Characteristics of Manufacturing and Service Organizations

Manufacturing Organization:

• Produces physical products that can be inventoried.

• Typically has low customer contact.

• Involves capital-intensive processes with long response times.

Service Organization:

• Offers intangible products that cannot be stored or inventoried.

• Requires high customer contact.

• Features short response times and is generally more labor-intensive.

The Implications of the 4 V's of Operations Process

Volume

• High Volume:

  • Associated with high repeatability, specialization, and capital intensiveness.

  • Results in low unit costs due to economies of scale.

• Low Volume:

  • Each staff member performs more varied roles, leading to less systematization and higher unit costs.

Variety

• High Variety:

  • Operations need to be flexible to match customer needs, which can result in higher unit costs.

• Low Variety:

  • Processes are well-defined and routine, leading to standardization and lower costs.

Variation in Demand

• High Variation in Demand:

  • Requires changing capacity and flexible anticipation strategies to align with fluctuating demand.

• Low Variation in Demand:

  • Operations can remain stable, predictable, and routine, optimizing resource utilization and minimizing costs.

Visibility

• High Visibility:

  • Operations need to focus on customer interaction skills due to high customer visibility and expectations.

• Low Visibility:

  • Time lag between production and consumption allows for standardization and centralization, reducing contact skills requirements and unit costs.

Operational Objectives in Operations Management

Quality - Being RIGHT

• Focuses on the accuracy and high standards of the output, ensuring that the product or service meets the set specifications and customer expectations.

Speed - Being FAST

• Emphasizes quick processing and response times, reducing the duration from order to delivery, which can significantly enhance customer satisfaction.

Dependability - Being ON TIME

• Relates to the reliability of the operation in delivering products or services when they are promised, thus maintaining trust and dependability with customers.

Flexibility - Being ABLE TO CHANGE

• The ability of the operation to adapt to changes, whether they are in product design, process adjustments, or variations in product or service demand.

Cost - Being PRODUCTIVE

• Involves managing and optimizing costs to achieve high productivity, enabling competitive pricing while maintaining profitability.