business formation.
• The
transformational process
converts factors of
production into outputs,
applicable to both
manufacturing and service
industries, aiming to achieve
added value.
• Contribution
of operations to added value
includes managing
efficiency, quality, flexibility,
and innovation.
• Operations
management focuses on
and Sustainability conversion.
• Productivity:
relative measure, vital for
competitiveness.
• Labor
productivity measured by
units per worker.
• Increase
productivity: training,
motivation, technology,
management.
• Efficiency
and effectiveness are
distinct but crucial.
• Sustainability
actions: reduce energy, use
recyclable materials.
converting inputs into
outputs efficiently, with a
keen emphasis on
productivity as a key factor
in determining business
competitiveness.
• Productivity,
a relative measure, is crucial
for competitiveness; labor
productivity, measured by
the number of units per
worker, illustrates efficiency.
• Ways to
increase productivity
include:
• Improving
employee training and skill
levels, acknowledging that
skilled workers enhance
productivity.
• Enhancing
worker motivation through
financial and non-financial
methods, considering the
importance of motivated
employees in efficient
operations.
• Investing in
technologically advanced
equipment for increased
output with fewer workers.
• Emphasizing
effective management for
overall productivity
improvement.
• Raising
productivity does not
guarantee success,
highlighting factors such as
product popularity, worker
resistance, and the quality
of management.
• A distinction
between efficiency
(measured by productivity)
and effectiveness (meeting
customer needs) is crucial.
• Sustainability
in operations involves
actions such as reducing
energy use, using recyclable
materials, and addressing
environmental concerns.
23.3: Labour Intensive and
Capital Intensive Operations
23.4: Operations
(Production) Methods
• Managers choose
labor or capital-intensive
approaches.
• capital-intensive approaches
Labor-intensive: small,
custom, skilled but low
output.
• and access to finance.
Capital-intensive:
economies of scale, quality,
high fixed costs.
• Choice
factors: product nature,
brand, costs, business size.
• Methods: job, batch,
flow, mass customization.
• Job: unique,
expensive, labor-intensive.
• Batch:
identical products, some
economies of scale.
• Flow:
continuous, mechanized,
low labor costs.
• Mass
customization: flexibility,
technology, customized at
scale.
• Factors
influencing choice: market,
capital, resources, customer
demand.
• Operations
managers must decide
between labor-intensive and
based on factors like the
nature of the product, brand
image, costs, business size,
•
Labor-intensive production
suits small businesses with
unique, customized
products but has limitations
like low output and skilled
labor requirements.
•
Capital-intensive production
offers economies of scale,
consistent quality, and low
unit costs but has limitations
like high fixed costs and
rapid technological changes.
• The choice
depends on the specific
circumstances of the
business, emphasizing the
importance of aligning
production methods with
business needs.
• Operations methods
include job production,
batch production, flow
production, and mass
customization, each with its
unique characteristics.
• Job
production involves
producing single, one-off
products, often expensive
and labor-intensive.
• Batch
production produces
identical products in groups,
allowing some economies of
scale.
• Flow
production is continuous
and suits high-demand
standardized products, often
mechanized with low labor
costs.
• Mass
customization combines

conclusion • Operations evolving,
complex products adapting.
• Technology
challenges traditional
differences.
• Demand for
original products from
smaller firms remains.
flexibility and technology for
customized products at high
volumes.
• Factors
influencing the choice of
methods include market
size, available capital,
resources, and customer
demand, highlighting the
need for strategic
decision-making.
• Operations methods
are evolving to adapt to
consumer demands,
emphasizing the importance
of strategic flexibility.
• Technology’s
flexibility challenges
traditional business
differences, showcasing the
need for businesses to stay
adaptable.
• The demand
for original and specialized
products from smaller firms
remains, emphasizing the
continued relevance of
various production methods.