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MNB1601 Assignment 2 Semester 1 2022
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MNB1601 Assignment 2 Semester 1 2022
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lOMoARcPSD|10935195CHAPTER 11
OPERATIONS MANAGEMENT
11.1 Introduction
A business transforms inputs from the environment into outputs to the environment
Operations function – that function of the business aimed at executing the transformation process
Operations management (the operations function and the management thereof) are directly concerned
with creating products and providing services in order to realise the objectives of the business
11.1.1 The importance of operations management
An effective and efficient operation can give a business four types of advantages:
o Reduce the costs of making the products or offering services
o Increase the revenue the business receives for offering its products and services
o Reduce the amount of investment (capital) needed to manufacture products or services
o Provide the impetus for new innovation by using its solid base of operational skills and
knowledge to develop new products and services
Other reasons why operations management is considered important:
o It improve productivity
o It can help a business to satisfy the needs of its customers/clients more efficiently
o It can be decisive for the general reputation of the business
11.1.2 Defining terms used in operations management
Operations management is concerned with the management of the transformation process (the
operations process) whereby products are manufactured or services rendered
Concepts defined operations management:
o The operations function is that function in the business aimed at the utilisation of resources
to manufacture products or render services
o Operations managers are the personnel in the business who is directly responsible for
managing the operations function
o Operations management involves operations managers• activities, decisions and
responsibilities that tie in with the execution of the operations function
11.2 Operations-management model
The most notable elements of the operations-management model are the operations-management
strategies and objectives, and the management activities that influence the transformation process that
produces outputs
11.2.1 Operations-management strategies and performance objectives
Consumer who are satisfied with the business•s products or services should be a top-priority
objective
Six main elements to customer/client needs:
o Higher quality
o Lower costs
o Shorter lead time (quicker manufacturing or provision of services)
o Greater adaptability (flexibility)
o Lower variability with regard to specifications (reliability)
o High level of service (better overall service)
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Six operations-management performance objectives to achieve customer/client needs:
o Do things right the first time – the operations function should not make mistakes
o Do things cost effectively – ensuring an acceptable profit for the business
o Do things quickly – time between demand and delivery be as short as possible
o Make changes quickly – adapt or change activities if necessary
o Do things right every time – error free products and services
o Do things better – providing a better product or service than the competitors
Fig11.2: Positive results obtained by the application of operations-management guidelines
Operations-management guideline Positive result
Doing things right the first time → Higher quality
Doing things cost effective → Lower cost
Doing things fast → Shorter lead time
Changing things quickly → Greater adaptability
Doing things right every time → Lower variability
Doing things better → Better service
11.2.2 The transformation model
The operation function is primarily concerned with using resources (inputs) to provide outputs by
means of a transformation process
Three main components:
o Inputs
• Material
• Customers/clients
• Information
• Human resources
• Equipment and facilities
• Technology
o The transformation process
• Convers inputs into outputs
o Outputs
• Assume the form of products or services
Different operations have different characteristics:
o The volume of output may differ
o The variety of output may differ
o The variation of output may differ
o The visibility of output may differ
11.3 The classification of process types for manufacturers and service providers
In manufacturing, the most common classification system classifies different operations processes
according to the volume of output (scope) and the variety of products
11.3.1 The classification of process types for manufacturers
Five main categories:
o Project processes
Projects represent operational processes that are highly individual and unique,
normally tackled on a large scale, e.g. construction projects, development projects
or upgrading projects
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o Jobbing processes
Jobbing represents operational processes conducted on a small scale with a low
volume of output, with the same nature of work throughout but the specific
requirements differ, e.g. jewellery manufacturing or express printing works
o Batch processes (job lots)
In batch production (lot production), a limited range of products is manufactured
and production appears to be nearly the same as jobbing, but it does not have the
same degree of variety, e.g. furniture, domestic or electronic manufacturers
o Mass processes
Mass production is the production of products in high volumes, but with relatively
little variety, e.g. poultry farm or motor car manufacturer
o Continuous processes
Continuous production is a step beyond mass production because the volume are
even greater, but there is very little variety in the type of product, e.g. wheat mill,
electricity generation utility, cement manufacturer, petrochemical refinery and
paper manufacturer
11.3.2 The classification of process types for service providers
Three main categories:
o Professional services
Professional services represent operational processes provided on a high client-
contact basis, e.g. dentist, doctors, attorneys, auditors and management
consultants
o Service shops
Service shops represent operational processes where the characteristics of service
provision fall between those of professional service and those of mass services, e.g.
banks, hotels and retails shops
o Mass services
Mass services represent operational processes where many client transactions take
place with limited client contact with a low variety; these services are usually
equipment orientated and are provided on a large scale, e.g. post and
telecommunication services, air and rail transport and television broadcast
services
11.4 Operations design
11.4.1 The nature of operations design
Operations design entails two interdependent aspects:
o The design of products and services (aka product design)
o The design of operations product or service processes to manufacture or provide these
products or services (aka process design)
11.4.2 The design of products and services
• The competitive advantage of good design
The design of a product or service begins and ends with the customer/client, designed to satisfy
the needs of the customer/client
• The components of products and services
All products and services consist of three interdependent components:
o A concept (or idea) the set of expected benefits that the customer/client purchases
when purchasing a product or service in response to his/her
needs
o A package product concept – tangible physical object, e.g. car, clothing
service concept – intangible object, e.g. the car•s guarantee
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o A process necessary to create the package of products and services, the
design of the products or services takes place in conjunction
with the design of the processes required to manufacture or
provide them
• The stages in the design of products and services
o Concept generation different ideas for new product or service concepts
are generated
o The screening process concepts are evaluated by means of a screening
process based on certain design criteria, such as
feasibility, acceptability and vulnerability
o Preliminary design the first attempt to specify the composition of the
components of the product or service to be included
in the package and to identify the processes that will
be necessary to produce or provide the product or
service package
o Evaluation and improvement evaluating the preliminary design with a view to
improving it, and making the process of manufacture
and provision less expensive and easier
o Prototype and final design the prototype is the last step, in order to test it in the
market, and if it is favourably received in the market,
the final design and specifications of the product or
service can be compiled
11.4.3 The design of operations processes
• The design of supply networks
o Suppliers of materials or services
o Intermediaries and final customers/clients
• The layout and flow of manufacturing and service-provision facilities
o The layout the physical arrangement of the resources, e.g. machines,
equipment and personnel
o The flow the way in which resources such as materials, information
and customers/clients flow through the transformation
process
The three steps of the layout:
Step 1: Selecting the process type
Step 2: Selecting the basic layout
o The fixed-position layout
o The process layout (flexible-flow layout)
o The product layout (line-flow layout)
o The cellular layout (hybrid layout)
Step 3: Making a detailed design of the layout
• The application of process technology
o Refers to the machines, equipment and apparatus used un the transformation process
• Job design and work organisation
o Job design it determines how workers perform their various daily tasks
o Work organisation factors influencing the people in the work environment in order to
improve the execution of tasks in terms of efficiency and
effectiveness
Method study the recording and investigation of work methods
Work measurement techniques designed to determine how long it takes a worker
to do a specific job
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