Operations management - Nigel Slack - 9th edition
Chapter 1. Operations management
Operations management is about how organizations create and deliver services and
products. Operations managers are the people who create and deliver services and
products. For example a store manager in a supermarket.
Operations management is the activity of managing the resources that create and
deliver services and products. These activities include design, develop, deliver
(planning and controlling) and direct (steering operations and processes). The
operations function is the part of the organization that is responsible for his activity
(shorter terms are also used).
See table 1.1 for some activities of the operations function in various organizations.
The core functions of organizations are:
• The marketing (and sales) function.
• Responsible for communication between organization and customers.
• The product/service development function.
• Responsible for coming up with new and modified services and products.
• The operations function.
• Responsible for creation and delivery of services and products.
Examples of support functions are the accounting and finance function, the technical
function, the human resources function and the information systems function.
In this book, the operations function is seen as all activities necessary for day-to-day
fulfilment of customer requests.
See figure 1.2 for the relationship between the operations function and other core and
support functions of the organization.
The general objective of the operations function is ‘create’.
For example a management consultant, operations management uses people to effectively
create the services that will address current and potential client needs.
Operations management uses resources to appropriately create outputs that fulfil defined
market requirements.
See figure 1.3.
In large companies, specialisation is possible compared to smaller companies where employees
have to do different jobs. Decision making is difficult in a small organisation, because
individuals' roles overlap.
Also non profit organisations have an operations function. However, the strategic objectives
from non profit organisations differ from the strategic objectives from profit organisations.
It is the task of non profit organisation MSF to react to any crisis with fast response, efficient
logistics systems, and efficient project management. Usually under conflict circumstances.
Changes in business environment have a significant impact on challenges faced by operations
managers:
, • The fast development of new technologies have a dramatic effect on operating
practices.
• Different supply arrangements due to globalisation.
• Increased emphasis on social and environmental issues. As a consequence, operations
have to change the way they create their products and services.
See figure 1.4 for the changes in the business environment which are shaping a new operations
agenda.
—> For example: Adidas has opened a speed factory to produce shoes faster, which gives the
company the ability to replenish the fastest selling products during the same season. Otherwise
it will take approximately 18 months.
What is the input - transformation - output process?
See figure 1.5 for the input transformation output process.
Inputs to the process:
• Materials.
• The physical properties, location or possession from the material changes.
• Sometimes materials are stored.
• Information.
• Sometimes informational properties are transformed. For example, the possession or
location changes.
• Customers.
• Sometimes physical properties are transformed. Also the accommodation, transportation
and changing the physiological state of customers is part of this.
• Co-production when customers are playing a vital part in product/service offering.
See table 1.2 dominant transformed resource inputs of various operations.
Transforming resources:
• Facilities (buildings, equipment, plant and process technology).
• Staff (people in operation).
—> The exact nature of both facilities and staff will differ between operations.
Outputs from the process
• Products, mainly tangible things.
• Services (can involve a product), mainly activities or processes.
The product a business produces can be a pure product as well as pure service.
But it is mostly a combination between product and service.
In fact, all operations are service providers, thus also a manufacturer who sells vehicles. Indeed,
the provided service is part of the offering of the product to their customers.
See figure 1.6 for examples of pure products and pure services.
Servitization is a term used for firms which develop capabilities which they need to provide
services and solutions that supplement their traditional product offerings. Sometimes companies
take the possibility to earn additional revenue from the provided services.
The subscription model shows that more and more products are sold according to a
subscription model. First services such as magazines and gym memberships were sold in that
way, but now also razors and vegetable boxes are sold that way.
,Market segmentation is the creation of different groups of customers, each group has different
needs. Different customer groups may want different things from an operation, even if they want
the same product.
Business to business operations provide their products or services to other businesses.
Business to consumers operations provide their products or services directly to consumers.
→ Operations need to be aware of the needs of other businesses / consumers.
→ The service/product needs to be designed, created and delivered according to specific
desires.
All operations consist of a collection of processes (or units/departments) which are together
responsible for transforming inputs into outputs. The different units/departments form an internal
network within the operation. Each process is, at the same time, an internal supplier and an
internal customer for other processes.
See table 1.3 for some examples of processes within different operations.
Each process is made up of a network of resources. Each business/operation can be seen as a
part of a greater network of businesses or operations. Any operation could have several
suppliers and several customers. A network of operations is called the supply network. See
figure 1.7 for an example of the 3 levels: the supply network, the operation and the process.
Keep in mind that internal customers and suppliers can’t choose another supplier, contrary to
external customers and suppliers who can choose another supplier.
Core functions as well as support functions manage processes (not only the operations
function). Each function will have its technical knowledge but also a process management role.
All parts of the business manage processes, so all parts of the business have an operations role
and need to understand operations management principles.
There are thus 2 meanings of ‘operations’:
• Operations as a function (part of the total organisation).
• Operations as an activity in each of the organization’s functions.
See table 1.4 for some examples of processes in non-operations functions.
Processes are defined by how the organization chooses to draw process boundaries.
See figure 1.8 for two examples of end-to-end business processes.
Operations processes differ in a number of ways, such as:
• The volume of their output.
• A multinational produces more products than a local business, that is why a
multinational is more systematized and can produce the same product for a lower
price.
• The variety of their output.
• Some companies (such as a taxi company) are more flexible than other
companies (such as a bus service). But flexibility results in a higher price.
• The variation in the demand for their output.
• For companies who have to cope with a fluctuating demand, the costs and thus
prices will be higher than for companies who have a steady demand. Companies
with a steady demand can schedule staff more easily for example.
• The degree of visibility that the creation of their output has for customers.
• Some operations are more exposed to its customers than others. In a physical
shop, customers have a relatively short waiting tolerance and the productivity is
, relatively high cost. Moreover more than one shop is needed, contrary to a
webshop.
See figure 1.9 for characteristics of each aspect.
Some operations have both high- and low-visibility processes within the same operation.
The position of an operation on the four dimensions is determined by the demand of the
market.
See figure 1.10 the four Vs profiles of two very different hospitality operations.
What do operations managers do in general?
• Directing the overall strategy of the operation.
• Designing the operations services, products and processes.
• Planning and control process delivery.
• Developing process performance.
Environmental sustainability means the extent to which business activity negatively impacts on
the natural environment. All pollution disasters were the result of an operations-based failure.
Reducing waste is good for the environment but it also saves cost for the organisation.
See figure 1.11 for a general model of operations management.
Keep in mind that some people don’t agree with the idea that two different businesses appear
similar on paper.
Chapter 2 Operations performance
Operations management is responsible for the further existing of a business. Operations
management can make the organization in several ways.
• Operations management focuses on doing things better.
• Operations management can build the ‘difficult to imitate’ capabilities.
• Operations management concerns process and thus influences the outcome.
Operations management faces challenges when the economic, social, political and
technological environment changes.
De performances of operations can be judged at three levels:
• At societal level (using the triple bottom line).
The operations function needs to understand the objectives of its stakeholders and set
its objectives accordingly. Stakeholders can be internal (employees) or external
(suppliers, customers, etc.).
• Corporate social responsibility (CSR) is the impact of operations on
stakeholders.
• See figure 2.3 stakeholder groups with typical operations objectives.
• The triple bottom line (people, planet, profit) means 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
ecological impact on the environment.
They need to balance economic, environmental and societal interests.
• The social bottom line (people) means that businesses should accept that they bear
responsibility for the impact they have on society and balance the external societal
consequences of their actions with the more direct internal consequences, such as
profit.
