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Summary Chapter 8
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Chapter 8 of Introduction to Business: Processes and context
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Organisational aspects ofoperations
Introduction
Operations is concerned with the creation of goods and services, offered to consumers
and the transformation of inputs, such as information, people, materials, finance and
methods, into outputs such as goods/services, profit, customer/employee satisfaction.
Operations thus influence revenue and costs, and organisation structure
Competitive advantage is derived from the objectives of the operations system. It is
acknowledged that these are:
o Quality
o Dependability
o Speed
o Flexibility
o Cost efficiency and effectiveness
E.g. Management of airports. Planes must take off/land safely and on time. Operations
must be coordinated, including air traffic control, ground crew, baggage-handling,
passport control, etc.
1: Identifying the operations function
Figure 8.1: operations as a system with inputs and outputs
o Not all outputs are desired outcomes. Waste (substandard products, unused
materials, or pollution) can be costly in manufacturing, or hazardous to the
environment. Customer dissatisfaction is another one
o Concept of pollution introduces the notion that outputs of one system are
invariably inputs to other systems.
o Increase of use of systems of global sourcing by manufacturers led to
developments in operations strategies and placed emphasis on supply chain
management.
o Outputs may be considered as inputs to the same system. Information gained
during the process can be used to improve the operation of the system. E.g.
changing the supplier to improve the quality of parts and reduce rejections.
Production is a transformation process resulting in the creation of goods and services.
There are three different types of transformation:
o Materials processing involves transformation of materials -> products
o Information involves transforming information -> value for end-user.
o Customer processing involves changing the state of the customer. E.g.
hairdressers or hospitals.
1.1: Differences between manufacturing and non-manufacturing industries
Manufactured goods are more tangible, storable and transportable
, Non-manufacturing: customer is more of an active participant in the process. This makes
it less predictable, more complex operation systems. E.g. Education
Unpredictability: operations are more difficult to control in non-manufacturing sector.
Productivity becomes more difficult to measure, and quality is subjective
Quality of a service is assessed on the basis of output and the way it is delivered. Aspects
of delivery are important for perceptions of quality in manufactured goods, but not
services.
1.2: Conflicting objectives and changing solutions
Completion and delivery must be within time limits and certain costs. The price charged
must be acceptable and ensure sufficient quality of sales to secure an acceptable return.
The entire system needs sufficient flexibility: adjusting to changing demands
Consumers want goods and services to their requirements of quantity/quality.
They need to be easy to obtain at the time needed, and at reasonable prices.
Consumers are willing to make trade-offs: pay more for quality, or wait for made-to-
measure items.
If not willing to do so: managers are left with the task of balancing conflicting objectives
to achieve customer satisfaction and efficient resource use
Reason for conflict: interrelated nature of the operations system.
o Managers can cut back on cost of materials/staff: lower-qaulity goods
o Workforce increases productivity for the same reward, or gear up for higher
productivity by ensuring long production runs, or reduction of client time.
Conflicts: lower quality: unacceptable for consumer, unless lower price. Workers may
resist attempts of increasing tempo of work. Manufacturing: long-production runs have
trade-offs in form of reduced flexibility and lack of consumer choice.
Operation managers: balance forces as mediator: coping with different demands.
1.3: Relationship between operations and other functional areas
Centrality of operations function and boundary role of operation managers bring the
relationship between operations function/other functional areas into focus.
o Innovation: heart of product development. In manufacturing/service industries,
production capabilities/capacities are important considerations at
design/development stage of any product.
o Marketing: information about consumer requirements is essential to those in
operations. Managers need to know demand and when this is required. Feedback
from customers on utility or its value for money help operations functions in
design/creations of future products
o Human resource management: assists recruitments and selection: in training
and development, management of pay and performance, and in ensuring good
employment relations (e.g. control of safety, health and welfare of workforce)
o Finance and accounting: interfaces with operations in the development of
budgets/targets. Operations information is essential for decisions about pricing
and wages.
2.0: Main activities of operations management
Table 8,5: distinction between activities of operations and management
2.1: Design of operations systems
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