MNO2601 notes summary PRODUCTION AND OPERATIONS MANAGEMENT
TOPIC 1: Foundations STUDY UNIT 1: Introduction to production and ops management
1.1 Introduction
● What is operations management
oThe activity of managing the resources which are devoted to the production and delivery of products and services. It is a core function of any business although it may not be called ops management
oIt is concerned with managing processes. Because all management functions manage processes it is relevant to all managers
●What are the similarities between all operations oAll operations can be modeled ass input-transformation-output processes.
oFew operations produce only products or only services but rather a mixture of both
oAll operations are part of a larger supply network through which each operation contributes to satisfying end customer requirement
oAll ops are made up of a network of internal customer-supplier relationships within the operations
●How are operations different from one another
oThey differ in terms of the volume of output, the variety of output, variation of demand and degree of visibility or customer contact
●What do ops managers do and why is it so important
oTranslation of strategy into operational action
oDesign, planning, controlling and improvement of operation/processes
oCan aid in reducing of costs, increasing revenue and reducing the investment cost for future innovation
oBecause of the a turbulent and dynamic business environment ops managers need to think on their feet
oImproving operations can be the most effective way to improve financial performance
The broad scope of operations
Management responsibilities
The broad scope of operations
Management responsibilities
1 | PageProduct/service
s development function
Information Systems (IS) functionHuman resources( HR) functionCommunicate human resource needs
Recruitment, development and trainingCommunicating information system needsSystems for design, planning control and improvementProvision or
Relevant dataOperations
FunctionProduct/service
s development functionTechnical Function
New product/ service ideas
Communicating the capabilities and constraints of operations processProcess technology
needsAccounting / Finance function
Provision or
Relevant dataFinancial analysis for performance measurement and decision makingProcess technology
optionsCommunicating the capabilities and constraints of operations process 1.2 What is operations management? (Effective productions/operations management)
●Three main core function of operations management include
oThe marketing function - communication the entity’s products and services to its markets to generate requests
oThe product/service development function - creating new products and services to generate service requests
oThe operation function – responsible for fulfilling customer requests through production and delivery.
Other support functions that facilitate the three core functions:
oThe accounting/finance function – information to assist in economic decision making & manages financial resources
oThe human resources function – recruits, develops entity’s staff as well as looking after their welfare. Operations management – The activities, decisions and responsibilities of managing the production and delivery of products and services
Operations function – The arrangement of resources that are devoted to the production and delivery of products and services. Operation managers – The staff of the organisation who have particular responsibility for managing some or all of the resources which comprise the operations function.
●Input and Outputs
oThe process of operations to produce products and services by changing inputs to outputs. oThe Transformation process model.
Transformed resources – The resources that are treated transformed or converted in a process, usually a mixture of materials information and customers.
●Materials – process which materials transform their physical properties, shape or composition such as manufacturing operations. Other change location(logistic companies), position (retail), storage(warehousing)
●Information – Operations that transform their informational properties such as accountants and marketing companies
●Customers – Process where customers may change their physical properties (hairdressing), storage (hotels) and locations (transportation)
Transforming resources – The resources that act upon the transformed resources, usually classified as facilities (the building, equipment, and plant of an operation) and staff the people who maintain and manage the operation.
●Facilities – The buildings, equipment, plant and process technology of the operation
●Staff -The people at any level who operate, maintain, plan and manage the operation
Outputs from the process of products and services differ in their respective tangibility. Tangible products, you can physically touch such as television or newspaper. Intangible products or services cannot be touched such as consultancy services or a haircut, although you can see the results. Most operations produce both products and services but some produce just products and others just services
●Pure product producers – Crude oil and aluminium smelters.
●Pure Services – Consultancy services
●Facilitating services – services are produced by an operation to support its products such as technical support or advice.
●Facilitating products – products that are produced by an operation to support its services. 1.3 Operations management is about managing process (Dominant focus of production/operations management)
Process – An arrangement of resources that producers some mixture of goods and services. It is the mechanism of transformation. Three levels of operation analysis
1.Supply network – The network of supplier and customer operations that have relationships with an operation
2.Internal supplier – Process or individuals within an operation that supply products or services to other processes or individuals within the operation
3.Internal customers – Processes or individuals within an operation who are the customers for other internal processes or individual outputs.
Hierarchy of operations – The idea that all operations processes are made up of smaller operations process. Operations management is relevant to all parts of the business process i.e. that is all functions manage processes. 2 | PageTransformed resources
Materials
Information
Customers
Transforming resources
Facilities
StaffTHE TRANSFORMATION PROCESSCustomers Input resources Output products and services oOperation as a function , meaning the part of the organisation which produces the products and services for the organisation’s external customers
oOperation as an activity, meaning the management of the processes within any of the organisations functions.
Business Process
When any organisations attempt to satisfy its customers needs it will use many processes, in both operations and functions. oEnd-to-end business process – When a company decised to reorganise its operations so the each product is produced from start to finish within the company. A process that is totally defined external customer needs.
oBusiness process re-engineering – The philosophy that recommends the redesign of processes to fulfil defined external customer needs.
1.4 Operation processes have different characteristics (Different characteristics of production/operation processes)
All operations are similar but they do differ slightly in different ways, four of the following are important:
1.Volume – The level or rate of output from a process, a key characteristics that determines process behaviour.
2.Variety – The range of different products and services produced by a process, a key characteristic that determines process behaviour.
3.Variation – The degree to which the rate of level of output varies from a process of time.
4.Visibility – The amount of value added activity that takes place in the presence, in reality or virtually, of the customer also called customer contact. ●The volume dimension: oRepeatability – The extent to which an activity does not vary.
oSystemisation – The extent to which standard procedures are made explicit. The cost per item is likely to be higher if the quantity is lower. Repeatability and systemisation gives low unit costs.
●The variety Dimension
oStandardisation – the degree to which processes, products or services are prevented from varying over time. The more regular and standardized process may result in lower costs.
●The variation dimension
oA routine and predictable schedule results in a high utilisation of resources. ●The visibility dimension
oHow much of the operations activities do its customers experience or how much of the operation is exposed. oCustomer contact skills are the skills and knowledge that staff need to meet customer expectations.
oMixed high visibility, these staff operate in a front office environment
oLow visibility environment, these staff operate in a back office environment.
o
The implication of the ‘four v’s’ of operations. A Typology of Operations
3 | PageLow repetition. Each staff member performs more of a job.
Less systemisation
High unit costs
Flexible
Complex
Much customer needs
High unit costs
Changing capacity
Anticipation
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.High repeatability
Specialisation
Systemisation
Capital intensive
Low unit costs
Well defined
Routine
Standardised
Regular
Low unit costs
Stable
Routine
Predictable
High utilisation
Low unit costs
Tim lag between production and consumption
Standardised
Low contact skills
High staff utilisation
Centralisation
Low unit costs.LowVARIETYHigh
LowVARIATIONHighLowVOLUMEHigh
LowVISIBILITYHigh
TOPIC 1: Foundations STUDY UNIT 1: Introduction to production and ops management
1.1 Introduction
● What is operations management
oThe activity of managing the resources which are devoted to the production and delivery of products and services. It is a core function of any business although it may not be called ops management
oIt is concerned with managing processes. Because all management functions manage processes it is relevant to all managers
●What are the similarities between all operations oAll operations can be modeled ass input-transformation-output processes.
oFew operations produce only products or only services but rather a mixture of both
oAll operations are part of a larger supply network through which each operation contributes to satisfying end customer requirement
oAll ops are made up of a network of internal customer-supplier relationships within the operations
●How are operations different from one another
oThey differ in terms of the volume of output, the variety of output, variation of demand and degree of visibility or customer contact
●What do ops managers do and why is it so important
oTranslation of strategy into operational action
oDesign, planning, controlling and improvement of operation/processes
oCan aid in reducing of costs, increasing revenue and reducing the investment cost for future innovation
oBecause of the a turbulent and dynamic business environment ops managers need to think on their feet
oImproving operations can be the most effective way to improve financial performance
The broad scope of operations
Management responsibilities
The broad scope of operations
Management responsibilities
1 | PageProduct/service
s development function
Information Systems (IS) functionHuman resources( HR) functionCommunicate human resource needs
Recruitment, development and trainingCommunicating information system needsSystems for design, planning control and improvementProvision or
Relevant dataOperations
FunctionProduct/service
s development functionTechnical Function
New product/ service ideas
Communicating the capabilities and constraints of operations processProcess technology
needsAccounting / Finance function
Provision or
Relevant dataFinancial analysis for performance measurement and decision makingProcess technology
optionsCommunicating the capabilities and constraints of operations process 1.2 What is operations management? (Effective productions/operations management)
●Three main core function of operations management include
oThe marketing function - communication the entity’s products and services to its markets to generate requests
oThe product/service development function - creating new products and services to generate service requests
oThe operation function – responsible for fulfilling customer requests through production and delivery.
Other support functions that facilitate the three core functions:
oThe accounting/finance function – information to assist in economic decision making & manages financial resources
oThe human resources function – recruits, develops entity’s staff as well as looking after their welfare. Operations management – The activities, decisions and responsibilities of managing the production and delivery of products and services
Operations function – The arrangement of resources that are devoted to the production and delivery of products and services. Operation managers – The staff of the organisation who have particular responsibility for managing some or all of the resources which comprise the operations function.
●Input and Outputs
oThe process of operations to produce products and services by changing inputs to outputs. oThe Transformation process model.
Transformed resources – The resources that are treated transformed or converted in a process, usually a mixture of materials information and customers.
●Materials – process which materials transform their physical properties, shape or composition such as manufacturing operations. Other change location(logistic companies), position (retail), storage(warehousing)
●Information – Operations that transform their informational properties such as accountants and marketing companies
●Customers – Process where customers may change their physical properties (hairdressing), storage (hotels) and locations (transportation)
Transforming resources – The resources that act upon the transformed resources, usually classified as facilities (the building, equipment, and plant of an operation) and staff the people who maintain and manage the operation.
●Facilities – The buildings, equipment, plant and process technology of the operation
●Staff -The people at any level who operate, maintain, plan and manage the operation
Outputs from the process of products and services differ in their respective tangibility. Tangible products, you can physically touch such as television or newspaper. Intangible products or services cannot be touched such as consultancy services or a haircut, although you can see the results. Most operations produce both products and services but some produce just products and others just services
●Pure product producers – Crude oil and aluminium smelters.
●Pure Services – Consultancy services
●Facilitating services – services are produced by an operation to support its products such as technical support or advice.
●Facilitating products – products that are produced by an operation to support its services. 1.3 Operations management is about managing process (Dominant focus of production/operations management)
Process – An arrangement of resources that producers some mixture of goods and services. It is the mechanism of transformation. Three levels of operation analysis
1.Supply network – The network of supplier and customer operations that have relationships with an operation
2.Internal supplier – Process or individuals within an operation that supply products or services to other processes or individuals within the operation
3.Internal customers – Processes or individuals within an operation who are the customers for other internal processes or individual outputs.
Hierarchy of operations – The idea that all operations processes are made up of smaller operations process. Operations management is relevant to all parts of the business process i.e. that is all functions manage processes. 2 | PageTransformed resources
Materials
Information
Customers
Transforming resources
Facilities
StaffTHE TRANSFORMATION PROCESSCustomers Input resources Output products and services oOperation as a function , meaning the part of the organisation which produces the products and services for the organisation’s external customers
oOperation as an activity, meaning the management of the processes within any of the organisations functions.
Business Process
When any organisations attempt to satisfy its customers needs it will use many processes, in both operations and functions. oEnd-to-end business process – When a company decised to reorganise its operations so the each product is produced from start to finish within the company. A process that is totally defined external customer needs.
oBusiness process re-engineering – The philosophy that recommends the redesign of processes to fulfil defined external customer needs.
1.4 Operation processes have different characteristics (Different characteristics of production/operation processes)
All operations are similar but they do differ slightly in different ways, four of the following are important:
1.Volume – The level or rate of output from a process, a key characteristics that determines process behaviour.
2.Variety – The range of different products and services produced by a process, a key characteristic that determines process behaviour.
3.Variation – The degree to which the rate of level of output varies from a process of time.
4.Visibility – The amount of value added activity that takes place in the presence, in reality or virtually, of the customer also called customer contact. ●The volume dimension: oRepeatability – The extent to which an activity does not vary.
oSystemisation – The extent to which standard procedures are made explicit. The cost per item is likely to be higher if the quantity is lower. Repeatability and systemisation gives low unit costs.
●The variety Dimension
oStandardisation – the degree to which processes, products or services are prevented from varying over time. The more regular and standardized process may result in lower costs.
●The variation dimension
oA routine and predictable schedule results in a high utilisation of resources. ●The visibility dimension
oHow much of the operations activities do its customers experience or how much of the operation is exposed. oCustomer contact skills are the skills and knowledge that staff need to meet customer expectations.
oMixed high visibility, these staff operate in a front office environment
oLow visibility environment, these staff operate in a back office environment.
o
The implication of the ‘four v’s’ of operations. A Typology of Operations
3 | PageLow repetition. Each staff member performs more of a job.
Less systemisation
High unit costs
Flexible
Complex
Much customer needs
High unit costs
Changing capacity
Anticipation
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.High repeatability
Specialisation
Systemisation
Capital intensive
Low unit costs
Well defined
Routine
Standardised
Regular
Low unit costs
Stable
Routine
Predictable
High utilisation
Low unit costs
Tim lag between production and consumption
Standardised
Low contact skills
High staff utilisation
Centralisation
Low unit costs.LowVARIETYHigh
LowVARIATIONHighLowVOLUMEHigh
LowVISIBILITYHigh
