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Learning Unit 1 - The Operations Management Function
Operation Management
The operations function is that function of the business aimed at executing the transformation process.
The importance of operations management :
It can reduce the cost of making products or offering services.
It can increase the revenue the business receives for offering its products and services to its customers/clients.
It can reduce the amount of investment (capital) needed to manufacture the type and quantity of products or to
offer the service required.
It can provide the impetus for new innovation by using its solid base of operational skills and knowledge to
develop new products and services.
Other reasons operations management are important to a business :
Operations management can improve productivity.
Operations management can help a business to satisfy the needs of its customers/clients more effectively.
Operations management can be decisive for the general reputation of the business.
Defining terms used in operations management :
The operations function is that function in the business primarily aimed at the utilisation of resources to
manufacture products or render services.
Operations management involves operations managers’ activities, decisions and responsibilities that tie in with
the execution of the operations function.
Operation-management strategies and performance objectives :
All businesses formulate business objectives, and if a business intends surviving in the long term, consumers who
are satisfied with the business’s products or services should be a top priority objective.
Although there are numerous customer needs that can be reduced to six main elements :
Higher quality
Lower costs
Shorter lead time (quicker manufacturing or provision of services)
Greater adaptability (flexibility)
Lower variability with regard to specifications (reliability)
High level of service (better overall service).
With these six customer/client requirements as a basis, operations management performance objectives can be
formulated to give the business an “operations-cased advantage” over other businesses. Operations management
performance objectives must indicate the specific areas with the domain of the operations function that will be
emphasised when products and/or services are produced or provided. The operations-management performance
objectives are formulated in such a way that they are applicable to both manufacturers and service providers.
To acquire operations based advantages, the following six general operations-management performance
objectives can be followed :
Do things right the first time
Do things cost effectively
Do things fast
Make changes quickly
Do things right every time
Do things better
, Operations management guideline Positive result
Do things right the first time Higher quality
Do things cost effectively Lower cost
Do things fast Shorter lead time
Changing things quickly Greater Adaptability
Do things right every time Lower variability
Do things better Better service
The transformation model
The operations function is primarily concerned with using resources (inputs) to provide outputs by means of a
transformation process.
Therefore the transformation model comprises three main components :
Inputs
The transformation process itself
Outputs
Inputs
Inputs used in the transformation process comprise both the resources that are to be transformed (processed,
changed or converted) and the resources required to make the transformation possible.
The resources to be transformed include the following :
Material
Customers/clients
Information
The resources required to make transformation possible include :
Human Resources
Equipment and facilities
Technology
The Transformation Process
The transformation process converts inputs to outputs. The nature of the process is determined by what input is
predominantly being processed.
Outputs
The ultimate goal of any transformation process is to transform inputs into outputs. Outputs assume the form of
products or services.
Characteristics of products and services
Products produced by manufacturer Services produced by service provider
Physically tangible and durable Intangible and perishable
Output kept in stock Output not kept in stock
Little customer contact Plenty of client contact
Manufactured before use Provision and consumption simultaneous
Long response time Short response time
Local & International markets Mainly local markets
Large production facilities Small service-provision facility
Capital-intensive production Labour intensive
Quality easily measurable Quality difficult to measure
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