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Summary Operations management
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Chapter 1Operations management is the activity of managing the resources that create and deliver services and products. Operations
managers are the people who have particular responsibility for managing some, or all, of the resources which comprise the
operations function. The operation function is one of the three core functions of any organization. These are:
The marketing (including sales) function – which is responsible for communicating the organization’s services and
products to its markets in order to generate customer requests;
The product/service development function – which is responsible for coming up with new and modified services
and products in order to generate future customer requests;
The operations function – which is responsible for the creation and delivery of services and products based on
customer requests.
In practice, there is not always a clear division between the three core functions or between core and support functions
(Functions which enable the core functions to operate effectively. These include, for example, the accounting and finance
function.).
Operations management uses ‘resources to appropriately create outputs that fulfil defined market requirements’.
Operations management uses machines/knowledge/people/resources/knowledge/experience to
effectively/creatively/efficiently assemble/produce/change/sell/move/cure/shape/etc. Product/services/ideas that
satisfy/match/exceed/delight customer/client/citizen’s/society demands/needs/concerns/dreams.
Operations management is also relevant to organizations whose purpose is not primarily to earn profits. However, the
strategic objectives of not-for-profit organizations may be more complex and involve a mixture of political, economic, social
or environmental objectives.
The business environment has a significant impact on what is expected from operations management. In recent years there
have been new pressures for which the operations function has needed to develop responses (for example: increased cost-
based competition, higher quality expectations, demands for better services, more choice and variety, etc.).
All operations create and deliver services and products by changing inputs into outputs using an input-transformation-
output process.
One set of inputs to any operation’s processes are transformed resources. These are the resources that are treated,
transformed or converted in the process. They are usually a mixture of the following:
Materials
Information
Customers; customers are not always simple ‘passive’ items to be processed. They can also play a more active
part in many operations and processes.
The other set of inputs to any operations process are transforming resources. These are the resources which act upon the
transformed resources. There are two types which form the ‘building blocks’ of all operations:
Facilities – the buildings, equipment, plant and process technology of the operation;
Staff – the people who operate, maintain, plan and manage the operation.
,When you look inside an operation, one will see that all operations consist of a collection of processes interconnecting with
each other to form a network. Each process acts as a smaller version of the whole operation of which they form a part, and
transformed resources flow in between them. In fact with any operation, the mechanisms that actually transform inputs
into output are these processes. A process is an arrangement of resources that create some mixture of service and
products. 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 an internal customer for other processes. Also any business or
operation can itself be viewed as part of a greater network of businesses or operations. It will have operations that supply it
with the services and products it needs and, unless it deals directly with the end consumer, it will supply customers who
themselves may go on to supply their own customers.
We must distinguish between two meanings of ‘operations’:
1. Operations as a function; meaning the part of the organization which creates and delivers services and products
for the organization’s external customers.
2. Operations as an activity; meaning the management of the processes within any of the organization’s functions.
The volume dimension
Volume has important implications for the way operations are organized. The first thing you notice is the repeatability of
the tasks people are doing and the systemization of the work where standard procedures are set down specifying how each
part of the job should be carried out. All this gives low unit costs. When companies have a low volume of products, the
repetition will also be far lower and the number of staff will be lower and therefore individual staff are likely to perform a
wider range of tasks. Also, it is less feasible to invest in specialized equipment. So the cost per product is likely to be higher.
The variety dimension
To offer a high variety, the company must be relatively flexible. However, the costs per product will be higher for a high
variety production than for a low variety production.
The variation dimension
The production process of companies with a high variation demand patterns is less predictable and in a less routine
manner.
The visibility dimension
This means how much of the operation’s activities its customers experience, or how much the operation is exposed to its
customers. Generally, customer-processing operations are more exposed to their customers than material- or information-
processing operations. But even customer-processing operations have some choice as to how visible they wish their
operations to be. When the visibility in a company is high, customers will have a relatively short waiting tolerance, and may
walk out if not served in a reasonable time. High-visibility operations require staff with good customer contact skills.
Customers could also request services or products which clearly would not be sold in such a shop, but because the
customers are actually in the operation they can ask what they like. This is called high received variety. This makes it
difficult for high-visibility operations to achieve high productivity of resources, so they tend to be relatively high-cost
operations.
, Some operations have both high- and low-visibility processes within the same operation. When the process is high-visible,
then the process takes place in a front-office environment. When the process is low-visible, then the process takes place in
a back-office environment.
To some extent the position of an operation in the four dimensions is determined by the demand of the market it is serving.
What do operations managers do?
- Directing the overall nature and strategy of the operation.
- Designing the operation’s services, products and process.
- Planning and control process delivery.
- Developing process performance.
We can now combine two ideas to develop the model of operations and process management that will be used. The first is
the idea that operations and the process 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. The second idea is that the 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, how they are designed, how delivery is planned and controlled and how they are developed and improved.
Chapter 2
Operation managers will always face new challenges, not only when they have major new projects to manage, but also
more generally as their economic, social, political and technological environment changes. How do operations managers try
to be, simultaneously, economically viable whilst being socially and environmentally responsible?
One common term that tries to capture the idea of a broader approach to assessing an organization’s performance is the
‘triple bottom line’, also known as ‘people, planet and profit’. Essentially, it is a straightforward idea – simply that
organizations should measure themselves not just on the traditional economic profit that they generate for their owners,
but also on the impact their operations have on society and the environment. The influential initiative that has come out of
this triple bottom line approach is that of ‘sustainability’. A sustainable business is one that creates an acceptable profit for
its owners, but minimizes the damage to the environment and enhances the existence of the people with whom it has
contact. The assumption underlying the triple bottom line is that a sustainable business is more likely to remain successful
in the long term than one which focuses on economic goals alone.
The social bottom line
The idea behind the social bottom line performance is not just that there is a connection between businesses and the
society in which they operate. Rather it is that businesses should accept that they bear some responsibility for the impact
they have on society and balance the external ‘societal’ consequences, such as profit (think about good work conditions
without undue stress).
The environmental bottom line
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