1.1
Introduction
OPERATIONS MANAGEMENT
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.2
Chapter Coverage
• Operations management in important
• Operations management is about process
management
• Operations processes have different
characteristics
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.3
Operations Management
•
Operations management is about how organizations produce
goods and services.
Definitions
•
•
•
The operations function of the organization is the
arrangement of the resources which are devoted to the
production and delivery of its products and services.
Operations managers are the staff of the organization who
have particular responsibility for managing some, or all, of
the resources which comprise the operations function.
Operations management is the term used for the activities,
decisions and responsibilities of operation managers
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.4
Operations Management – Basic Principles
Materials
Information
Customers
Operations
management is
concerned with
producing and
delivering products
and services
Products and
services
All types of enterprise have an operations function, even if
it isn’t called ‘operations.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.5
Back office
operation in
a bank
Kitchen unit
manufacturing
operation
They are all
operations
Retail
operation
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Take-out /
restaurant
operation
Operations Management, 4E: Chapter 1
1.6
Operations Management is Important
•
Operations management can
• Reduce costs of producing products and service by being
efficient.
• Increase revenue by increasing customer satisfaction
through good quality and service.
• Reduce need for investment by increasing the effective
capacity of the operation and by being innovative in how
it uses its physical resources
• Enhance innovation by building a solid base of
operations skills and knowledge within the business.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.7
Operations in the Organization
•
The operations function is key to an organization because it
produces the goods and services, but it is neither the only, nor
necessarily the most important, function. The three core
functions of any organization are:
• The marketing function – responsible for communicating
the organization’s product and services to its markets in
order to generate customer request for goods and services.
• The product/service development function – responsible
for creating new and modified products and services in
order to generate future customers requests.
• The operations functions – responsible for fulfilling
customer requests for service throughout the production
and delivery of goods and services.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.8
The support functions of any organization are:
• The accounting and finance function – provides the
information to help economic decision making and
manages the financial resources of the organization
• The human resources function - recruits and develops
the organization’s staff as well as looking after their
welfare.
In practice, functional names, boundaries and responsibilities do
vary significantly between organizations.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.9
Table 1.1 The activities of core functions in some organization
Core functional
activities
Internet service
provider
Fastfood chain
Marketing and
sales
- Promotes service
to users and get
registration
- Sell advertising
space
- Advertise on TV
- Device
promotional
materials
- Advertise in
magazines
- Determine pricing
policy
-Sell to stores
- Design
hamburgers,
pizzas, etc.
- Design décor for
restaurants
- Design new
furniture
- Coordinate with
fashionable colours
- Make burgers,
pizzas, etc.
- Serve customers
- Maintain
equipments
- Make
components
- Assemble
furniture
- Deliver furniture
Product/service - Device new
services and
development
commission new
information
content
Operations
- Maintain
hardware, software
and content
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Furniture
manufacturer
Operations Management, 4E: Chapter 1
1.10
Operations Management is About Managing
Processes - transformation processes
ENVIRONMENT
TRANSFORMED
RESOURCES
MATERIALS
INFORMATION
CUSTOMERS
INPUT
TRANSFORMATION
PROCESS
GOODS
OUTPUT
AND
SERVICES
FACILITIES
STAFF
TRANSFORMING
RESOURCES
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
ENVIRONMENT
Operations Management, 4E: Chapter 1
1.11
Inputs to the Process
•
•
Transformed resources – resources that are treated,
transformed or converted in the process. They are a mixture of
• Materials
• Information
• Customers
Transforming resources – these are the resources which act
upon the transformed resources. They are two types:
• Facilities
• Staff
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.12
Within the Process
•
Materials processing –transforms material’s physical
properties, location, possession or materials are stored.
•
Information processing– transforms information properties,
possession, location or information is stored.
•
Customer processing – transforms customer’s physical
properties, location, physiological state, psychological state or
store (accommodate) customers.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.13
Outputs from the Process
•
Outputs from process can be differentiate between products
and service based organization – tangibility of products and
intangibility of services
•
Most operations produce both products and services – (slide
1.13)
•
Services and products are merging – all operations are service
providers who may produce products as a means of serving
customers.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
The output from most types of operation is a
mixture of goods and services
Psychotherapy clinic
Tangible
Can be stored
Production precedes
consumption
Low customer
contact
Can be transported
Quality is evident
Management
consultancy
Computer systems
services
Restaurant
Specialist machine tool
manufacturer
Pure goods
Aluminium smelting
Crude oil production
1.14
Intangible
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to
judge
Pure services
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.15
Process Hierarchy
•
•
•
•
All macro operations are made up many micro operations.
Micro operations have inputs.
Each micro operation produces outputs of goods and services
for the benefit of customers.
Within each micro operation there might be sections or groups.
Internal customers and internal suppliers
• Internal customers take outputs from other micro operations.
• Internal suppliers take give inputs to other micro operations.
• Each micro operations is an internal customer and internal
supplier.
• By treating their internal customers with care the effectiveness
of the operation is improved.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.16
All parts of the organization are operations
• All micro operations are similar to macro operations – they
have inputs transformed to outputs.
• Each functions have its ‘technical’ knowledge.
• Every managers in a micro operations is an operations
manager.
• The two meanings of operations must be differentiated:
• Operations as a function – the part of the organization
which produces the products and services for the external
customers.
• Operations as an activity – any processing of input
resources in order to produce products and services for
internal or external customers.
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.17
Operations Processes Have Different Characteristics
•
Operations processes differ in four distinctive ways:
• The volume of their output
• The variety of their output
• The variation in the demand for their output
• The degree of visibility which customers have of the
production of the product or service
•
The volume dimension
• High volume means high repeatability – people can
specialize
• High volume leads to systemization of work – SOP
• High volume gives lower unit costs
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.18
•
The variety dimension
• High variety of products and services offered
• High variety increases cost of goods and services
• High variety operations must be flexible
• Standardization minimizes cost
•
The variation dimension
• Demand for goods and services can change depending on
the external environment – seasonal factor
• Creates change in resources needed
• Activities must be planned effectively – forecasting
• Variation in demand can increase cost
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
1.19
•
The visibility dimension
• Visibility means process exposure
• Customers in a high visibility operation may judge the
operation by their perceptions – customer contact skill is
important
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
Operations Management, 4E: Chapter 1
A Typology of Operations
1.20
IMPLICATIONS
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Flexible
Complex
Match customer needs
High unit cost
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit cost
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit cost
IMPLICATIONS
Low
Volume
Variety
High
High Variation in demand
High
Visibility
© Nigel Slack, Stuart Chambers & Robert Johnston, 2004
High
High repeatability
Specialization
Systemization
Capital intensive
Low unit cost
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
Standardized
Low contact skills
High staff utilization
Centralization
Low unit costs
Operations Management, 4E: Chapter 1