Operations management aims to create products and services to realise business objectives.
Four types of advantages from effective and efficient operations:
Reduce costs of making products or providing services. Profit = Revenue − Costs, so reducing production costs directly boosts profitability.
Increase revenue through superior quality, service excellence, and value for money.
Decrease required capital investment by using facilities, machines, and equipment more effectively; optimise capacity and procedures to lower capital needs.
Provide impetus for new innovation by leveraging the operational skill base to develop new products/services in line with best international practices.
Other key benefits and rationales for operations management:
Improves productivity (output per input). Productivity = \text{Output} / \text{Input}. Higher productivity increases profitability and can benefit the country’s economy.
Helps satisfy customers more effectively; quality products/services at reasonable prices are central; satisfied customers are crucial for long-term survival.
Operations management contributes to the business’s reputation; good operations can build a reputation for high quality and value, which serves as a competitive advantage (e.g., Woolworths, Panasonic).
The idea that all managers are, in essence, operations managers: every manager contributes to creating products/services through processes, for internal or external customers.
Summary: Operations management sits at the heart of business life because every manufactured item or service delivered arises from operations planning and control.
Defining terms used in operations management
The operations function: the business function focused on utilising resources to manufacture products or render services.
Operations managers: personnel directly responsible for managing the operations function.
Operations management (the operations-management function): activities and responsibilities of operations managers that tie to the execution of the operations function.
The operations-management process includes: operations planning, operations organising, operations scheduling, and operations control.
The case study illustrates how an operations system responds to a problem (illustrates the role of planning and scheduling in service operations, e.g., Noise Clipper).
The operations-management model (general framework)
Core components depicted in the model: Inputs, Transformation Process, Outputs, and Environment.
The transformation is guided by operations-management strategies and Objectives, along with management activities: Operations design, Operations planning and control, and Operations improvement.
Environment influences the transformation system; Inputs are converted into Outputs via the transformation process under the influence of the design and control activities.
Figure context (paraphrased): Material; Information; Customers/clients; Human resources; Equipment and facilities; Technology enter as Inputs; The Transformation Process produces Outputs (Products/Services); The Environment interacts with the system; Management Activities (Design, Planning & Control, Improvement) steer performance.
The Transformation Model (inputs, transformation process, outputs)
The transformation model comprises three main components:
Inputs: resources to be transformed and those required to enable transformation.
Transformation Process: the activity that converts inputs to outputs.
Outputs: products or services produced.
Inputs broken into two groups:
Inputs to be transformed:
Material (processed or unprocessed) – e.g., steel, glass, plastic; or raw ore such as gold ore; for services, materials like shampoo or tinting agents.
Customers/clients (the subject being transformed in service contexts, e.g., a dental patient or gym participant).
Information (primary input when processed into information products like news; or as secondary input to tailor outputs to customer preferences).
Resources required to enable transformation:
Human resources (workers, supervisors).
Equipment and facilities (factories, machines, offices, hospitals).
Technology (automation, communications, IT systems).
Environment: external factors that affect the transformation system.
Outputs: Products and services delivered to customers/clients.
Example mapping: The Noise Clipper case demonstrates a batch-like operation with project management and adjustable capacity strategies; emphasis on service planning, large-quantity fitment, and a resource-to-order approach.
Basic transformation model (inputs–transformation–outputs) applies to both manufacturing and service providers.
The 4 Vs of operations (design implications)
Volume: high vs. low; scale of operations.
Variety: the range of different products/services (high vs. low).
Variation in demand: stability vs. fluctuation (seasonality, busts).
Visibility: the extent to which customers experience the value-adding activities (high vs. low).
Implications for cost and design:
High-volume, low-variety, low-variation, low-visibility processes tend to have lower processing costs.
Low-volume, high-variety, high-variation, high-visibility processes typically incur higher per-unit costs due to customization and variability.
These characteristics influence process choice and cost structures; the model emphasizes matching process design to demand patterns and customer experience.
A case: service/process designs (Noise Clipper example)
Noise Clipper service system features:
Large-quantity planning and scheduling for fitments; governed by project management with adjustable capacity (shifts).
Emphasis on innovation, creativity, and value creation by employees.
High service quality marketing (reliability, responsiveness).
Development of process technologies (e.g., Salometer for seal tests; Calometer for field worker calibration).
Typical operation is batch-oriented with a process layout capable of meeting small daily quantities; labor-intensive due to customization; JIT philosophy to reduce waste and lead times.
The transformation model: inputs, processes, and outputs in more detail
The transformation model (Figure 11.2 style): Inputs → Transformation Process → Outputs, with Environment and Management Activities overlaying the system.
Inputs may include both resources to be transformed and the means to enable transformation; outputs are tangible goods or serviced outputs.
The inputs and transformation are influenced by the environment (external factors like market conditions, regulations, technology advances).
Example mapping of inputs to outputs across industries (Table 11.1 ideas):
Rail transport: Inputs (Locomotives, Carriages, Tracks) → Transformation (Movement of passengers and freight) → Outputs (Passengers, Freight at destinations).
The transformation process differs for manufacturers vs. service providers, depending on whether inputs are physical materials or clients and information.
The transformation model is a unifying framework for both manufacturing and service operations.
The six general customer requirements (to derive performance objectives)
Customer/clients require a set of six general outcomes from operations:
Higher quality
Lower costs
Shorter lead time (faster delivery or service provision)
Greater adaptability (flexibility to changes in demand or product mix)
Higher service level (quality of service and after-sales support)
Lower variability (consistency in performance and outputs)
Operations-management performance objectives are crafted to address these needs and to gain an operations-based competitive advantage.
Operations-management performance objectives (the six actions)
Do things right the first time: aim for error-free outputs to achieve a quality advantage; reduces costs associated with defects and rework; supports higher pricing and market share (e.g., Woolworths’ quality).
Do things cost effectively: produce/provide at costs that enable profitable pricing; cost advantage is essential for competition; useful in both for-profit and non-profit contexts.
Do things quickly: minimize lead times; reduce time from demand to delivery; enables faster market response and reduces lost sales.
Make changes quickly: adapt activities to meet changing demands; enhances adaptability and agility (e.g., Toyota, Ford adapting product lines like Aygo and Fiesta).
Do things right every time: achieve high reliability and low variability in long-term operations; important for continuous mass production (e.g., McDonald’s Big Mac consistency, SAA departure reliability).
Do things better: improve total product/service package through better quality and service; aligns with Total Quality Management (TQM).
Outcomes of these objectives include improved service quality, reduced variability, shorter lead times, higher efficiency, and potential for premium pricing or market share gains.
Innovation and the quadruple-helix framework (innovation dynamics)
Innovation is essential for organizational success in the digital era; technology intensity and technology management enable inventions and strategic performance.
The quadruple-helix model provides a holistic view of dimensions needed for innovation:
Triple Helix ecosystem: university–industry–government collaboration (UBC), valorisation of research outputs and start-ups.
Epochal society: increasingly informed consumers, knowledge economy, networked/virtual society, and service quality expectations.
Upscaling agility: organisational agility as a foundation for change capability; agile teams and flexible culture.
Triple management theory (TMT): interoperability and coordination of technology with organizational processes to achieve flexible operation and workflow orchestration.
Four primary dimensions summarized: the triple helix, epochal society, upscaling agility, and triple management theory.
The transformation model (11.2.3) in depth: Inputs, Process, Outputs (and the model’s components)
The transformation model comprises three main components:
Inputs: Resources to be transformed and resources required to perform the transformation (materials, customers, information, aids, human resources, equipment and facilities, technology).
Transformation process: The actual conversion of inputs into outputs; its nature is determined by which inputs are transformed (e.g., physical change of materials vs. service provision involving people and information).
Outputs: The products or services delivered to customers/clients.
Environment is depicted as an external factor interacting with the transformations system.
The model applies to both manufacturers and service providers.
The table of inputs/outputs across industries illustrates that both tangible materials and customers can be transformed; outputs vary by sector (goods vs. services).
The design of products and services (11.4) and the design of operations processes
Operations design has two interdependent aspects:
Design of products and services (product/service design): determining what is to be produced/delivered and the benefits customers expect (the product/service concept).
Design of the operations processes to manufacture/provide the product/service (process design): determining how to deliver the design in practice.
The primary aim of operations design: to satisfy customer needs by providing products/services and processes that meet those needs efficiently and effectively.
The design of products and services considers that products/services are bundles of components (concept, package, process):
Concept: the set of expected benefits customers obtain.
Package: the combination of products and services that customers purchase.
Process: the means of creating the package (manufacturing/provision).
Stages in designing products/services (concept to final design):
Concept generation: ideas from inside or outside the firm (R&D, customers, competitors).
Screening: evaluate concepts using criteria (feasibility, acceptability, vulnerability).
Preliminary design: specify components and processes for the product/service package.
Evaluation and improvement: refine design to simplify manufacture/provision and reduce costs.
Prototype and final design: build a prototype or simulate the service to test in market; finalize specifications.
The design of operations processes emphasizes that no process exists in isolation; supply networks must be considered.
The supply network design includes selecting process type, selecting layout type, and integrating new technology with existing operations to support performance goals.
Layouts, process technology, and job design (11.4.3)
Four basic layout types for manufacturing/service facilities:
Fixed-position layout: product remains in place; resources moved to the product (e.g., construction sites).
Process layout (flexible-flow layout): similar processes grouped together (e.g., saw, planing, turning in a wood shop).
Product layout (line-flow layout): processes arranged in sequence to match product flow (e.g., assembly line).
Cellular layout (hybrid): cells of dedicated equipment arranged for a family of products or service steps.
Steps to design layout:
Select the process type.
Choose the basic layout type.
Create a detailed layout design (placement of machines, flow of materials, and customer traffic).
Process technology: the machines, equipment, and technology used to transform inputs into outputs; ranges from simple to highly automated systems. Automation can improve quality, speed, dependability, and reduce waste, but involves higher capital costs and complexity.
The operations manager should understand technology basics, its advantages, and limitations.
Job design and work organization: human resource planning and organization; the use of method study and work measurement to improve efficiency.
Operations planning and control (11.5)
Planning and control are the activating counterpart to design, ensuring that the planned process is executed efficiently and meets performance objectives (quality, cost, lead time, adaptability, variability, and service).
Planning and control reconcile two sides: supply (production/provision) and demand (customer needs).
Key activities in operations planning and control include capacity planning, inventory and supply-chain planning, scheduling, and quality management.
Capacity planning and control:
Capacity is defined as the maximum level of value-added activity a process can achieve over a period under normal demand and operating conditions.
Total capacity = \text{Number of bays} \times \frac{\text{Hours open}}{\text{Average service time}} (example: a 500-bay parking garage open 10 hours with average 1 hour per vehicle yields 5000 total capacity).
Step 1: Determine total demand and required capacity; Step 2: Identify alternative capacity plans (level, chase, demand-management); Step 3: Choose the best approach.
Three capacity strategies: level capacity (constant capacity), chase demand (adjust capacity to demand), demand management (adjust demand to capacity).
Demand forecasting and planning accuracy are important; moving-average forecasting is used for stable short-term patterns; capacity representations can be graphed to compare scenarios.
Inventory and supply-chain planning and control:
Inventory is all stored resources (materials, information, clients) required to smooth operations; liaise with purchasing.
Inventory and purchasing are often treated as a separate function but are tightly linked to operations planning.
Techniques for capacity planning and control include moving-average forecasting and cumulative representations of demand and capacity; other methods exist but are not covered in detail here.
Quality planning and control (11.5.4) and TQM integration
Quality is central to adding value and achieving a long-term competitive advantage; quality management involves the entire business, not just the operations function (TQM).
Steps in quality planning and control (six steps):
Step 1: Defining the quality characteristics of the product or service (characteristics tied to design specs and customer expectations).
Step 2: Measuring quality characteristics for each product/service (e.g., functional performance, appearance).\
Step 3: Setting standards for each quality characteristic (realistic targets, e.g., an expected lifespan).
Step 4: Controlling quality against standards (where to check, sample vs. 100% inspection, and inspection methods such as SPC or acceptance sampling).
Step 5: Identifying and rectifying the causes of poor quality.
Step 6: Continuously improving quality (linking to broader quality initiatives like TQM).
Measuring quality can be challenging (e.g., staff friendliness can be measured via customer feedback; objective metrics are often used where possible).
The PDCA cycle (Plan-Do-Check-Act) and continuous improvement are core to quality management.
The role of TQM: quality is the responsibility of the entire organization; the focus is on customer focus, leadership, evidence-based decisions, engagement of people, process approach, and continual improvement.
ISO 9001:2015 quality management system requirements:
Ten headings: Scope, Normative references, Terms and definitions, Context of the organization, Leadership, Planning, Support, Operations, Performance, Improvement.
Aligned with PDCA; emphasizes risk-based thinking for managing business processes.
ISO 9001:2015 structure mirrors the PDCA cycle; leadership and context are foundational for quality management.
Total Quality Management (TQM) implementation and models (11.6.3)
TQM definition: a management philosophy to satisfy customers by delivering high-quality products/services; responsibility for quality shifts from operations to the entire business.
Key aspects of TQM:
Meeting customer needs and expectations.
Involving all parts of the business, including minor processes.
Making every employee quality-conscious and responsible for contributions to quality.
Identifying and accounting for all costs of quality (prevention and failure costs).
Doing things right the first time (proactive quality management).
Developing and implementing systems and procedures for quality and improvement.
A continuous improvement culture (Kaizen) and the PDCA cycle as practical tools.
Oakland’s TQM model highlights: focus on processes at customer and supplier interfaces, plus hard components (quality systems, techniques/methods, teams) and soft components (commitment, communication, culture).
The implementation of quality management systems and risk thinking
The ISO 9001:2015 standard drives quality management adoption; it has a strong emphasis on risk-based thinking and a PDCA-aligned structure.
Risk-based thinking requires formal risk analysis to identify and manage challenges within business processes.
Failure prevention and recovery (11.6.2) and system reliability
Failures can arise from design, facility, equipment, or human factors; examples include design flaws (e.g., Galaxy Note 7 batteries) or facility failures due to external events (e.g., lightning outages).
Failure prevention and recovery involve:
Detection and analysis of failures (using process monitoring, customer feedback, complaint data).
System reliability improvement (redesign processes/products, maintenance, back-up systems, staff training).
Recovery planning and contingency measures to minimise customer impact.
Lean thinking, waste reduction, and continuous improvement (11.6.2 continued)
Continuous improvement approaches include Kaizen and PDCA (Plan-Do-Check-Act).
Lean management aims to smooth workflow and eliminate waste across processes; seven wastes targeted by TPS (Toyota Production System):
1) Overproduction
2) Waiting times
3) Transport
4) Process (design and maintenance issues)
5) Inventory
6) Motion
7) Defects
Service management classifications (manufacturers vs. service providers)
Process-type classifications for service providers (three main categories):
Professional services: high client-contact; customized; low volume; high variety (e.g., dentists, doctors, attorneys, consultants).
Service shops: intermediate client contact; standardized to an extent but adaptable to client needs; moderate volume/variety (e.g., banks, hotels, retail stores).
Mass services: high-volume, low-variation, low-visibility; largely standardized; equipment-oriented (e.g., telecommunications, mass transit, broadcasting).
Process-type classifications for manufacturers (five main categories):
Project processes: highly individual, long-duration, low volume but high variety (construction projects, car development, complex upgrades).
Batch processes: limited range produced in batches (toasters, televisions).
Mass processes: high-volume, some variation (car manufacturing with optional equipment).
Continuous processes: very high volume, minimal variety (cement, oil refining, paper).
Key takeaway: Projects and jobbing suit low volume and high variety; batch/mass/continuous suit higher volume and lower variety.
The design of supply networks and layout (11.4.3.1–11.4.3.2)
Operations design is not isolated; it requires consideration of the broader supply network (suppliers, intermediaries, customers).
Design steps in layout planning:
Process type selection (based on volume and variety).
Basic layout type selection (fixed-position, process, product, cellular).
Detailed layout design including placement of machines, equipment, and flow of materials and customers.
The layout types and their impact on the transformation process:
Fixed-position layout: product remains stationary; resources move to it.
Process layout: similar processes grouped together; flexible workflow.
Product layout: line-flow; sequential arrangement aligned with product assembly.
Cellular layout: cells with dedicated equipment; groups of similar products or service steps.
Process technology: tools and machinery used; selection should balance performance benefits with practical constraints and compatibility with existing systems.
Job design and work organization: human factors, task design, methods to improve efficiency; use of method study and work measurement to optimise tasks.
The design of supply networks and process integration (11.4.3.4 and 11.4.3.3)
Process technology: automation, sophisticated systems; future of manufacturing includes higher automation and robotics to deliver superior quality, speed, dependability, and lower waste.
The design of the supply network includes considering inputs, flows, and dependencies; integration with suppliers and customers is essential for competitive advantage.
The role of the operations manager includes identifying suitable technologies and integrating them with existing processes, while planning for upgrades or replacements as needed.
11.5 Operations planning and control (summary of key ideas)
Planning and control activate and guide the operation; aim to meet customer needs while achieving performance objectives (quality, cost, lead time, adaptability, variability, service).
Planning and control balance supply and demand; scheduling and sequencing