Test 1
,Chapter 1: Operations Management
INTRODUCTION
Operations management is about how organizations create and deliver services and
products. This is an introductory chapter, so we will examine what we mean by ‘operations
management’, how operations processes can be found everywhere, how they are all similar
yet different, and what it is that operations managers do.
Operations management: is the activity of managing the resources that create and deliver
services and products. The operations function (in short:
operation(s)) is the part of the organization that is responsible
for this activity
Operations principle:
All organizations have ‘operations’ that produce some mix of services and products
Operations in the organization
The operations function is central to the organization because it creates and delivers
services and products, which is its reason for existing. The operations function is one of the
three core functions of any organization. These are needed to sell their services and
products. These are:
- the marketing (including sales) function – which is responsible for communicating
the organization’s services and products to its markets in order to generate customer
requests
- the product/service development function – which is responsible for coming up with
new and modified services and products in order to generate future customer
requests
- the operations function – which is responsible for the creation and delivery of
services and products based on customer requests
In addition, there are the support functions which enable the core functions to operate
effectively. These include, for example, the accounting and finance function, the technical
function, the human resources function, and the information systems function.
A relatively broad definition of operations: We treat much of the product/service
development, technical and information systems activities and some of the human resource,
marketing, and accounting and finance activities as coming within the sphere of operations
management. We view the operations function as comprising all the activities necessary for
the day-to-day fulfilment of customer requests.
Operations principle:
Operations managers need to co-operate with other functions to ensure effective
organizational performance.
,OPERATIONS MANAGEMENT IS IMPORTANT IN ALL TYPES OF ORGANIZATION
Any business that creates something must use resources to do so, and so must have an
operations activity à in order to make a profit from creating and delivering their products or
services.
Examples:
- Automobile assembly factory – operations management uses machines to efficiently
assemble products that satisfy current customer demands
- Physician (general practitioner) – operations management uses knowledge to effectively
diagnose conditions in order to treat real and perceived patient concerns
- Management consultant – operations management uses people to effectively create the
services that will address current and potential client needs
- Disaster relief charity – operations management uses our and our partners’ resources to
speedily provide the supplies and services that relieve community suffering
- Advertising agency – operations management uses our staff’s knowledge and experience to
creatively present ideas that delight clients and address their real needs
Operations management uses ‘resources to appropriately create outputs that fulfil defined
market requirements’
Operations management in the smaller organization
Regardless of their size, all companies need to create and deliver their services and products
efficiently and effectively.
Problems small companies: not enough resources to dedicate individuals to specialized
tasks, problems in decision makings because of individuals’ roles overlap.
Operations management in not-for-profit organizations
operations management is also relevant to organizations whose purpose is not primarily to
earn profits. Managing the operations in an animal welfare charity, hospital, research
organization or government department is essentially the same as in commercial
organizations. Operations have to take the same decisions – how to create and deliver
services and products, invest in technology, contract out some of their activities, devise
performance measures, improve their operations performance, and so on.
But, the strategic objectives of not-for-profit organizations may be more complex and
involve a mixture of political, economic, social or environmental objectives.
,The new operations agenda
The business environment has a significant impact on what is expected from operations
management. In recent years there have been new pressures for which the operations
function has needed to develop responses. Table 1.2 lists some of these business pressures
and the operations responses to them. These operations responses form a major part of a
new agenda for operations.
THE INPUT–TRANSFORMATION–OUTPUT PROCESS
All operations create and deliver services and products by changing inputs into outputs using
an ‘input–transformation–output’ process. Put simply, 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.
Inputs to the process
Transformed resources: These are the resources that are treated, transformed or
converted in the process. They are usually a mixture of
materials, information and customers
- Materials – operations which process materials could do so to transform their
physical properties (shape or composition, for example) à change in location,
possession, and storage
- Information – operations which process information could do so to transform their
informational properties (that is the purpose or form of the information) à change
in possession, storage, and location
- Customers – operations which process customers might change their physical
properties in a similar way to materials processors à change storage
(accommodations), physiological state (hospital), and psychological state.
- Co-production when the input of the customer is vital to the operation
,Transforming resources: These are the resources which act upon the transformed
resources. There are two types, facilities and staff
- Facilities – the buildings, equipment, plant and process technology
- Staff – the people who operate, maintain, plan and manage the operation (all people
in the operation, at any level)
The exact nature of both facilities and staff will differ between operations.
Outputs from the process
Products and services are different. Products are usually tangible things, whereas services
are activities or processes. Also, while most products can be stored, at least for a short time,
service only happens when it is consumed or used
Most operations produce both products and services
Some operations create and deliver just services and others just products, but most
operations combine both elements. When a production organization also deliver some
services (e.g. technical advice) à they are called facilitating services
Operations principle:
Whether an operation produces tangible products or intangible services is becoming
increasingly irrelevant. In a sense all operations produce service for their customers
Customers
If there were no customers (whether business customers, users or consumers), there would
be no operation. Operations managers must be aware of customer needs, both current and
potential
, THE PROCESS HIERARCHY
Look inside any operation, and one will see that all
operations consist of a collection of processes (though
these processes may be called ‘units’ or ‘departments’)
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 in between them.
Each process is, at the same time, an internal supplier
and an internal customer for other processes
Operations principle:
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
Two meanings of ‘operations’:
‘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 processes within any of the
organization’s functions.
Operations principle:
All parts of the business manage processes, so all parts of the business have an operations
role and need to understand operations management principles.
Business processes
Whenever a business attempts to satisfy its customers’ needs it will use many processes,
both in its operations and its other functions
‘End-to-end’ business process: each product is created from start to finish by a
dedicated process that contains all the elements
necessary for its production
