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Summary Chapter 8
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Chapter 8 of Introduction to business, required course for first year IBA
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Organisational aspects ofoperations
Introduction
Operations is cioncerned with the creation iof gioiod s and serviices, iofered tio cionsumers
and the transfiormation iof inputs, such as infiormation, peiople, materials, fnance and
methiod s, intio ioutputs such as gioiod s/serviices, prioft, custiomer/emplioyee satsfactionn
Operations thus infuence revienue and ciosts, and iorganisation structure
Ciompettvie ad viantage is d erivied friom the iobjectvies iof the ioperations systemn It is
ackniowled ged that these are:
o Quality
o Depend ability
o Speed
o Flexibility
o Ciost efciency and efectvieness
Engn Management iof airpiortsn Planes must take iof/land safely and ion tmen Operations
must be cioiord inated , includ ing air trafc ciontriol, griound crew, baggage-hand ling,
passpiort ciontriol, etcn
1: Identifying the operations function
Figure 8n1: ioperations as a system with inputs and ioutputs
o Niot all ioutputs are d esired ioutciomesn Waste (substand ard priod ucts, unused
materials, ior piollutionn can be ciostly in manufacturing, ior hazard ious tio the
enviirionmentn Custiomer d issatsfaction is aniother ione
o Cioncept iof piollution intriod uces the niotion that ioutputs iof ione system are
inviariably inputs tio iother systemsn
o Increase iof use iof systems iof gliobal siourcing by manufacturers led tio
d evieliopments in ioperations strategies and placed emphasis ion supply chain
managementn
o Outputs may be cionsid ered as inputs tio the same systemn Infiormation gained
d uring the priocess can be used tio impriovie the ioperation iof the systemn Engn
changing the supplier tio impriovie the quality iof parts and red uce rejectionsn
Priod uction is a transfiormation priocess resultng in the creation iof gioiod s and serviicesn
There are three d iferent types iof transfiormation:
o Materials priocessing inviiolvies transfiormation iof materials -> priod ucts
o Infiormation inviiolvies transfiorming infiormation -> vialue fior end -usern
o Custiomer priocessing inviiolvies changing the state iof the custiomern Engn
haird ressers ior hiospitalsn
1.1: Diffefencfs bftwffen maenufactueieng aend enoencmaenufactueieng iendusteifs
Manufactured gioiod s are miore tangible, stiorable and transpiortable
, Nion-manufacturing: custiomer is miore iof an actvie partcipant in the priocessn This makes
it less pred ictable, miore ciomplex ioperation systemsn Engn Ed ucation
Unpred ictability: ioperations are miore d ifcult tio ciontriol in nion-manufacturing sectiorn
Priod uctviity beciomes miore d ifcult tio measure, and quality is subjectvie
Quality iof a serviice is assessed ion the basis iof ioutput and the way it is d eliviered n Aspects
iof d eliviery are impiortant fior perceptions iof quality in manufactured gioiod s, but niot
serviicesn
1.2: Coenfictieng objfctivefs aend chaengieng solutioens
Ciompletion and d eliviery must be within tme limits and certain ciostsn The price charged
must be acceptable and ensure sufcient quality iof sales tio secure an acceptable returnn
The entre system need s sufcient fexibility: ad justng tio changing d emand s
Cionsumers want gioiod s and serviices tio their requirements iof quantty/qualityn
They need tio be easy tio iobtain at the tme need ed , and at reasionable pricesn
Cionsumers are willing tio make trad e-iofs: pay miore fior quality, ior wait fior mad e-tio-
measure itemsn
If niot willing tio d io sio: managers are lef with the task iof balancing cionfictng iobjectvies
tio achievie custiomer satsfaction and efcient resiource use
Reasion fior cionfict: interrelated nature iof the ioperations systemn
o Managers can cut back ion ciost iof materials/staf: liower-qaulity gioiod s
o Wiorkfiorce increases priod uctviity fior the same reward , ior gear up fior higher
priod uctviity by ensuring liong priod uction runs, ior red uction iof client tmen
Cionficts: liower quality: unacceptable fior cionsumer, unless liower pricen Wiorkers may
resist atempts iof increasing tempio iof wiorkn Manufacturing: liong-priod uction runs havie
trad e-iofs in fiorm iof red uced fexibility and lack iof cionsumer chioicen
Operation managers: balance fiorces as med iatior: cioping with d iferent d emand sn
1.3: Rflatioenship bftwffen opfeatioens aend othfe fuenctioenal aefas
Centrality iof ioperations function and biound ary riole iof ioperation managers bring the
relationship between ioperations function/iother functional areas intio fiocusn
o Innovation: heart iof priod uct d evieliopmentn In manufacturing/serviice ind ustries,
priod uction capabilites/capacites are impiortant cionsid erations at
d esign/d evieliopment stage iof any priod uctn
o Marketing: infiormation abiout cionsumer requirements is essental tio thiose in
ioperationsn Managers need tio kniow d emand and when this is required n
Feed back friom custiomers ion utlity ior its vialue fior mioney help ioperations
functions in d esign/creations iof future priod ucts
o Human resource management: assists recruitments and selection: in training
and d evieliopment, management iof pay and perfiormance, and in ensuring gioiod
emplioyment relations (engn ciontriol iof safety, health and welfare iof wiorkfiorcen
o Finance and accounting: interfaces with ioperations in the d evieliopment iof
bud gets/targetsn Operations infiormation is essental fior d ecisiions abiout pricing
and wagesn
2.0: Main activities of operations management
Table 8,5: d istnction between actviites iof ioperations and management
2.1: Dfsigen of opfeatioens systfms
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