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PRELIM COVERAGE: DIRECTING THE OPERATION

• Operations Management
1. Operations Performance
2. Operations Strategy
3. Products and Service Innovation
4. The Structure and Scope of Operations
OPERATIONS MANAGEMENT
 DEFINITION

Operations Operations
Operations
Operations management management is management is an
focuses on area of management
management the concerned with
is the activity carefully administration of designing and
of managing managing the business practices controlling the
processes to to create the process of
the resources production and
produce and highest level of
that create and redesigning business
distribute efficiency possible
deliver services within an
operations in the
products and production of goods
and products. organization. or services.
services. Investopedia Wikipedia
Free Management Library
 Operations Function

is the part of the organization that is

responsible for OM.
Every organization has an operations function
because every organization creates some types
of services and/or products.
 Operations Manager
are the people who have particular
responsibility for managing some, or all, of the
resources that make up the operations function.
other names: ‘fleet manager’ in a distribution
company, the ‘administrative manager’ in a
hospital, or the ‘store manager’ in a
supermarket
 Three Core Functions
• 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
1. 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
2. the operations function
which is responsible for the creation and delivery of services and
products based on customer requests
 Support Functions

accounting and finance function

the technical function
the human resources function
information systems function
 Figure 1.2
The relationship
between the
operations
function and other
core and support
functions of the
organization
 Why OM is important in ALL types of
Organization?
In some types of organization it is relatively easy to visualize the
operations function and what it does, even if we have never seen it.
(e.g automobile and advertising agency) But what is their operations
function?
The clue lies in the word ‘create’. Any business that creates
something must use resources to do so, and so must have an
operations activity.
One important element in common: both have a higher objective –
to make a profit from creating and delivering their products or
services.
Not-for-profit organizations also use their resources to create and
deliver services, not to make a profit, but to serve society in some
way.
Why OM is important in ALL types of
Organization?

Automobile assembly factory –

Operations management uses
machines to effi ciently assemble
products that satisfy current
customer demands
Why OM is important in ALL types of
Organization?

Physician (general practitioner) –

Operations management uses
knowledge to eff ectively diagnose
conditions in order to treat real and
perceived patient concerns
Why OM is important in ALL types of
Organization?

Management consultant –
Operations management uses people
to eff ectively create the services that
will address current and potential
client needs
Why OM is important in ALL types of
Organization?

Disaster relief charity – Operations

management uses ours and our
partners' resources to speedily
provide the supplies and services that
relieve community suffering
Why OM is important in ALL types of
Organization?

Advertising agency – Operations

management uses our staff ’s
knowledge and experience to
creatively present ideas that delight
clients and address their real needs
Figure 1.3 Operations management uses resources to appropriately create outputs that
fulfil defined market requirements.
 Operations management in the smaller
organization
Large companies may have the resources to dedicate
individuals to specialized tasks but smaller companies often
cannot, so people may have to do different jobs as the need
arises. Such an informal structure can allow the company to
respond quickly as opportunities or problems present
themselves. But decision making can also become confused
as individuals' roles overlap.
Small companies may have exactly the same operations
management issues as large ones but they can be more
difficult to separate from the mass of other issues in the
organization.
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 service and products, invest in technology,
contract out some of their activities, devise performance
measures, improve their operations performance, and so on.
 Figure 1.4
Changes in
the business
environment
are shaping
a new
operations
agenda
Figure 1.5 All operations are Input–Transformation–Output Processes
 Inputs to the process
One set of inputs to any operation’s processes is transformed
resources. These are the resources that are treated, transformed
or converted in the process. They are usually a mixture of the
following:
1. Materials – operations which process materials could do so to
transform their physical properties (shape or composition, for example).
2. Information – operations which process information could do so to
transform their informational properties (that is, the purpose or form of
the information).
3. Customers – operations which process customers might change their
physical properties in a similar way to materials processors
Table 1.2 Dominant transformed resource inputs of various operations
 Inputs to the process
The other set of inputs to any operations process is
transforming resources . These are the resources which act
upon the transformed resources. There are two types which
form the ‘building blocks’ of all operations:
1. facilities – the buildings, equipment, plant and process
technology of the operation
2. staff – the people who operate, maintain, plan and
manage the operation.
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.
A car or a newspaper or a restaurant meal is a product, whereas a
service is the activity of the customer using or consuming that
product.
Some services do not involve products. Consultancy advice or a
haircut is a processes (though some products may be supplied in
support of the service, such as a report or a hair gel).
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.
Indeed we would argue that all operations are service
providers which may create and deliver products as part of
the offering to their customers.
This is why operations management is important to all
organizations. Whether they see themselves as
manufacturers or service providers is very much a secondary
issue.
 Customers
Customers may be an input to many operations but they are
also the reason for their existence.
If there are no customers (whether business customers, users
or consumers), there will be no operation.
So it is critical that operations managers are aware of
customers’ needs, both current and potential.
This information will determine what the operation has to do
and how it has to do it which in turn defines the
service/product offering to be designed, created and
delivered.
 What is the process hierarchy?
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.
End-to-end business processes that satisfy customer needs
often cut across functionally based processes.
 How do operations and processes differ?
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?
Responsibilities can be classed in four categories – direct, design,
deliver and develop:
✔ Direct includes understanding relevant performance objectives, setting
an operations strategy, managing innovation and the scope of the
operation.
✔ Design includes the design of the operation and its processes and its
resources.
✔ Delivery includes the planning and controlling of the activities of the
operation.
✔ Develop includes the improvement of the operation over time.
Increasingly operations managers have a responsibility for an
operations environmental performance.
 Operations Principle
All organizations have “operations” that produce some mix of
services and products.
Operations Managers need to co-operate with other functions to
ensure effective organizational performance.
The economic sector of an operation is less important in
determining how it should be managed than its intrinsic
characteristics.
Operation Management is at the forefront of coping with, and
exploiting, developments in business and technology.
All processes have inputs of transforming and transformed
resources that they use to create products and services.
 Operations Principle
Transformed resource inputs to a process are materials,
information or customers.
All processes have transforming resources of facilities (equipment,
technology, etc.) and people.
Most Operations produce a mixture of tangible products and
intangible services.
Whether and operation produces tangible products or intangible
services is becoming increasing irrelevant. In sense all operations
produce service for their customers.
 Operations Principle
Transformed resource inputs to a process are materials, information
or customers.
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.
All parts of the business manage processes so all parts of the business
have an operations role and need to understand operations
management principles.
Processes are defined by how the organization chooses to draw
process bounderies.
 Operations Principle
The way in which processes need to be manage is influence by volume,
variety, variation and visibility.
Operations and processes can (other things being equal) reduces their
costs by increasing volume, reducing variety, reducing variation and
reducing visibility.
Operations management activities will have a significant effect on the
sustainability performance of any type of enterprises.
Operations management activities can be group into 4 broad categories:
directing the overall category of operation; designing the operation
products, services and processes; planning and controlling delivery; and
developing performance.
 REFERENCES

Operations Management 8th Edition by Nigel

Slack, Alistair Brandon-Jones and Robert
Johnston