Operations Management Lesson 1 (chaps 1 + 3)

Operations management

The systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external, customers

process

set of related activities often occurring in a sequence with a defined 'start' to a defined 'finish'

activity

defined task consuming both time and resources occurring alone or a group

purpose of a process

establish and maintain a commonly understood flow that allows a task to be completed efficiently and consistently

4Ds of operations management

• Direct: overall direction, ensuring everyone is aligned
• Design: planning, designing what's produced and how
• Delivery: fulfilling the designed product or service for the customer
• Develop: builds the workforce and quality controls to sustain the delivery system

Transformed resources

materials, information, customers

transforming resources

facilities, people

Why are customers the focus of input transformation

customers bring value and can also be part of value creation

product vs process creation

IHIP

• intangibility
• heterogeneity
• inseparability
• perishability

servitisation

firms developing capabilities they need to provide services and solutions that supplement their traditional service offering

Baumol effect

cost of services tends to rise steadily over time, when productivity improvements are minimal

--> contrasts with the manufacturing sector, where technological advancements often lead to increased productivity and lower costs

4Vs to analyze operations

• Volume
• Variety
• Variation
• Visibility

implication of high volumes and low volumes

higher repetition, staff is task specialized, high systemization, lower unit costs BUT capital intensive

low repetition, staff is multitasking, less systematization, higher unit costs but not as capital intensive

economies of scope

average total cost of production decreases when there is an increasing variety of goods produced since overhead costs and assets are shared between products

implications of high variety and low variety

flexibility in operations, complexity of offering. Offering is adaptable to customer needs BUT results in higher unit costs

operations are well defined. routine processes that are standardized, not adaptable to customer BUT result in lower unit costs

implication of high and low varieties

face changing capcity, anticipation of demand, focus on flexibility BUT higher unit costs

are stable, routine predictable, focus on high utilization BUT result in low unit costs

implication of high and low visibility

customers perception or satisfaction important, received order variety is high BUT higher unit costs

time lag between production and consumption, standardized offering, higher staff utilization, centralization BUT lower unit costs

operations have two roles

• strategic: do the right things
• operational: do things correctly

operations performance objectives

• quality
• speed
• dependability
• flexibility
• cost

quality

the match between a product or service features and a customer's expectations. manifested in 2 ways

• quality specification
• quality conformance

Important because it influences market perception and allows the price to be higher compared to competitors

why is speed important

• reduces inventories
• reduces risks caused by demand variability
• create competitive advantage

dependability

ensuring consistent and reliable performance of operations

flexibility

adapting to changes in customer demand, market conditions or new technologies