Chapter 1
What is operations management?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management defined
Operations management is the activity
of managing the resources which are
devoted to the production and delivery of
products and services.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The consultancy services market – % of world
revenues of 40 largest consultancy firms
Financial
6
Organizational
design
11
Marketing / sales
2
Operations and process
management
31
Benefits / actuarial
16
IT strategy
17
Corporate strategy
17
The operations function is fashionable!
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Back office operation
in a bank
Retail operation
Kitchen unit
manufacturing
operation
They are
all
operations
Take-out / restaurant
operation
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Creating Customer Value
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management at IKEA
Design elegant
products which can be
flat-packed efficiently
Design a store layout
which gives smooth
and effective flow
Site stores of an
appropriate size in
the most effective
locations
Maintain cleanliness
and safety of storage
area
Ensure that the jobs of
all staff encourage
their contribution to
business success
Continually examine
and improve
operations practice
Monitor and enhance
quality of service to
customers
Arrange for fast
replenishment of
products
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
All operations are transformation processes …
Inputs
Transformation process
Outputs
that transform inputs …
into outputs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some inputs are transformed resources
Some inputs are transforming resources
Transformed
resources …
Input
resources
Transformation process
Output
products
and
services
Customers
Transforming
resources …
Outputs are products and services that add
value for customers
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
At Prêt a Manger
Transformed
resources …
?
Input
resources
Served and
satisfied
customers
Transforming
resources …
?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The output from most operations is a mixture of
products and services
Crude oil production
Acme Whistles
Pure products – Outputs
that are exclusively
tangible
Aluminium smelting
Specialist machine tool
production
Prêt a Manger
Restaurant
Information systems provider
IKEA
Mixture of products
and services – Outputs
that are a mixture of
the tangible and the
intangible
Management consultancy
Mwagusi Safari Lodge
Psychotherapy clinic
Pure services – Outputs
that are exclusively
intangible
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Characteristics of Goods v Services
Contrast the characteristic differences between Manufacturing and
Services over the following factors:-
Manufacturing
<>
Product
Inventory
Customer Contact
Response times
Markets
Facilities
Capital
Labour
Quality
Service
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Differences within sectors are often greater than the
differences between sectors
Financial services
An account
management centre at
a large retail bank
Financial analyst
advising a client at an
investment bank
Furniture manufacturing
Mass production of
kitchen units
Craft production of
reproduction
‘antique’ furniture
Hotels
Value-for-money
hotel
Lobby of an
international
luxury hotel
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
A Typology of Operations
Low
Volume
High
High
High
Variety
Low
High
Variation in
demand
Low
High
Visibility
Low
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Implications
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Flexible
Complex
Match customer needs
High unit costs
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit costs
A Typology of Operations
Low
High
High
High
Volume
Variety
Variation in
demand
Visibility
Implications
High
High
High repeatability
Specialization
Capital intensive
Low unit costs
Low
Well defined
Routine
Standardized
Regular
Low unit costs
Low
Stable
Routine
Predictable
High utilization
Low unit costs
Low
Time lag between
production and
consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
4 V’s profile of two operations
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
Mwagusi
Safari Lodge
Formule 1
Hotel
Important to understand how different operations are positioned
on the 4 V’s.
Is their position where they want to be?
Do they understand the strategic implications?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Decisions in Operations
Five major decision areas:

Process

Quality

Work force

Inventory

Capacity
Schroeder Section 1.6 - page 16
Operations Management
Slack, Chambers and Johnston, Operations Management 5th
th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
R G Schroeder, Operations Management, 4 edition,1993, McGraw Hill
Some interfunctional relationships between the operations
function and other core and support functions
Engineering/
technical
function
Accounting
and finance
function
Product/service
development
function
Operations
function
Marketing
function
Human
resources
function
Information
technology
(IT) function
Micro Environment
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Case : Too Short The Day
Analysis
What is Giles trying to do ?
What is Giles actually doing ?
What are the problems within the
organisation ?
Recommendations
What should Giles do ?
What changes if any should the organisation make ?
Identify the functions of a manager
Identify the levels of management
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Case : The Glastonbury Festival
1 What is the role of an operations manager
such as Michael Eavis in this situation?
How does this change at different stages
of the festival organisation?
2 List the different types of transformation
processes involved in the festival
activities within the classifications:
Materials/Information/Customer
3 Relate the 5 decision areas as outlined in
R G Schroeder’s Operations Management,
to the Glastonbury case.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007