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Summary Operations Management
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Operations Management by LynoukDear all,
This is the summary of OM, and contains the sections from the book + the lecture content. However,
I still need to summarise three chapters but I will add these later to the content. Let me know your
thoughts about it and goodluck.
Chapter 1 Directing the organisation
1.1 What is operations management?
Operations management is the activity of managing the resources that create and deliver services
and products.
Operations principle: All organisations have “operations” that produce some mix of services and
products.
Operations function: It is central to every organisation because it creates and delivers services and
products, which is its reason for existing. Three core functions:
1. The marketing (including sales) function: Responsible for communicating the organisation’s
services and products to its markets in order to generate customer requests.
2. The product/service development function: Responsible for coming up with new and
modified services and products in order to generate future customer
requests.
3. Operations function: Responsible for the creation and delivery of services
and products based on customer requests.
There are support functions that help the core functions to operate effectively,
accounting and finance function, technical function etc.
We view the operations function as comprising all the activities necessary for the day-to-day
fulfilment of customer requests within the constraints of environmental and social sustainability.
Operations principle: Operations managers need to cooperate with other functions to ensure
effective organisational performance.
1.2 Why is operations management important in all types of organisation?
Any business that creates something must use resources and thus have an operations activity. Both
for profit and non-profit organisations. For non-profits, strategic objectives may be more complex as
it involves a mix of politics, economics, social and environmental objectives.
Operations principle: The economic sector of an operation is less important in determining how it
should be managed than its intrinsic characteristics.
Operations management uses resources to appropriately create outputs that fulfil defined market
requirements.
OM in the smaller organisation
OM is as important in small organisations as in large ones, all companies need to create and deliver
their service and products efficiently and effectively. However, in small companies it can raise
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,problems because in large companies they can specialize individuals and in small companies a
person has to do different kind of tasks. Though there can also be an advantage.
Changes in the business environment influenced operations managers:
New technologies: A dramatic effect, radically altering the operating practices of almost all
types of operation.
Different supply arrangements: Markets have become more global, this brings both
opportunities (cost saving, bigger supply market) and problems of long supply chains,
vulnerability and reputational risk.
Increased emphasis on social and environmental issues: Operations have to change the
way they create products and services and should be more transparent about it.
Operations principle: OM is at the forefront of coping with, and exploiting, developments in business
and technology.
1.3 What is the input-transformation-output process?
Operations principle: All processes have inputs of
transforming and transformed resources that they use to
create products and services.
Input resources:
- Materials:
o Often used to transform their physical properties (e.g. shape or composition).
o Change location (e.g. delivery companies).
o Change the possession (e.g. retail operations). Store materials (e.g. warehouses).
- Information:
o Transform informational properties (e.g. accountants)
o Change the possession (e.g. market research companies sell info)
o Store information (e.g. archives, libraries)
o Change the location (e.g. telecommunication companies)
- Customers:
o Change physical properties (e.g. hairdressers)
o Store (or accommodate) (e.g. hotels)
o Change location (e.g. airlines)
o Transforming psychological state (e.g. theatre)
o Customers are not always passive items to be processed. E.g. they create an
atmosphere in a restaurant. They are then called co-production.
Most of the time operations have inputs of one of these, but sometimes they can be used together.
Building blocks of all operations: they differ per organisation
1. Facilities: The buildings, equipment, plant and process technology of the operation.
2. Staff: The people who operate, maintain, plan and manage the operation (staff = all people
in the operation at any level)
Operations principle: All processes have transforming resources of facilities (equipment, technology
etc) and people.
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,Outputs to the process: Most operations produce both products and services. The difference
between services and products is difficult to define.
Operations principle: Whether an operation produces tangible products or intangible services is
becoming increasingly irrelevant. In a sense, all operations produce services of their customers.
Servitization: To indicate how operations, which once considered themselves exclusively producers
of products, are becoming more service-conscious. It involves firms developing the capabilities they
need to provide services and solutions that supplement their traditional products offerings.
Subscription model: An operation’s customers pay a (usually) fixed amount each agreed time
period, for which they receive a pre-agreed service. It has moved from being a product to an
intangible download service.
Operations principle: An understanding of customer needs is always important whether B2B or B2C.
1.4 What is the process hierarchy?
Process: An arrangement of resources and activities that transform inputs into outputs that satisfy
(internal or external) customer needs. They are the building blocks of all operations and they form
an internal network within an operation. Each process is, at the same time, an internal supplier and
internal customer for other processes.
Supply network: Any business or operation is made up of a network of processes and any process is
made up of a network of resources. Any operation could have several suppliers and several
customers, which may lead to competition.
Hierarchy of operations (process hierarchy): The process, the upwards from small to larger
processes, right up to the huge network.
Operations principle: A process perspective can be used at three levels:
1. The level of the operations itself
2. The level of the supply network
3. The level of individual processes.
The relationship between groups and individuals is significantly more
complex than that between commercial entities. One cannot treat internal customers and supplier
exactly as the external.
Operations principle: All parts of the business manage processes, so all parts of the business have an
operations role and need to understand operations management principles.
Two meanings of operations:
1. Operations as a function, the part of the organisation which creates and delivers services
and products for the external customers.
2. Operations as an activity, the management of the processes of the organisations functions.
Operations principle: Processes are defined by how the organisation chooses to draw process
boundaries.
1.5 How do operations and processes differ?
Four Vs:
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, - The volume of their output
- The variety of their output
- The variation in the demand for their output
- The degree of visibility that the creation of their output has
for customers.
Some operations have both high- and low- visibility processes within
the same operation. E.g. the airport, some activities are visible to
the customers and other not (front and back office)
Cost down -> high volume + low variety + low variation + low visibility
Cost up -> Low volume + high variety + high variation + high visibility
Operations principle: Operations and processes can (other things being equal) reduce their costs by
increasing volume, reducing variety, reducing variation and reducing visibility.
1.6 What do operations managers do?
Four general activities of OM managers:
1. Directing: The overall strategy of the operation
2. Designing: The activity of determining the physical form, shape and composition of
operations and processes together with the services and product they create.
3. Planning and control process delivery: Delivery of services and products from suppliers
through the total operation to customers must be planned and controlled.
4. Developing process performance: The OM manager cannot simply routinely deliver services
and products; they constantly need to improve.
Environmental sustainability (Brundtland report from UN): Meeting the needs of the present
without compromising the ability of future generations to meet their own needs.
Environmental sustainability: The extent to which business activity negatively impacts on the
natural environment. Somehow, operations were inadequate for a long time.
Operations principle: OM activities will have a significant effect on the sustainability performance of
any type of enterprise. Because planning and control may affect material
wastage but also effects energy and labour wastage.
First idea: Operations and processes that make up both the operations and
other business functions are transformation systems that take in inputs and
use process resources to transform them into outputs.
Second idea: Resources both in an organisation’s operations as a whole and
in its individual processes need to be managed in terms of how they are
directed, designed, how delivery is planned and controlled and how they are developed and
improved.
Chapter 2 Operations performance
2.1 Why is operations performance vital in any organisation?
OM can make the organisation in several ways better:
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