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MNO 3701 Production & Ops Management
Chapter 1
Effective production & Operations Management
Operations management is about how organisations produce goods and services.
Operations management is the activity of managing the resources which are devoted to the production and
delivery of products and services. The operations function is the part of the organisation that is responsible for this
activity.
Operations managers are the people who have a particular responsibility for managing some, or all, of the
resources which comprises operations function
See page four of the textbook for the definitions
Operations in the organization
Operations function is one of the three core functions of any organisation. These are:
Marketing function – responsible for communicating the organization’s products and services to market
Product/service development function – creating new and modified products and services
Operations function – responsible for fulfilling customer requests for service throughout the production and
delivery process
Support function – enables the core functions to operate effectively. Includes:
o Accounting and finance function
o Human resources function
There is not always a clear division between the three core functions or between core and support functions
Working effectively with other parts of the organisation is one of the most important responsibilities of operations
management. It is a fundamental of modern management that functional boundaries should not hinder efficient
internal processes.
The support functions have a different relationship with operations than the other core functions. Operation
managements responsibility to support functions is primarily to make sure that they understand operations needs
and help them to satisfy these needs
See table 1.1 on page five – activities of core functions in some organisations.
See figure 1.1 on page six of the textbook
Operations management in the small organisation
Managing operations in a small or medium sized organisations has its own set of problems. Large companies may
have the resources to dedicate individuals to specialized tasks but smaller companies often cannot
And informal structure can allow the company to respond quickly as opportunities or problems arise.
Operations management in not-for-profit organisations
Operations management is also relevant to organisations whose purpose is not primarily to earn profits.
Operations have to take the same decisions – how to produce products and services, invest in technology,
contract out activities, devise performance measures, improve operations performance etc.
The strategic objectives of not-for-profit organisations may be more complex
They may be a greater chance of operations decisions being made under conditions of conflicting objectives.
1
,Inputs and outputs
All operations produce products and services by changing inputs into outputs. They do this by using the input
transformation output process.
Transformation process model – describes operations in terms of their input resources, transforming processes and
outputs of goods and services.
Input Resources – transforming and transformed resources that form the input to operations
See figure 1.2 on page nine of the textbook
Inputs to the process
One set of inputs to any operations processes are transformed resources – resources that are treated, transformed
or converted in the process.
Materials
Transformation of the physical properties. Other operations process materials to change their location.
Some retailer operators change the possession of the materials. Some operations store materials i.e.
wharehouse.
Information
Transformation of the informational properties of the inputs – accountants.
Changing the position of the information – marketing and research companies
Store the information – libraries
The location of the information – telecommunication companies
Customers
Changing the physical properties in a similar way to materials – hair stylist or cosmetic surgeon
Accommodating customers – hotels
Transportation and bus companies - transforming the location of customers
Hospitals – transformation of the customer physiological state
Entertainment Centres – music, theatre, television and radio transformations – transforming the
psychological state of the customer.
The other set of inputs to any operations process are transforming resources. These are the resources which act
upon the transformed resources.
The are two types which form the building blocks of all operations:
Facilities – buildngs, equipment, transforming resources, plant and process technology of the operation
Staff –the people who operate, maintain, plan and manage the operation
The exact nature of both facilities and staff would differ between operations.
See table 1.2 on page 10 of the textbook
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,Outputs from the process
All processes exist to produce products and services.
The most obvious difference is their respective tangibility – the main characteristic that distinguishes products from
services.
Services may have a shorter stored life. Products can be stored for a time, some Food Products only a few days.
The life of the service is much shorter.
Most operations produce both products and services
Many operations are positioned in the spectrum from pure products producers to pure service producers.
Crude oil – concerned almost exclusively with the product.
Aluminium smelters – may also produce some services such as technical advice (called facilitating services)
An information systems provider may produce software products but primarily it is providing a service to its
customers, with facilitating products.
See figure 1.3 on page 11 of the textbook
Services and products are merging
The distinction between services and products is both difficult to define and not particularly useful. Information
and Communications Technologies are even overcoming some of the consequences of the intangibility of
services.
All operations are service providers who may produce products as a means of serving their customers.
Operations management is about managing processes
Process: an arrangement of resources that produces some mixture of goods and services.
The mechanisms that transform inputs to outputs are called processes.
Any operation is made up of a collection of processes, interconnecting with each other.
See table 1.3 on page 13 of the textbook.
Three levels of operations analysis
Operations management can use the idea of the input-transformation-output model to analyse businesses at
three levels:
Any operation could have several suppliers, several customers and may be in competition with other operations
producing similar services. This collection of operations is called the supply network
Processes are smaller versions of operations, they form an internal network in the same way as whole operations
form a supply network. Each process is, at the same time, an internal supplier and an internal customer for other
processes.
Even within individual processes, materials, information or customers will flow between individuals staff and
resources – hierarchy of operations.
See definitions on page 13 of the textbook.
In reality the relationship between groups and individuals is significantly more complex than that between
commercial entities. One cannot treat internal customers and suppliers exactly as we do external customers and
suppliers.
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, The operations management is relevant to all parts of the business
All functions manage processes.
Processes in the other functions also need managing using similar principles to manage the process within the
operations function.
Each will also have an operations ‘process management’ role of producing plans, policies, reporting and services.
All managers have some responsibility for managing processes.
Operations management is relevant for all functions
We must distinguish between two meanings of operations:
Operations as a function – part of the organisation which produces the products and services for external
customers.
Operations as an activity – management of the processes within any of the organization’s functions.
Business processes
End to end business process – customer needs for each product are entirely fulfilled.
Often cuts across conventional organizational boundaries.
Reorganising process boundaries an organization responsibilities around his business processes is the philosophy
behind business process reengineering (BPR)
See definitions on page 15 of the textbook.
Operations processes have different characteristics
Although all operations are similar to do differ in a number of ways:
Volume of the output
Variety of the output
Variation in the demand for their output
The degree of visibility which customers have of the production
Volume
Volume has important implications for the way operations organized, repeatability lot of the tasks people are
doing and the systemization of the work where standard procedures are set down in a manual.
Provides low unit costs
All is standardized and regular which result in relatively low cost.
Variation
The operation must change its capacity in some way by hiring extra staff to cope with the variation in demand.
Visibility
Means process exposure.
How much of the operations activities its customers experience, or how much the operation is exposed.
The bricks and mortar shop operation is a higher visibility operation – custom here have a relatively short waiting
tolerance. They will walk out if not served in a reasonable time
Higher visibility operations require staff with good customer contact skills.
High received variety – customers request goods which are clearly are not sold in a shop but because they are in
the operation they can ask what they like.
In contrast, Internet based shops – far lower visibility. Can be more factory like.
Customer contracts skills – skills and knowledge that operation staff need to meet customer expectations
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