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MNO2601NOTES
,PRODUCTION AND OPERATIONS MANAGEMENT
TOPIC 1: Foundations
STUDY UNIT 1: Introduction to production and ops management
1.1 Introduction
What is operations management
o The activity of managing the resources which are devoted to the production and delivery of products and services.
It is a core function of any business although it may not be called ops management
o It is concerned with managing processes. Because all management functions manage processes it is relevant to all
managers
What are the similarities between all operations
o All operations can be modeled ass input-transformation-output processes.
o Few operations produce only products or only services but rather a mixture of both
o All operations are part of a larger supply network through which each operation contributes to satisfying end
customer requirement
o All ops are made up of a network of internal customer-supplier relationships within the operations
How are operations different from one another
o They differ in terms of the volume of output, the variety of output, variation of demand and degree of visibility or
customer contact
What do ops managers do and why is it so important
o Translation of strategy into operational action
o Design, planning, controlling and improvement of operation/processes
o Can aid in reducing of costs, increasing revenue and reducing the investment cost for future innovation
o Because of the a turbulent and dynamic business environment ops managers need to think on their feet
o Improving operations can be the most effective way to improve financial performance
The broad scope of operations
Management responsibilities Technical
Function
Accounting / Process technology
Finance needs Product/service
function Process technology
s development
options
Communicating the function
Financial analysis for capabilities and constraints
performance measurement Provision or of operations process New product/ service
and decision making Relevant data ideas
Operations
Function Communicating the
Communicate human capabilities and constraints
resource needs of operations process
The broad scope of operations
Management responsibilities Systems for
Communicating design, planning
information system control and Provision or
Recruitment, needs improvement Relevant data
Human development and
resources( HR) training Product/service
function s development
function
Information
Systems (IS)
function
2|Page
,1.2 What is operations management? (Effective productions/operations management)
Three main core function of operations management include
o The marketing function - communication the entity’s products and services to its markets to generate requests
o The product/service development function - creating new products and services to generate service requests
o The operation function – responsible for fulfilling customer requests through production and delivery.
Other support functions that facilitate the three core functions:
o The accounting/finance function – information to assist in economic decision making & manages financial
resources
o The human resources function – recruits, develops entity’s staff as well as looking after their welfare.
Operations management – The activities, decisions and responsibilities of managing the production and delivery of products and
services
Operations function – The arrangement of resources that are devoted to the production and delivery of products and services.
Operation managers – The staff of the organisation who have particular responsibility for managing some or all of the resources
which comprise the operations function.
Input and Outputs
o The process of operations to produce products and services by changing inputs to outputs.
o The Transformation process model.
Transformed resources
Materials
Information THE TRANSFORMATION Output products and Customers
Input resources
Customers PROCESS services
Transforming resources
Facilities
Staff
Transformed resources – The resources that are treated transformed or converted in a process, usually a mixture of
materials information and customers.
Materials – process which materials transform their physical properties, shape or composition such as manufacturing
operations. Other change location(logistic companies), position (retail), storage(warehousing)
Information – Operations that transform their informational properties such as accountants and marketing companies
Customers – Process where customers may change their physical properties (hairdressing), storage (hotels) and
locations (transportation)
Transforming resources – The resources that act upon the transformed resources, usually classified as facilities (the
building, equipment, and plant of an operation) and staff the people who maintain and manage the operation.
Facilities – The buildings, equipment, plant and process technology of the operation
Staff -The people at any level who operate, maintain, plan and manage the operation
Outputs from the process of products and services differ in their respective tangibility. Tangible products, you can physically
touch such as television or newspaper. Intangible products or services cannot be touched such as consultancy services or a
haircut, although you can see the results.
Most operations produce both products and services but some produce just products and others just services
Pure product producers – Crude oil and aluminium smelters.
Pure Services – Consultancy services
Facilitating services – services are produced by an operation to support its products such as technical support or
advice.
Facilitating products – products that are produced by an operation to support its services.
1.3 Operations management is about managing process (Dominant focus of production/operations management)
Process – An arrangement of resources that producers some mixture of goods and services. It is the mechanism of transformation.
Three levels of operation analysis
1. Supply network – The network of supplier and customer operations that have relationships with an operation
2. Internal supplier – Process or individuals within an operation that supply products or services to other processes or
individuals within the operation
3. Internal customers – Processes or individuals within an operation who are the customers for other internal processes or
individual outputs.
Hierarchy of operations – The idea that all operations processes are made up of smaller operations process.
3|Page
, Operations management is relevant to all parts of the business process i.e. that is all functions manage processes.
o Operation as a function, meaning the part of the organisation which produces the products and services for the
organisation’s external customers
o Operation as an activity, meaning the management of the processes within any of the organisations functions.
Business Process
When any organisations attempt to satisfy its customers needs it will use many processes, in both operations and functions.
o End-to-end business process – When a company decised to reorganise its operations so the each product is produced from
start to finish within the company. A process that is totally defined external customer needs.
o Business process re-engineering – The philosophy that recommends the redesign of processes to fulfil defined external
customer needs.
1.4 Operation processes have different characteristics (Different characteristics of production/operation processes)
All operations are similar but they do differ slightly in different ways, four of the following are important:
1. Volume – The level or rate of output from a process, a key characteristics that determines process behaviour.
2. Variety – The range of different products and services produced by a process, a key characteristic that determines process
behaviour.
3. Variation – The degree to which the rate of level of output varies from a process of time.
4. Visibility – The amount of value added activity that takes place in the presence, in reality or virtually, of the customer also
called customer contact.
The volume dimension:
o Repeatability – The extent to which an activity does not vary.
o Systemisation – The extent to which standard procedures are made explicit. The cost per item is likely to be higher
if the quantity is lower. Repeatability and systemisation gives low unit costs.
The variety Dimension
o Standardisation – the degree to which processes, products or services are prevented from varying over time. The
more regular and standardized process may result in lower costs.
The variation dimension
o A routine and predictable schedule results in a high utilisation of resources.
The visibility dimension
o How much of the operations activities do its customers experience or how much of the operation is exposed.
o Customer contact skills are the skills and knowledge that staff need to meet customer expectations.
o Mixed high visibility, these staff operate in a front office environment
o Low visibility environment, these staff operate in a back office environment.
o
The implication of the ‘four v’s’ of operations. A Typology of Operations
Low repetition. High repeatability
Each staff member performs Specialisation
more of a job. Low VOLUME High Systemisation
Less systemisation Capital intensive
High unit costs Low unit costs
Flexible Well defined
Complex Routine
Much customer needs Low VARIETY High Standardised
High unit costs Regular
Low unit costs
Changing capacity Stable
Anticipation Routine
In touch with demand Low VARIATION High Predictable
High unit costs High utilisation
Low unit costs
Short waiting tolerance Tim lag between production and
Satisfaction governed by consumption
customer perception Standardised
Customer contact skills needed Low VISIBILITY High Low contact skills
Received variety is high High staff utilisation
High unit costs. Centralisation
Low unit costs.
4|Page
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