Chapter 1 – Operations Management
What is Operations management?
Operations management is the activity of managing the resources that create and deliver
services and products. The operation function is the part of the organization that is responsible
for this activity. Organizations have “operations” that produce some mix of services and
products.
Operations in the organization
The operation function is central to the organization because it creates and delivers services and
products. Operation function is one of three core functions of any organization:
1. The marketing function is responsible for communication between the organization
and the market to create customer demand.
2. The product/service development function comes up with new and modified services
to generate future customer demand.
3. The operations function creates and delivers services based on customer demands.
Support functions such as accounting, finance, technical function, human resources help the
core functions to work effectively. Operations managers need to co-operate with other functions
to ensure effective organizational performance. It is fundamental to modern management that
functional boundaries should not hinder efficient internal processes.
Why is operations management important in all types of organizations?
Any business that creates something must use resources to do so, and so must have an
operations activity. Operations management uses not only machines but also knowledge,
people, partner resources, staff, experience to effectively assemble or produce products that
satisfy customer demands.
Operations management in the smaller organization
All companies need to create and deliver their services and products efficiently and effectively.
Large companies have enough resources to attribute people to specialized tasks which is
something that small companies cannot. Therefore, people have to do different jobs as the need
arises. This can result in confused decision making as all roles are overlapped.
Operations management in non-for-profit organizations
Operations management is also relevant to organizations whose purpose is not primarily to earn
profits. Operations have to take the same decisions regardless of the type of the company.
Strategic objectives might be different and more complex for non-for-profit organizations and
can result in conflict.
What is the input-transformation-output process?
,All operations create and deliver service and products by changing inputs into outputs using an
“input-transformation-output” process. All operations conform to this model even if they differ
in the nature of their specific inputs and outputs.
Inputs to the process
Inputs are usually a mix of the following:
- Materials: operations which process materials could do so to transform physical
properties. Others process materials to change their location and others change the
possession.
- Information: operations which process information could do so to transform
informational properties and some change the position or the location.
- Customers: operations which process customers might change the location of the
information.
Some operations have inputs of materials and information and customers, but usually one of
these is dominant. For example, banks print statements but are also responsible of customers
financial transactions. It is much more problematic if financial transactions are done badly than
the statements.
The other set of inputs to any operations process is transforming 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.
Outputs from the process
Products and services are different. Products are usually tangible things whereas services are
activities or processes. Some services do not involve products. While most products can be
stored, service only happens when it is consumed or used. However, most operations produce
both products and services. Whether an operation products tangible products or intangible
services is becoming increasingly irrelevant. In a sense all operations produce service for their
customers.
Customers may be an input to many operations, but they are also the reason for their existence.
No customers, no operation. This information will determine what the operation has to do and
how it has to do it which in turn defines the service/product offering to be designed, created
and delivered.
What is the process hierarchy?
A process is an arrangement of resources and activities that transform inputs into outputs that
satisfy customer needs. Each process is at the same time an internal supplier and an internal
customer for other processes. This internal customer concept provides a model to analyze
internal activities of an operation. Within each of these processes is another network of
individual units of resource such as individual people and individual items of process
technology. Any business or operation is made up of a network of processes and any process is
made up of a network of resources.
,A process perspective can be used at three levels: the level of the operation itself, the level of
the supply network and the level of individual processes.
Operations management is relevant to all parts of the business
All parts of the business manage processes, so all parts of the business gave an operations role
and need to understand operations management principles.
- Operations as a function, meaning the part of the organization which creates and
delivers services and products for the organization’s external customers.
- Operations as an activity, meaning the management of the process within any of the
organization’s functions.
Business processes
A business needs to use many processes to satisfy customers. Each of the process will contribute
some part to fulfilling customer needs. Processes are defined by how the organization chooses
to draw process boundaries.
How do operations and processes differ?
All operations processes are similar in that they all transform inputs, they do differ in a number
of ways, the four V’s:
- The volume of their output (volume can be responsible for a low unit cost)
- The variety of their output (to offer variety the company must be flexible)
- The variation in the demand for their output (some products are way more asked at some
moments than others, aquatic parks have a lot of variation whereas food chains don’t)
- The degree of visibility which customers have of the creation of their output. (you can
see the processes and operations used to construct the final product)
The implications of the four V’s of operations processes
All four dimensions have implications
for the cost of creating and delivering
services and products. Operations and
process can reduce their costs by
increasing volume, reducing variety,
reducing variation and reducing
visibility.
, What do operations managers do?
Operations management activities are the following:
- Directing the overall strategy of the operation.
- Designing the operation’s resources and processes.
- Planning and control process delivery
- Developing process performance.
Operations management impacts environmental sustainability
Environmental sustainability means meeting the needs of the present without compromising the
ability of future generations to meet their own needs. Operations management activities will
have a significant effect on the sustainability performance of any type of enterprise.
Chapter 2 – Operations Performance
Why is operations performance vital in any organization?
The operation function gives the power to compete by providing the ability to respond to
customers and by developing the capabilities that will keep if ahead of its competitors in the
future. Operation Management is important to improve the overall productivity. The ratio of
input to output is termed as productivity. Operation management plays a crucial role in an
organization as it handles issues like design, operations, and maintenance of the system used
for the production of goods.
Operations management can make the organization better in several ways:
- Operations management is concerned with doing things better, better quality, service,
responsiveness, reliability, flexibility, cost…
- Operations management can build the difficult to imitate capabilities that can have a
significant strategic impact.
- Operations management is very much concerned with process and with how thing are
done.
Operations management is fundamental to the sustainable success of any organization.
Performance at three levels
Performance is not straightforward. Operations can judge its performance at three levels:
- The broad, societal level, using the idea of the “triple bottom line”
- The strategic level of how an operation can contribute to the organization’s overall
strategy
- The operational level, using the five operations performance objectives
How is operations performance judged at a societal level?
