1 Introduction

Nigel Slack, Stuart Chambers & Robert Johnston, 2004 Operations Management, 4E: Chapter 1
1.1
Introduction
OPERATIONS MANAGEMENT
1.2
Chapter Coverage
Operations management in important
Operations management is about process
management
Operations processes have different
characteristics
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
1.4
Operations Management Basic Principles
All types of enterprise have an operations function, even if
it isnt called operations.
Materials
Products and
services
Information
Customers
Operations
management is
concerned with
producing and
delivering products
and services
1.5
They are all
operations
Retail
operation
Back office
operation in
a bank
Take-out /
restaurant
operation
Kitchen unit
manufacturing
operation
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.
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 organizations 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.
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 organizations staff as well as looking after their
welfare.
In practice, functional names, boundaries and responsibilities do
vary significantly between organizations.
1.9
Table 1.1 The activities of core functions in some organization
Core functional
activities
Internet service
provider
Fastfood chain Furniture
manufacturer
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
Product/service
development
- Device new
services and
commission new
information
content
- Design
hamburgers,
pizzas, etc.
- Design dcor for
restaurants
- Design new
furniture
- Coordinate with
fashionable colours
Operations
- Maintain
hardware, software
and content
- Make burgers,
pizzas, etc.
- Serve customers
- Maintain
equipments
- Make
components
- Assemble
furniture
- Deliver furniture
1.10
Operations Management is About Managing
Processes - transformation processes
ENVIRONMENT
ENVIRONMENT
INPUT OUTPUT
GOODS
AND
SERVICES
TRANSFORMED
RESOURCES
MATERIALS
INFORMATION
CUSTOMERS
FACILITIES
STAFF
TRANSFORMING
RESOURCES
TRANSFORMATION
PROCESS
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

1.12
Within the Process
Materials processing transforms materials physical
properties, location, possession or materials are stored.

Information processing transforms information properties,
possession, location or information is stored.

Customer processing transforms customers physical
properties, location, physiological state, psychological state or
store (accommodate) customers.
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.
1.14
The output from most types of operation is a
mixture of goods and services
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Pure goods
Tangible
Can be stored
Production precedes
consumption
Low customer
contact
Can be transported
Quality is evident
Intangible
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to
judge
Pure services
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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.
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.
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
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
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
1.20
A Typology of Operations
IMPLICATIONS IMPLICATIONS

High Low Visibility
High
Low
Variation in demand
High Low Variety
Low High Volume
Time lag between
production and
consumption
Standardized
Low contact skills
High staff utilization
Centralization
Low unit costs

Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit cost
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit cost
Flexible
Complex
Match customer needs
High unit cost
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Stable
Routine
Predictable
High utilization
Low unit costs
Well defined
Routine
Standardized
Regular
Low unit costs
High repeatability
Specialization
Systemization
Capital intensive
Low unit cost

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Nigel Slack, Stuart Chambers & Robert Johnston, 2004 Operations Management, 4E: Chapter 1

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