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Business process management summary
Summary of the book Operations management (NIGEL SLACK et.al.) 8TH Edition. All the matters that are described in the book are summed up and where needed explained. course: MBIB-BPM-14
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Business Process ManagementChapter 1 operations management
What is operations management?
Is the activity of managing the resources that create and deliver services and products.
Operation function is the part of the organization that is responsible for this activity. All
organizations have ‘operations’ that produce some mix of services and products. Operation
managers are the people who have particular responsibility for managing some, or all, of the
resources which comprise the operations function.
Core functions of any organization:
1. The marketing (including sales) function, responsible for communicating the
products/services to its market in order to generate customer requests
2. The product/service development function, responsible for coming up with new and
modified services/products in order to generate future customer requests
3. The operations function, which is responsible for the creation and delivery of
services/products based on customer requests.
Support functions:
- Accounting and finance function, inform about economic and finance
- Technical function
- Human resources function, recruit and develop staff
- Information systems function
Every organization has the three core functions because fundamental need to sell products and
services, meet customer requests and come up with new services/products to satisfy customer.
Fundamental of modern management that functional boundaries should not hinder efficient
internal processes. Operations managers need to co-operate with other functions to ensure
effective organizational performance.
Why is operations management important in all types of organization?
The economic sector of an operation is less important in determining how it should be managers
than its intrinsic characteristics.
Operations management uses ‘resources to appropriately create outputs that fulfil defined market
requirements.
The role operations management in smaller organizations often overlaps significantly with other
functions. Operations decisions are the same in commercial and not for profit organizations;
however strategic objectives of non-profit organizations differ from commercial companies.
Due to business pressures the business environment is changing and therefore the operations
management has different expectations. Operations management is increasingly important
because today’s business environment requires new thinking from operations management.
What is the input-transformation-output process?
all operations create and deliver services and products by changing inputs into outputs using an
‘input-transformation-output’ process. Operations are processes that take in a set of input
resources which are used to transform something, or are transformed themselves, into outputs of
services and products.
Two types of inputs:
1. Transformed resources
- Materials, operations which process materials could do so to transform their physical
properties (shape, composition). Manufacturing operations are like this. Other
operations process materials to change location, retail operations do so to change
possession of the materials and warehouses store materials.
- Information, operations which process information could do so to transform their
informational properties (purpose/form of information); accountants do this. Change
possession, store information or change location of information.
- Customers, operations which process customers might change their physical
properties in a similar way to materials processors. Some store customers (hotels),
transform location (airlines), transform physiological state (hospital). Customers can
, take active role which is called co-production because the customer plays a vital part
in the provision of the product/service offering.
2. Transforming resources
- Facilities, the buildings, equipment, plant and process technology of the operation
- Staff, the people who operate, maintain, plan and manage the operation (all people in
the operation)
All processes have transforming resources of facilities and people.
Outputs from the process:
- Products, tangible things
- Service, activities or processes
The output of most organizations is a mixture of tangible product and intangible services. Most
operations produce both products and services.
Whether an operation produces tangible or intangible services is becoming increasingly
irrelevant. In a sense all operations produce service for their customers.
Customers are reason for existence operations. Take into account customer needs, current and
potential. 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?
Operation consists of collection of processes interconnecting with each other to form a network.
Each process acts as a smaller version of the whole operation of which they form a part, and
transformed resources flow between them.
A process is an arrangement of resources that create some mixture of service and products.
Form an internal network within an operation. Each process is
an internal supplier and customer for other processes. Treating
internal customers as external customers the effectiveness of
whole operation can be improved. Operation is made up of a
network of processes and any process is made up of a network
of resources.
Three levels of Operation Management:
supply network (flow between operations)
operation (flow between processes)
process (flow between resources)
Macro level: business is part of whole supply network, acquiring
services from creative agencies, liaising with promotion agencies and serving its broadcasting
company customers.
Micro level, within overall operation there are many individual processes; workshops
manufacturing sets, marketing processes that liaise with potential customers, etc.
All parts of the business manage processes so all parts of the business have an operations role
and need to understand operations management principles.
Two meanings of operations:
1. operations as a function, meaning the part of the organization which creates and delivers
services and products for the organization’s external customers
2. operations as an activity, meaning the management of the processes within any of the
organization’s functions
Processes are defined by how the organization chooses to draw process boundaries.
End-to-end business processes that satisfy customer needs often cut across functionally based
processes.
How do operations processes have different characteristics?
Operations are similar but differ in four ways, four Vs:
the volume of their output
the variety of their output
the variation in the demand for their output
the degree of visibility which customers have of the creation of their output.
,Implications Implications
-Low repetition Low Volume High -High repeatability
-Each staff member -Specialization
performs more jobs -Systemization
-Less systemization -Capital intensive
-High unit costs -Low unit costs
-Flexible High Variety Low -Well defined
-Complex -Routine
-Match customer needs -Standardized
-High unit costs -Regular
-Low units cost
-Changing capacity High Variation in Low -Stable
-Anticipation demand -Routine
-Flexibility -Predictable
-In touch with demand -High utilization
-High unit costs -Low unit cost
-Short waiting tolerance High Visibility Low - Time lag between
-Satisfaction governed by production and
customer perception consumption
-Customer contact skills -Standardized
needed -Low contact skills
-High unit cost -High staff utilization
-Centralization
-Low unit costs
Operations and processes can (other things being equal) reduce their costs by increasing
volume, reducing variety, reducing variation and reducing visibility.
Low volume, high variety, high variation and high customer contact carry cost penalty.
High volume, low variety, low variation and low customer contact help keeping costs down.
What do operations managers do?
Classify operations management activities under four headings:
1. directing, the overall nature and strategy of the operation.
2. Designing, the operation’s services, products and processes. Activity of determining the
physical form, shape and composition of operations and processes together with the
services and products they create.
3. Delivering, delivery of services and products from suppliers and through the total
operation to customers must be planned and controlled.
4. Developing, develop the capabilities of their processes to improve process performance.
Two ideas to develop model of operations and process
management:
1. Operations and the processes make up both the
operations and other business functions are
transformation systems that take in inputs and use
process resources to transform them into outputs.
2. Resources both in an organization’s operations as
whole and its individual processes need to be
managed in terms of: how they are directed and
designed, how delivery is planned and controlled,
and how they are developed and improved.
, Chapter 2 Operations performance
Why is operations performance vital in any organization?
Operations function gives the ability to compete by providing the ability to respond to customers
and by developing the capabilities that will keep it ahead of its competition in the future.
Operation managers face new challenges, with new projects, but generally as their economic,
social, political and technological environment changes. Operations management is fundamental
to the sustainable success of any organization.
Triple bottom line, people planet profit. 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 environment.
People, the social account, measured by the impact of the operation on the quality of
people’s live (customer safety from products, non-exploitation)
planet, the environmental account, measured by environmental impact of the operation
(recyclability of materials, reducing transport-related energt)
profit, the economic account, measured by profitability, return on assets, etc. of the
operation. (cost of producing products, building capacities for future).
1. The social bottom line, businesses should accept they they bear some responsibility for the
impact they have on society and balance the external ‘societal’ consequences of their actions
with the more direct internal consequences.
Level individual, devising jobs and work patterns which allow individuals to contribute
their talents without undue stress.
Group level, recognizing and dealing honestly with employee representatives.
Businesses part of larger community, recognizing responsibilities to local communities by
helping promote their economic and social well-being.
2. The environmental bottom line
Environmental sustainability means ensuring that the overall productivity of accumulated
human and physical capital resulting from development actions more than compensates for
the direct or indirect loss or degradation of the environment. The extent to which business
activity negatively impacts on the natural environment. Operational failures which are the root
of pollution disasters and operation decisions which impact on long-term environmental
issues.
3. The economic bottom line
Operations managers must use the operation’s resources effectively. Five aspects of
performance have significant impact on economic performance:
1. Process efficiency lower costs
2. Reduced errors, and gives better resilience low operational costs
3. Higher capacity utilization lower capital requirements
4. Enhanced service service revenue
5. Opportunities for process learning
capabilities for future innovation
Stakeholders are the people and groups who
have legitimate interest in the operation’s
activities. All operations should reflect the
interests of stakeholders groups.
CSR are voluntary actions that business can
take, over and above compliance with minimum legal requirements, to address both its own
competitive interests and the interests of wider society.
Five operations performance objectives.
Triple bottom line, stakeholders and CSR objectives form the backdrop to operations decision
making, but running operations at an operational day-to-day level requires a more tightly defined
set of objectives.
Quality, being right. error-free goods which fit purpose
Speed, being fast. Minimizing time customer asking and to fulfil them.
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