1.1 Introduction
-Goods are physical items that include raw materials, parts, subassemblies.
-Services are activities that provide some combination of time. Location, form, or psychological
value.
-The collective success or failure of companies’ operations functions has an impact on the ability of
a nation to compete with other nations an don the nations economy.
-Ideal is supply = demand
-Three basic functional areas: finance, marketing and operations.
-Operations management = the management of systems or processes that create good/ services.
-Supply chain = the sequence of organizations that are involved in producing and delivering.
→ You can outsource it (external) or do it yourself (internal).
→ the transformation of the products is optimal by feedback en control.
→ goods-service combination is a continuum.
-Value-added = the difference between the cost of inputs and the value of the outputs.
1.2 Production of goods versus providing services
-Goods are tangible (aanraakbaar) output, services implies an act.
-Comparisons between manufacturing and service: degree of customer contact, lobar content of
jobs, uniformity of inputs, measurement of productivity, quality assurance, inventory, wages and
ability to patent. (The management of these also have a lot of similarities.)
1.3 Why learn about operations management
-Every aspect of business affects or is affected by operations.
-Having a better understanding of how companies work.
-Lead time = the time between ordering a good or service and receiving it (marketing needs this
information from operations).
1.5 Process management
-A process consists of one or more actions that transform inputs into outputs.
-Three categories of business processes: upper-management processes (entire organisation) +
Operational processes (make up the value stream) + Supporting processes (support the core
processes).
-Basic sources of variation: variety of goods/ services being offered + structural variation in
demand + random variation (can’t be influenced) + Assignable variation (caused by defectives).
1.7 Operations management and decision making
-Operations management professionals make a number of key decisions that affect the entire
organization.
-A model is a abstraction of reality (simplified): physical model (look like their real-life
counterparts) + schematic model (more abstract than physical) + mathematical (most abstract).
-Managers use these because: less expensive, easy, increasing understanding, etc.
-Limitations of models: missing information + can be incorrectly applied + no guarantee.
-Managers can use: quantitative approaches (mathematical optimal solution) + performance
metrics + trade-offs (con against pro) + decision in degree of customization + looking at the big
picture (system = interrelated parts that must work together) + establishing priorities (Pareto
phenomenon = a few factors account for a high percentage of the occurrence of some event(s).
2.2 Competitiveness
-Competitiveness: How effectively an organization meets the wants and needs of customers
relative to other that offer similar goods or services.
-It influences the wants/ needs, price/ quality and advertising and promotion.
,-A lot of areas containing operations and influence on competitiveness are interrelated.
-Chief reasons for organizations failing: neglecting operations strategy, failing SWOT, to much
emphasis on short term and product and service design, neglecting investments in capital an HR,
bad communications, failing considering wants/ needs.
2.3 Mission and strategies
-Mission: the reason for the existence of an organization.
-Mission statement: states the purpose of an organization.
-Goals: provide detail and scope of the mission.
-Strategies: plans for achieving organizational goals. (Overall: entire organization, functional: relate
to each of the functional areas + tactics: methods and actions used to accomplish strategies.)
-Tree main basic strategies: low cost + responsiveness + differentiation from competitors.
-Core competencies: The special attributes or abilities that give an organization a competitive edge.
-SWOT: (strengths(i), weaknesses(i), opportunities(e) and threats(e)).
-Michael Porter’s five forces model: treats of: new competition, substitutes, power of customers,
suppliers and intensity of competition.
-Order qualifiers: characteristics that customers perceive as minimum standards of acceptability to
be considered as a potential for purchase.
-Order winners: characteristics of an organization’s goods or services that cause it to be perceived
as better than the competition.
-Environmental scanning: the monitoring of events and trends that present threats or
opportunities for a company.
-External factors: economy, political, legal, technology, competition, customers, etc.
-Internal factors: HR, facilities and equipment, financial, products and services, etc.
-Supply chain strategy specifies how the supply chain should function to achieve those goals.
-Sustainability strategy: strategy devoting attention to sustainability goals.
-Global strategy: relates to where the products/ services are made and where the are sold.
2.7 Productivity
-Productivity is a measure of the effective use of resources, usually expressed as the ratio of output
to input. (output/input)
-You have partial (1 input), multifactor (multiple input) and total measures (all the input).
-Productivity is used to track performances, is a aggregate (to compare) measure.
-Process yield: ratio of output of good product to the quantity of raw material input.
-Biggest factors affecting productivity: methods, capital, quality, technology and management.
Further there are still a lot factors affecting, which you might not have influence on (equipment
breakdowns), but you could also outsource to improve it.
-Positive factors: developing measures + look at most critical part + establish reasonable goals, etc.
5.1 Introduction
-Capacity = the upper limit or ceiling on the load that an operating unit can handle.
-Overcapacity: costs are too high, undercapacity: doesn’t meet demand.
5.2 Capacity decisions are strategic
-Capacity decisions can affect: meet demands + operations costs + initial cost + commitment +
competitiveness + management + globalization + financial.
5.3 Defining and measuring capacity
-Difficulties in measuring arises when you need to choose how to measure (money, quantity etc).
, -Design capacity = the maximum designed service capacity or output rate. (ideal conditions)
-Effective capacity = design capacity minus allowances such as personal time, equipment
maintenance, delays due to scheduling problems, and changing the mix of products.
-Efficiency = actual output / effective capacity x 100%
-Utilization = actual output / design capacity x 100%
5.4 Determinants of effective capacity
-Main factors which have impact on the capacity: facilities + product and service factors + process
factors + human factors + policy factors + operational factors + supply chain factors + external.
5.5 Strategy formulation
-Three primary strategies: leading (anticipating capacity) + following (builds capacity when exceeds
current demand) + tracking (similar to following but adds in small increments).
-Capacity cushion: extra capacity used to offset demand uncertainty.
5.6 Forecasting capacity requirements
-Long term considerations; demand over time horizon and converting into capacity requirements.
-Short term needs are less concerned with cycles, trends, and seasonal things.
-When time intervals are too short to have seasonal variations in demand, the analysis can often
describe the variations by probability distributions.
-Irregular variations are the most troublesome, difficult or impossible to predict.
-Units of capacity needed: processing time needed/ processing time capacity per unit.
-Misjudgements on capacity lead to substantial losses.
5.7 Additional challenges of planning service capacity
-Three important factors in planning service capacity are: need to be near customers + inability to
store services + degree of volatility of demand.
-Speeds of delivery becomes major concern in service capacity planning.
-Demand management strategies can be used to offset capacity limitations.
5.8 Do it in-house ore outsource it?
-Factors of outsourcing: available capacity + expertise + quality considerations + the nature of
demand + the costs + risks.
5.9 Developing capacity strategies
-Enhance development of capacity strategies: design flexibility into systems + take stage of life
cycle into account (grown or small company) + take a big picture (look at all factors that will
change) (Bottleneck operation: an operation in a sequence of operations whose capacity is lower
than that of the other operations) + Prepare to deal with capacity ‘chunks’ (capacity increase will
be bigger increase than necessary at first) + attempt to smooth out capacity requirements +
identify the optimal operating level (economies of scale: if the output rate is less than the optimal
level, increasing the output rate results in decreasing average unit costs/ opposite diseconomies) +
choose a strategy if expansion is involved.
5.10 Constraint management
-Constraint: something that limits the performance of a process or system in achieving its goals.
Categories of constraint: market, resource, material, financial, supplier, knowledge, policy.
5.11 Evaluating alternatives
