Topic 1

Operations management

The activity of managing the resources that create and deliver services and products

Operations function

The part of the organization that is responsible for operations management

Operations manager

The people responsible for managing some or all resources that comprise the operations function. Other names; fleet manager, administrative manager, store manager

Operations principle 1

All organizations have operations that produce some mix of services and products

Operations principle 2

Operations management is at the forefront of coping with and exploiting development in business and technology

Examples of operations - internet service provider

-Maintain and update hardware

-Update software and content

-Respond to customer queries

-Implement new services

-Ensure security of customer data

Examples of operations - fast-food chain

-Locate potential sites for restaurants

-Provide processes and equipment to produce burgers etc.

-Maintain service quality

-Develop, install and maintain equipment

-Reduce impact on local area

-Reduce packaging waste

Examples of operations - international aid charity

-Provide aid and development projects for recipients

-Provide fast emergency response when needed

-Procure and store emergency supplies

-Be sensitive to local cultural norms

Examples of operations - furniture manufacturer

-Produce appropriate raw materials and components

-Make sub-assemblies

-Assemble finished products

-Deliver products to customers

-Reduce environmental impact of products and processes

In which areas, has operations managers had to adjust especially?

-New technologies, in both manufacturing and service industries

-Different supply arrangements, some supply chains increasingly vulnerable

-Increased emphasis on social and environmental issues

Transformations process model

Basis of all operations

Input-transformation-output process

Operations take in a set of input resources that are used to transform something or are transformed themselves, into outputs of services and products

Operations principle 3

All processes have inputs of transforming and transformed resources that they use to create products and services.

Transformed resources

-Materials

-Information

-Customers

-The resources that are treated, transformed and converted in the process

Transforming resources

-Facilities

-Staff

-Act upon the transformed resources

Operations performances

-Societal

-Strategic

-Operational

Materials as a transformed resources

-Transform physical properties

-Change location

-Change the possession of the materials

-Store materials

Information as a transformed resource

-Transform informational properties(purpose or form)(accountants)

-Change the possession of the information(market research and some)

-Store information(library)

-Change the location of the information(telecommunication company)

Customers as a transferred resource

-Physical properties(hair, cosmetic surgery)

-Store(accommodate) customers(hotels)

-Transform(transport)(airline)

-Transform physiological state(hospital)

-Transform psychological state(tv, music, theme parks)

Operations principle 4

Transformed resource inputs to a process are materials, information or customers

Facilities as a transforming resource

-Buildings, equipment, plant and process technology of the operations

Staff as a transforming resource

The people who operate, maintain, plan and manage the operations(all the people, any level)

Predominantly processing inputs of materials

-All manufacturing operations

-Mining companies

-Retail operations

-Warehouses

-Postal services

-Container shipping lines

-Trucking companies

Predominantly processing inputs of information

-Accountants

-Bank headquarters

-Market research companies

-Financial analysts

-New services

-University research unit

-Telecoms companies

Predominantly processing inputs of customer

-Hairdresser

-Hotel

-Hospital

-Mass rapid transport

-Theatres

-Theme parks

-Dentists

Operations principle 5

All processes have transforming resources of facilities and people

Front-office/front-of-house

Processes that interact(transform) with customers

Back-office/back-of-house

Operations and processes that have little to no direct contact with customers but perform the activities that support the front office in some way

IHIP

-Distinction between product and service is measured by:

-Intangibility, eterogeneità, inseparability, perishability

Intagibility

-Not a physical item

-Difficult to define the boundary of the less tangible elements of service-important to manage expectations

Heterogeneity

-Difficult to standardise

-Each time service is delivered, it’s different, because behavior of customers vary

Inseparability

-Production and consumption are simultaneous

-Provider physically present when customer consumes the service

-Must have sufficient capacity to meet demand

Perishability

-Cannot be stored

-May perish in the instant of their creation

-Ceases to have value after a relatively short time

Operations principle 6

Most operations produce a blend of tangible products and intangible services

Service-dominant logic

-The idea that all operations should be seen as offering value propositions through service

-Service is the fundamental basis of exchange

-Physical goods are simply the distribution mechanisms for the provision of service

-Customer is always the co-creator of value

Pure products

-Significant tangible elements

-Largely standardised

-Production and consumption can be separated

-Storage is possible

Pure services

-No tangible elements

-Not at all standardized

-Production and consumption totally simultaneous

-No storage possible

Co-creation

Customer involvement in the design of a product or service

Co-production

Customer involvement just in the production of a pre-designed offering

Servitisation definition

Indicates how operations, which once considered themselves exclusively producers of products, are becoming more service-conscious

Operations principle 7

Servitisation inviolées firme developing the capabilities to provide services and solutions that supplement their traditional product offerings.

Operations principle 8

An understanding of customer needs is always important, whether customers are individuals or businesses.

Voice of the customer

Assessing how customers view their offerings and bringing it into their operation

Three levels of performance

-The board, 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 subjectives

Stakeholders

The people and groups who have a legitimate interest in the operation’s activities

Societal level of performance

-Planet
-People
-Profit
-Sustainability

Strategic level of performance(impact)

-Learning

-Capital

-Risk

-Cost

-Revenue

Operational level of performance(objectives)

-Quality

-Speed

-Dependability

-Flexibility

-Cost

Operations principle 9

All operations decisions should reflect the interests of stakeholder groups

Corporate social responsibility(CSR)

Idea that operations should consider their impact on a broad mix of stakeholders.

UK government definition: essentially about how business takes account of its economic, social and environmental impacts in the way it operates-maximizing the benefits and minimizing the downsides

Triple bottom line(TBL)

-People, plant and 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 their ecological impact on the environment.

Operations principle 10

Operations should judge themselves on the triple bottom line principle of people, plant, profit.

The social bottom line(people)

-Measured by the impact of operation the the quality of the people’s lives

-Customer safety, employment impact of location, implications of outsourcing, staff safety, workplace stress

The environmental bottom line(planet)

-Measured by the environmental impact of the operation

-Recyclability, energy consumption, waste material generation, transport-related energy, pollution, process failures

The economic bottom line(profit)

-Measured by profitability, return on assets and other conventional financial measures of the operation

What indicates the business’s sustainability?

Combination of profit, planet, people-triple bottom line of principle

Sustainable business

-Creates an acceptable profit for its owners

-Minimises the damage to the environment

-Enhances the existence of the people with whom it has contact

-Balances economic, environmental and societal interests

-Assumption; sustainable business more likely to remain successful in the long term

Operations principle 11

All operations should be expected to contribute to their business at a strategic level by controlling costs, increasing revenue, making investment more effective, reducing risks and growing long-term capabilities

Performance objectives

Quality, speed, dependability, flexibility, cost

Operations principle 12

Quality can give the potential for better services and products, and save costs

Operations principle 13

Speed can give the potential for faster delivery of services and products, and save costs

Operations principle 14

Dependability can give the potential for more reliable delivery of services and products and save costs

Operations principle 15

Flexibility can give the potential to create new, wider variety, differing volumes and differing delivery dates of services and products and save costs

Operations principle 16

Cost is always an important objective for operations management, even if the organization does not compete directly on price

Why are high-quality operations important?

They do not waste time or effort having to re-do things

Why are fast operations important?

They reduce the level of internal inventory, as well as administrative overheads

Why are dependable operations important?

They can be relied on to deliver exactly as planned, which eliminates wasteful disruption

Why are flexible operations important?

They adapt to changing circumstances quickly and without disrupting the rest of the operation and can change over between tasks without wasting time and capacity

External effects of performance objectives

-Cost:low price, low margin

-Dependability: dependable delivery

-Flexibility: frequent new services/products, wide range, volume and delivery adjustments

-Quality: on-specification services and products

-Speed: fast delivery

Internal effects of performance objectives

High total productivity, reliable processes, ability to change, error-free activities, fast throughput

Processes(units, departments)

-An arrangement of resources and activities that transform inputs into outputs that satisfy customer needs

-Operations consist of processes

-Interconnect to form an internal network

-Each process acts as a smaller version of the whole operation it is part of

-Internal supplier and internal customer

Operations principle 17

A process perspective can be used at three levels; level of the operation itself, the level of the supply network, and the level of individual processes

Supply network

The network of supplier and customer operations that have relationships with an operation

Hierarchy of operations

The idea that all operations processes are made up of smaller operations processes

Operations principle 18

All parts of the business manage processes, so all parts of the business have an operations role and need to understand operations management principles

Operations principle 19

Processes are defined by how the organization chooses to draw process boundaries

The 4 Vs of operations processes

-Volume

-Variety

-Variation

-Visibility

Operations principle 20

The way in which processes need to be managed is influenced by volume, variety, variation and visibility

Operations principle 21

Operations and processes can(other things being equal) reduce their costs by increasing volume, reducing variety, reducing variation and reducing visibility

High volume:

-High repeatability

-Specialisation

-Capital intensive

-Low unit costs

Low volume:

-Low repetition

-Each staff member performs more of each task

-Less systemisation

-High unit costs

Low variety

-Well-defined

-Routine

-Standardised

-Regular

-Low unit costs

High variety

-Flexible

-Complex

-Match customer needs

-High unit costs

Low variation in demand:

-Stable

-Routine

-Predictable

-High utilisation

-Low unit costs

High variation in demand

-Changing capacity

-Anticipation

-Flexibility

-In touch with demand

-High unit costs

Low visibility

-Time lag between production and consumption

-Standardisation

-Low contact skills

-High staff utilisation

-Centralisation

-Low unit costs

High visibility

-Short waiting tolerance

-Satisfaction governed by customer perception

-Customer contact skills needed

-Received variety is high

-High unit costs

Classifying operations management activities under 4 categories

-Direct, design, develop, deliver

Operations principle 22

Operations management activities will have a significant effect on the social, ethical and environmental performance of any type of enterprise

Operations principle 23

Operations management activities can be grouped into four broad categories: directing the overall strategy of the operation, designing the operation’s resources and processes, planning and controlling delivery and developing performance.

What is operations management? (Key question 1.1)

-Operations management is the activity of managing the resources that are devoted to the creation and delivery of services and products. It is one of the core functions of any business, although it may not be called “operations management” in some industries.

-Operations management is concerned with managing processes. And all processes have internal customers and suppliers. But all management functions also have processes. Therefore, operations management has relevance for all managers.

What is the input-transform-output process?(Key question 1.2)

-All operations can be modeled as these processes. They all have inputs of transforming resources, which are usually divided into facilities and staff, and transformed resources, which are some mixture of materials, information and customers.

-Most operations create and deliver a combination of services and products, rather than being a pure service or product operation.

-All operations can be positioned by their intangibility, heterogeneity, inseparability and perishability characteristics.

Why is operations management important to an organization’s performance?(Key question 1.3)

-Operations management uses the organization’s resources to create outputs that fulfill defined market requirements. This is the fundamental activity of any type of exercise.

-Operations management is increasingly important because today’s changing business environment requires new thinking from operations managers, especially in the areas of new technology, supply networks and environmental sustainability.

What is the process hierarchy?(Key question 1.4)

-All operations are part of a larger supply network, which, through the individual contributions of each operation, satisfies end-customer requirements.

.All operations are made up of processes that form a network of internal customer-supplier relationships within the operation.

How do operations(and processes) differ?(Key question 1.5)

-Operations and processes differ in terms of the volume of their outputs, the variety of outputs, the variation in demand for their outputs and the degree of visibility they have.

-High volume, low variety, low variation and low customer visibility are usually associated with low cost.

What do operations managers do?(Key question 1.6)

-Responsibilities can be classed in four categories - direct, design, deliver and develop.

-Increasingly, operations managers have a responsibility for an operation’s environmental performance

Operations

All activities involved in creating and delivering services and products