28.6.2023
Summary of Chapter Operations Management
(Prepared as a teaching support by Prof. Narayana Rao K.V.S.S.)
OPERATIONS MANAGEMENT
Seventh edition
Nigel Slack, Alistair Brandon-Jones, Robert Johnston 2013
Chapter 1 Contents
Operations management 4
Introduction 4
What is operations management? 6
Operations management is important in all types of organization 8
The input–transformation–output process 13
The process hierarchy 18
Operations processes have different characteristics 23
What do operations managers do? 26
Summary answers to key questions 30
Case study: Design house partnerships at Concept Design Services 31
Problems and applications 34
Selected further reading 34
Useful websites
"P" refers to page number in the book.
P1
OPERATIONS MANAGEMENT
p2
1 Operations management
2 Operations performance
3 Operations strategy
p3
Part One - INTRODUCTION
This part of the book introduces the idea of the operations function in different types of organization.
It identifies the common set of objectives to which operations managers aspire in order to serve their customers, and it explains how operations can have an important strategic role.
Operations management 4
Introduction 4
Key questions
What is operations management?
❯ Why is operations management important in all types of organization?
❯ What is the input–transformation–output process?
❯ What is the process hierarchy?
❯ How do operations processes have different characteristics?
❯ What do operations managers do?
P4
Operations management is about how organizations create and deliver services and products.
Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university – all have been created by operations
p4
Figure 1.1 This chapter examines operations management
What is operations management? 6
P6
(Note in addition that we also use the shorter terms ‘the operation’ or ‘operations’ interchangeably with the ‘operations function’.) Operations managers are the people who have particular responsibility for managing some, or all, of the resources which comprise the operations function.
Page 6
Operations management is a vital part of IKEA’s success
IKEA shows how important operations management is for its success . Of course, the first requirement for any business organization is understanding customers, the market. IKEA understands its market and its customers. Just as important, is the way the organization manages the network of operations that design, produce and deliver its products and services. It must be right for its market. No organization can survive in the long term if it cannot provide its customers satisfaction and delight. It means operations have to be effective. This is essentially what operations management is about – designing, producing and delivering products and services that satisfy market requirements. For any business, it is a vitally important activity.
Some of the Activities of IKEA’s Operations Managers
● Capacity management: Deciding the Floor Space and Volume of the Store. Coping with fluctuations in demand through rapid mobilization of inventory held at other facilities.
● Facility Location: Locating stores of an appropriate size in the most effective place (also part of supply network design).
● Facility Design or Layout Design: Arranging the store’s layout to give a smooth and effective flow of customers (includes process design).
● Product design: Designing stylish products that can be flat-packed efficiently.
● Job Design: Making sure that all staffs have job description, understand their duties, and contribute to the company’s success.
● Supply Chain Management: Arranging for the delivery of products to stores. Maintaining suppliers and communicating to them the requirements.
● Failure Prevention: Maintaining cleanliness and safety of storage areas.
● Inventory Management: Avoiding running out of products for sale.
● Quality Management: Monitoring and enhancing quality of service to customers.
● Operations Improvement: Continually examining and improving operations practice.
WHAT IS OPERATIONS MANAGEMENT?
Operations management is the activity of managing the resources that create and deliver services and products.
Operations in the organization
The operations function is a core function of the organization because it creates and delivers services and products, which is the objective of a business organization. The operations function is one of the three core functions of any organization. These are:
● the marketing (including sales) function
● the product/service development function
● the operations function
Page 7
The authors view the operations function as comprising all the activities necessary for the day-to-day fulfilment of customer requests. This includes sourcing services and products from suppliers and delivering services and products to customers.
✽ An Operations principle - Principle of Cooperation (Scientific Management)
Operations managers need to co-operate with other functions to ensure effective organizational performance.
Table 1.1 The activities of core functions in some organizations
p7
✽ Operations principle
Operations managers need to co-operate with other functions to ensure effective organizational performance.
Operations management is important in all types of organization
p8
Figure 1.2 The relationship between the operations function and other core and support functions of the
organization
Marketing & Sales
New Product Development
Accounting & Finance
Information Systems
HR
p8
✽ Operations principle
The economic sector of an operation is less important in determining how it should be managed than its intrinsic characteristics.
p9
OPERATIONS MANAGEMENT IS IMPORTANT IN ALL TYPES OF ORGANIZATION
Operations Function in Different Organizations
Automobile assembly factory – operations management uses machines to efficiently assemble products that satisfy current customer demands
Physician (general practitioner) – operations management uses knowledge to effectively diagnose conditions in order to treat real and perceived patient concerns
Management consultant – operations management uses people to effectively create the services that will address current and potential client needs
Advertising agency – operations management uses our staff’s knowledge and experience to creatively present ideas that delight clients and address their real needs
p10
Operations Management use Resources Appropriately to Create Outputs that Fulfil Defined Market Requirements.
Figure 1.3 Operations management uses resources to appropriately create outputs that fulfil defined market requirements
Operations management in not-for-profit organizations
Operations have to take the same decisions – how to create and deliver services and products, invest in
technology, contract out some of their activities, devise performance measures, improve their operations performance, and so on. However, the strategic objectives of not-for-profit organizations may be more complex and involve a mixture of political, economic, social or environmental objectives. Because of this there may be a greater chance of operations decisions being made under conditions of conflicting objectives.
p11
SHORT CASE Torchbox: award-winning web designers
. To succeed, web designers need technology skills, design capabilities, business awareness
and operational professionalism.
‘ We know how to make sure that our projects run not only on time and to budget’ ,
We back everything we do with a robust feature-driven development process using a kanban project
management methodology which helps us manage our obligations to our clients.’
‘ Using sound operations management techniques helps us constantly to deliver value to our clients .’
‘We like to think that our measured and controlled approach to handling and controlling work helps ensure
that every hour we work produces an hour’s worth of value for our clients and for us.’
p12
SHORT CASE MSF operations provide medical aid to people in danger
MSF has developed and produced pre-packaged disaster kits ready for transport within hours, including a complete surgical theatre the size of a small conference table and an obstetrics kit the size of a two-drawer filing cabinet. There is an ongoing process of revising the kits every time a new drug or medical tool becomes available.
The input–transformation–output process 13
p13
✽ Operations principle
All processes have inputs of transforming and transformed resources that they use to create products and services.
p13
Table 1.2 Changes in the business environment are shaping a new operations agenda
P14
Figure 1.4 All operations are input–transformation–output processes
p14
✽ Operations principle
Transformed resource inputs to a process are materials, information or customers.
P15
SHORT CASE Co-creation at First Direct
P16
Table 1.3 Dominant transformed resource inputs of various operations
Predominantly processing - Predominantly processing - Predominantly processing
inputs of materials - inputs of information - inputs of customers
P16
✽ Operations principle
All processes have transforming resources of facilities (equipment, technology, etc.) and people.
p17
Figure 1.5 The output from most operations is a mixture of products and services. Some general examples are shown here together with some of the operations featured as examples in this chapter
P17
✽ Operations principle
Most operations produce a mixture of tangible products and intangible services.
✽ Operations principle
Whether an operation produces tangible products or intangible services is becoming increasingly irrelevant. In a sense all operations produce service for their customers.
P18
SHORT CASE Customer service at Pret A Manger
The process hierarchy 18
Page 19
So any business, or operation, is made up of a network of processes and any process is made up of a network of resources.
P21
. It also means that we must distinguish between two meanings of ‘operations’:
● ‘operations’ as a function, meaning the part of the organization which creates and delivers services and products for the organization’s external customers;
● ‘operations’ as an activity , meaning the management of the processes within any of the
organization’s functions.
P 21
✽ Operations principle
All parts of the business manage processes so all parts of the business have an operations role and need to understand operations management principles.
Operations processes have different characteristics 23
Operations Processes have Different Characteristics
Although all operations processes are similar in that they all transform inputs, they do differ in a number of ways, four of which, known as the four Vs, are particularly important:
● 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 creation of their output
P 23
The volume dimension
High-volume hamburger production of McDonald’s
Millions of burgers every day.
Implications. Repetition of tasks by people.
Systemization of the work. Standard procedures are set down.
Due to repetition development of specialized fryers and ovens takes place.
All this gives low unit costs.
Now consider a small local cafeteria.
The range of items on the menu may be similar to the large firm.
But the volume for any item is far lower.
The number of staff will be lower (possibly only one person).
So each individual person is likely to perform a wider range of tasks on more general purpose oven etc.
Cost of production is higher.
The variety dimension
A taxi company offers a relatively high-variety service (any where to anywhere).
Compare with a bus service having a few well-defined routes, with a set schedule.
The variation dimension
Consider the demand pattern for a successful summer holiday resort hotel.
Busy during summer. More employees. But during off-season less employees. So during summer temporary employees are to be hired.
Even some of the facilities are hired during summer only.
A hotel of a similar standard with level demand can plan its activities well in advance in more predictable manner.
P24
The visibility dimension
What do operations managers do? 26
P26
What Do Operations Managers Do?
The exact details of what operations managers do will, to some extent, depend on the way an organization defines the boundaries of the function. Yet there are some general classes of activities that apply to all types of operation irrespective of whether they are service, manufacturing, private or public sector, and no matter how the operations function is defined. We classify operations management activities under four headings: direct, design, deliver and develop.
● Directing the overall nature and strategy of the operation. A general understanding of operations and processes and their strategic purpose and performance, together with an appreciation of how strategic purpose is translated into reality, is a prerequisite to the detailed design of operations and process. This is treated in Chapters 1 to 3.
● Designing the operation’s services, products and processes. Design is the activity of determining the physical form, shape and composition of operations and processes together with the services and products that they create. This is treated in Chapters 4 to 9.
● Planning and control process delivery. After being designed, the delivery of services and products from suppliers and through the total operation to customers must be planned and controlled. This is treated in Chapters 10 to 17.
● Developing process performance. Increasingly it is recognized that operations managers, or indeed any process managers, cannot simply routinely deliver services and products in the same way that they always have done. They have a responsibility to develop the capabilities of their processes to improve process performance. This is treated in Chapters 18 to 21.
P28 & 29
To be a great operations manager you need to . . .
Enjoys getting things done.
● Understands customer needs
● Communicates and motivates
● Committed to innovation
● Knows their contribution - cooperation with other departments
● Capable of analysis
● Keeps cool under pressure
Summary answers to key questions 30
Case study: Design house partnerships at Concept Design Services 31
Chapter 1 Operations management - Company/examples covered
Chapter Location Company/example Region Sector/activity Company size
p. 5 IKEA Global Retail Large
p. 11 Torchbox UK Web design Small
p. 12 MSF Global Charity Large
p. 15 First Direct UK Banking Large
p. 18 Pret A Manger Europe/USA Retail Medium
p. 24 Formule 1 Europe Hospitality Large
p. 25 Anantara Bangkok Riverside Resort & Spa Thailand Hospitality Medium
p. 28 To be a great operations manager you need to . . . General General N/A
p. 31 Concept Design Services UK Design/manufacturing/distribution Medium
19.10.2014
Summary of Chapter 1 of the book Operations Management by Nigel Slack, Stuart Chambers, and Robert Johnston
The operations function of the organization is concerned with the production and delivery of its products and services. Every organization has operations function as it producers some type of product or service or product/service combination.
Operations managers are the staff in the organization who have particular responsibility for managing some or all processes of operations function.
Operations management is the term that is used for the activities, decisions and responsibilities of operations managers.
Operations function is central to the organization because providing goods or services is the reason for its existence. It is one of the three core functions of the organization. The three core functions are:
* Marketing and Sales: Marketing collects and provides the information regarding the customer needs and acceptance of the firm products in fulfillment of that need. Sales function gets in touch with potential customers in right time and place and presents the company's offerings as a solution for customer needs and gets orders or completed sales.
* New Product/Service Development Function: This function is responsible for developing and designing commercially profitable new products/services or modified products/services. They develop products based on marketing information.
* Operations Function: This function is responsible for creating the production facilities for anticipated/targeted demand and fulfilling the customer requirements at the requested deliver time.
In addition, there are many support services in an organization who facilitate the supply chain of the organization.
The operations function of the organization is concerned with the production and delivery of its products and services. Every organization has operations function as it producers some type of product or service or product/service combination.
Operations managers are the staff in the organization who have particular responsibility for managing some or all processes of operations function.
Operations management is the term that is used for the activities, decisions and responsibilities of operations managers.
Operations function is central to the organization because providing goods or services is the reason for its existence. It is one of the three core functions of the organization. The three core functions are:
* Marketing and Sales: Marketing collects and provides the information regarding the customer needs and acceptance of the firm products in fulfillment of that need. Sales function gets in touch with potential customers in right time and place and presents the company's offerings as a solution for customer needs and gets orders or completed sales.
* New Product/Service Development Function: This function is responsible for developing and designing commercially profitable new products/services or modified products/services. They develop products based on marketing information.
* Operations Function: This function is responsible for creating the production facilities for anticipated/targeted demand and fulfilling the customer requirements at the requested deliver time.
In addition, there are many support services in an organization who facilitate the supply chain of the organization.
Ud. 22.8.2023, 9.7.2023, 28.6.2023
Pub. 13.10.2014
