[Airine]  Services use less inventory than

manufacturing.
Production of Goods versus Delivery of
 Unlike goods, services cannot be stored
Services
and must be delivered on demand.
 Production of Goods 7) Wages
- Tangible outputs, such as an  Manufacturing jobs tend to be well-paid with
automobile, eyeglasses, or a less variation.
refrigerator.  Service jobs range widely, from highly paid
- Production may occur in a factory or professionals to minimum-wage workers.
elsewhere (e.g., farming). 8) Ability to Patent
 Delivery of Services  Product designs are easier to patent than
- Generally, implies an act rather than service methods.
a tangible product.  Some services cannot be patented, making
- Examples: Physician's examination, them easier for competitors to replicate.
TV and auto repair, Lawn care,
&Projection of a film in a theater
Primary Similarities Between Both:
 Forecasting and capacity planning to match
Categories of Service Jobs
supply and demand.
1. Professional Services  Process management.
2. Mass Services  Managing variations.
3. Service Shops  Monitoring and controlling costs and
4. Personal Care productivity.
5. Government Services  Supply chain management.
6. Education  Location planning, inventory management,
7. Food Services quality control, and scheduling.
8. Services Within Organizations
9. Retailing & Wholesaling
10. Residential Services Figure 4.7 Typical differences between production
11. Transportation of goods and provision of services
12. Travel & Hospitality
13. Miscellaneous Services Characteristics Goods Services
Output Tangible Intangible
Comparison Points: Customer Low High
Contact
1) Degree of Customer Contact Labor Content Low High
 Many services involve high customer Uniformity of High Low
interaction (e.g., doctor-patient). input
 Some services, like Internet providers or Measurement of Easy Difficult
utilities, do not require direct contact. productivity
2) Labor Content of Jobs Opportunity to High Low
 Services often require more labor than correct problems
manufacturing jobs. before delivery
 Automated services are exceptions. Inventory Much Little
3) Uniformity of Inputs Wages Narrow range Wide range
 Service inputs vary greatly (e.g., unique Patentable Usually Not usually
client or patient situations).
 Manufacturing typically has more uniform PROCESS MANAGEMENT
inputs, leading to consistent processes.
4) Measurement of Productivity - A Key Aspect of Operations Management
 Productivity is harder to measure in services - A process consists of one or more actions
due to input variation. that transform inputs into outputs.
 Example: A doctor with difficult cases may - The central role of all management is
appear less productive than one with routine process management.
cases.
Categories of Business Processes:
5) Quality Assurance
 More challenging for services because of 1. Upper-management processes
input variability and simultaneous  Govern the operation of the entire
delivery/consumption. organization. (e.g., Organizational
 Manufacturing allows correction before the governance and strategy)
customer receives the product. 2. Operational processes
6) Inventory  Core business activities (e.g., purchasing,
production, sales, marketing).
 o It cannot generally be
influenced by managers.
3. Supporting processes:
4) Assignable variation
 Support core processes (e.g., Accounting, o Caused by defective inputs
human resources, IT) or incorrect methods.
o Can be eliminated by
Figure 4.8 Business processes form a sequence of
analysis and corrective
suppliers and customers
action.

A business The Results of Disruptions in Operations and

Supplier(s) organization, a Supply Chain:
Customer(s)
department, or an  Additional costs.
individual  Delays and shortages.
Input(s) from one
Transformation Output(s) to one or
 Poor quality.
or more suppliers more customers  Inefficient work systems.

Business Process Management (BPM)

Key Activities:
 Process design.
 Process execution.
 Process monitoring.
Operations and Supply Chain Management
Focus Areas:
 Managing a Process to Meet Demand
 Ideal Capacity: Process output matches
demand.
 Challenges:
o Excess capacity → Waste and cost.
o Insufficient capacity → Dissatisfied
customers and lost revenue.
 Requirements:
o Accurate demand forecasting.
o Translating forecasts into capacity
needs.
o Processes capable of meeting
demand.

 Process Variation
 Variations occur in all business
processes.
 Causes of Variation:
1) The variety of goods/services
[Archie]
being offered
o The greater the variety of Analysis of Trade-Offs
goods and services, the
greater the variation in  These decisions involve balancing
production/service competing objectives or goals, where
requirements. choosing one option often comes at the cost
2) Structural variation in demand of another.
o Generally predictable (e.g., Degree of Customization
trends and seasonal
variations).  This refers to the extent to which products
o Particularly important for or services are tailored to meet specific
capacity planning customer needs.
3) Random variation A Systems Approach
o This natural variability is
present to some extent in all  It refers to a way of thinking about problems
processes. and solutions that considers the whole
 system and emphasizes the  Process Analysis and Improvement, and
interconnectedness of different components Quality Improvement
 Lean Production
Establishing Priorities
 It is the process of determining the relative
Lean System
importance of tasks or issues, allowing for
focused effort on the most critical items.  are so named because they use much less
 Pareto phenomenon is a small number of of certain resources than typical mass
inputs or actions that can have a production system
disproportionately large impact on the  use a highly skilled workforce and flexible
outcome. equipment

Key Issue for Today’s Business Operation

Operation Today and Key Issues
 Economic Conditions- lingering recession
 E-business
and slow recovery in various sectors of the
 is changing the way business
economy
organizations interact with their
 Innovating- finding new or improved
customers and their suppliers.
products or services are only two of the
 E-commerce
many possibilities that can provide value to
 is the buying and selling of goods and
an organization
services over the internet.
 Quality Problems- This relates to product
 Technology
design and testing oversight of the suppliers
 refers to the application of scientific
 Risk Management- need for managing risk
discoveries to the development and
for underscored by recent events that
improvement of goods and services.
include the crisis in housing, product recalls,
oil spill and natural manmade disaster
Three main types of operation technology  Competing in a global economy- low
labor costs in third world countries have
 Product and service technology increased pressure to reduce labor cost.
 This refers to the discovery and
development of new products and
services. Environmental Concerns
 Process technology  Concern about global warming and pollution
 refers to methods, procedures, and
 Increasing effect of how business cooperate
equipment used to produce goods and
provide services. Ethical Conduct
 Information technology (IT)
 Need in business is becoming increasingly
 refers to the science and use of
obvious given numerous examples of
computers other electronic equipment to
questionable actions in recent history.
store, process, and send information.
 how their decisions will affect shareholders,
management, employees and customers.
Management of Technology
 A strategic process of applying the The Need to Manage the Supply Chain
development implementing and managing
1. The need to improve operations
technology to achieve organizational goals.
2. Increasing levels of outsourcing
Globalization 3. Increasing transportation costs
4. Competitive pressures
 the need for global supply chains have
5. Increasing globalization
broadened the scoop of supply chain
6. Increasing of Important of e business
management.
7. The complexity of supply chain
8. The need to manage inventories

Competitive pressures and changing economic

conditions have caused businesses organizations
to put more emphasis on
 Operation strategy
 Working with fever resources
 Revenue Management