MGTN11B

Operations Management
- relates to the management of systems or processes
that create goods and/or provide services. These
processes involve the planning, coordination, and
execution of all activities within an organization that
creates goods and services.
Supply Chain
- the sequence of organizations, including their
facilities, functions, and activities, that are involved in
producing and delivering a product or service.
Operations Function
- consists of all activities that are related directly to
producing goods or providing services. It is the core
of most business organizations because it is Benefits of Operations Management
responsible for the creation of an organization’s goods 1. Product/Service Quality
or services. Its essence is to add value during the - The operations manager will have a set list of
transformation process (the difference between the processes and a checklist to determine that
cost of inputs and value and price of outputs). everything is in order during the pre-production
Operations process. This includes making sure that everyone
- part of a business organization that is responsible for is aware of what the product/service needs and
producing goods and/or services. informing everyone of the product/service
Goods objectives.
- physical items that include raw materials, parts, - Once the final product has been created, the
subassemblies such as motherboards that go into operations manager will assess to ensure it meets
computers, and final products such as cell phones and the organization goals and that the customer’s
automobiles. needs are met. Thereafter, the operations manager
Service will review the pre-production process to ensure
- activities that provide some combination of time, efficiency for the next creation.
location, form, or psychological value. 2. Customer Satisfaction
Business Functions in Operations Management - A customer review can make or break a business.
- The three primary functions are operations, finance, If a negative word spreads, it could be a challenge
and marketing. Operations is concerned with the to retain clients. This is why it’s important to
creation of goods and services, finance is concerned ensure that your customers’ needs are at the
with provision of funds necessary for operation, and forefront of your product or service.
marketing is concerned with promoting and/or selling - The operations manager will conduct a quality
goods or services. management process, a methodology uses to
Finance create a product/service that will meet the
- is responsible for securing financial resources at customers’ needs. If the organization is a service
favorable prices and allocating those resources provider, the customer is the lifeblood. The
throughout the organization, as well as budgeting, operations manager will have processes in place to
analyzing investment proposals, and providing funds make sure that the service quality is the best. A
for operations. returning customer means more for the bottom
Marketing line.
- is responsible for assessing consumer wants and needs - The elements used to help gain a satisfactory
and selling and promoting the organization’s goods or customer includes:
services. o Quality management: To ensure the
Operations organization maintains a consistent and
- is responsible for producing the goods or providing good service.
the services offered by the organization. o Employee capacity: Making sure the right
people are in the right roles, which helps
produce a good product/service.
o Planning: To make sure that there is no
lapse in production and that goods/services
are on time.
o Enough inventory: To keep up with
customer demand.
3. Revenue Increase
- An organization will have a good reputation
Value-added thanks to great product/service quality and
- is the term used to describe the difference between the customer satisfaction. This leads to increased
cost of inputs and the value or price of outputs revenue from a new customer base.
Key Benefits of Effective Operations Management
1. Product Quality
The first unit in a typical firm that checks durability and 5. Controlling
reliability in a product is the operations management. - implies measurement of accomplishment against
Operations management sees to quality of products or the standards and correction of deviation if any to
goods which would suit customers on and after delivery. ensure achievement of organizational goals. The
When a product is of quality, it gives you an edge purpose of controlling is to ensure that everything
compared to your competitors. occurs in conformities with the standards.
2. Productivity - Controlling is the measurement & correction of
Productivity is defined as the ratio of input to output and performance activities of subordinates in order to
it is the only way to verify employees input. Operations make sure that the enterprise objectives and plans
management ensures appropriate staffing of employees to desired to obtain them as being accomplished
resources so as to get maximum result. The only way to The Role of Operations Manager
ensure productivity is through an effective operations • Human resource management – the people
management. employed by an organization either work directly
3. Customer Satisfaction to create a good or service or provide support to
There is no feeling for a manager or an employee as a those who do. People and the way they are
customer getting the utmost satisfaction ever. Operations managed are a key resource of all organizations.
management rightly ensures this coupled with quality • Asset management – an organization's buildings,
product. Customers make organization thrive and they facilities, equipment and stock are directly
must be treated well in every way necessary and possible. involved in or support the operations function.
4. Reduced Operating Cost • Cost management – most of the costs of
Through productivity, quality products and customer producing goods or services are directly related to
satisfaction, cost incurred on products servicing is the costs of acquiring resources, transforming
maximally reduced. This simultaneously leads to them or delivering them to customers. For many
increased revenue. Only operations management can organizations in the private sector, driving down
make this possible. In reducing operating cost, there is costs through efficient operations management
also waste reduction. Exact number/size of products is gives them a critical competitive edge. For
produced as requested via a proper operations organizations in the not-for-profit sector, the
management ability to manage costs is no less important.
What Operations Managers Do: Decision making is a central role of all operations
1. Planning managers. Decisions need to be made in:
- is deciding in advance - what to do, when to do & • designing the operations system
how to do. It bridges the gap from where we are & • managing the operations system
where we want to be. A plan is a future course of • improving the operations system.
actions. It is an exercise in problem solving & Goods
decision making. Planning is determination of Goods are physical, tangible things we produce. We can
courses of action to achieve desired goals. Thus, touch or handle them. People buy or sell and eventually
planning is a systematic thinking about ways & consume them. We can store and transport goods.
means for accomplishment of pre-determined Services
goals. Services are the non-physical, intangible parts of our
2. Organizing economy.
- the process of bringing together physical, financial Examples of Services
and human resources and developing productive • Professional services (e.g., financial, health care,
relationship amongst them for achievement of legal)
organizational goals. • Mass services (e.g., utilities, Internet,
3. Staffing communications)
- the function of manning the organization structure • Service shops (e.g., tailoring, appliance repair, car
and keeping it manned wash, auto repair/maintenance)
4. Directing • Personal care (e.g., beauty salon, spa, barbershop)
- part of managerial function which actuates the • Government (e.g., Medicare, mail, social services,
organizational methods to work efficiently for police, fire)
achievement of organizational purposes. • Education (e.g., schools, universities)
- Supervision- implies overseeing the work of • Food service (e.g., catering)
subordinates by their superiors. It is the act of • Services within organizations (e.g., payroll,
watching & directing work & workers. accounting, maintenance, IT, HR, janitorial)
- Motivation- means inspiring, stimulating or • Retailing and wholesaling
encouraging the sub-ordinates with zeal to work. • Shipping and delivery (e.g., truck, railroad, boat,
Positive, negative, monetary, non-monetary air)
incentives may be used for this purpose. • Residential services (e.g., lawn care, painting,
- Leadership- may be defined as a process by general repair, remodeling, interior design)
which manager guides and influences the work of • Transportation (e.g., mass transit, taxi, airlines,
subordinates in desired direction. ambulance)
- Communications- is the process of passing • Travel and hospitality (e.g., travel bureaus, hotels,
information, experience, opinion etc from one resorts)
person to another. It is a bridge of understanding.
 • Miscellaneous services (e.g., copy service, Key Difference Between Goods And Services
temporary help) 1. Goods are the material items that the customers
Services are the intangible economic product that is are ready to purchase for a price. Services are the
provided by a person on the other person’s demand. It is amenities, benefits or facilities provided by
an activity carried out for someone else. the other persons.
- They can only be delivered at a particular moment, and 2. Goods are tangible items i.e. they can be seen or
hence they are perishable in nature. They lack physical touched whereas services are intangible items.
identity. Services cannot be distinguished from the service 3. When the buyer purchases the goods by paying
provider. the consideration, the ownership of goods moves
- Services cannot be owned but can only be utilized. from the seller to the buyer. Conversely, the
- Service receiver should fully participate when the ownership of services is non-transferable.
service is provided. 4. The evaluation of services is difficult because
The five I’s of services every service provider has a different approach of
Intangibility carrying out services, so it is hard to judge
Inventory whose services are better than the other as
Inseparability compared to goods.
Inconsistency 5. Goods can be returned to or exchanged with the
Involvement seller, but it is not possible to return or exchange
services, once they are provided.
6. Goods can be distinguished from the seller. On the
other hand, services and service provider are
inseparable.
7. A particular product will remain same regarding
physical characteristics and specifications, but
services can never remain same.
8. Goods can be stored for future use, but services
are time bound, i.e. if not availed in the given
time, then it cannot be stored.
9. First of all the goods are produced, then they are
traded and finally consumed, whereas services are
produced and consumed at the same time.
Mission Statement
- Answers the question “What business are we in?”, it
varies depending on the nature of their business. It
serves as the basis for organizational goals, which
provide more detail and describe the scope of the
mission. States the purpose of the organization.
Mission
- The reason for an organization’s existence
Goals
- serve as a foundation for the development of
organizational strategies.
- Provide detail and the scope of the mission
- can be viewed as organizational destinations
- serve as the basis for organizational strategies
Strategy
- a plan for achieving organizational goals, serves as
roadmap for reaching organizational destinations
Organizational Strategies
- Overall strategies that relate to the entire organization,
support the achievement of organizational goals and
mission.
Functional Level Strategies
- Relate to each other of the functional areas that
support the achievement of the organizational strategy
Responsiveness
- Relates to ability to respond to changing demands
Tactics
- Methods and actions used to accomplish strategies
Three Basic Business Strategies
1. Low Cost
2. Responsiveness – ability of a system or process to
complete tasks within a given time fram
 3. Competitive Differentiation – strategic positioning - Strengths and weaknesses
tactic External Factors
Competitiveness - Opportunities and threats
- an important factor in determining whether a
company prospers, barely gets by, or fails.
Marketing Influences Competitiveness
1. Price and quality- are key factors in consumer
buying decisions. It is important to understand the
trade-off decision consumers make between price
and quality
2. Advertising and promotion- are ways
organizations can inform potential customers
about features of their products or services, and
attract buyers.
Major Influence on Competitiveness of Operation
1. Product and Service Design - should reflect joint
efforts of many areas of the firm to achieve a
match between financial resources, operations
capabilities, supply chain capabilities, and
consumer wants and needs
2. Cost
3. Location
4. Quality – refers to materials, worksmanship,
design and service.
5. Quick Response
6. Flexibility – ability to respond to change
7. Inventory Management – effectively matching
supplies of goods with demand
8. Supply Chain Management – involves
coordinating internal and external operations
9. Service
10. Managers and Workers
Productivity
- measure of the effective use of resources, usually
expressed as the ratio of output to input
- Service sector productivity is difficult to measure and
manage because it involves intellectual activities and
has a high degree of variability.
- The key to successfully competing is to determine
what customers want and then directing efforts toward
meeting (or even exceeding) customer expectations.
Why Productivity Matters
- High productivity is linked to higher standards of
living
o As an economy replaces manufacturing jobs with
lower productivity service jobs, it is more difficult
to maintain high standards of living
- Higher productivity relative to the competition leads
to competitive advantage in the marketplace
o Pricing and profit effects
- For an industry, high relative productivity makes it
less likely it will be supplanted by foreign industry
Order Qualifiers
- Characteristics that customers perceive as minimum
standards of acceptability for a product or service to
be considered as a potential for purchase
Order Winners
- Characteristics of an organization’s goods or services
that cause it to be perceived as better than the
competition
Environmental Scanning
- The monitoring of events and trends that present
Forecast
threats or opportunities for a company.
- a statement about the future value of a variable of
Internal Factors
interest. Forecasts are a basic input in the decision
 processes of operations management because they To entice trial, heavy sales promotion is necessary.
provide information on future demand. Following these product life cycle strategies for
The essence of a business organization is the products and the first PLC stage, the company and the new
services it offers, and every aspect of the organization and product are ready for the next stages.
its supply chain are structured around those products and 2. The growth stage is the stage in which the
services product’s sales start climbing quickly. This rise in
Organizations that have well-designed products or sales also attracts more competitors that enter the
services are more likely to realize their goals than those market. Since these will introduce new product
with poorly designed products or services. features, competition is fierce and the market will
Product or service design should be closely tied to an expand. As a consequence of the increase in
organization’s strategy. It is a major factor in cost, quality, competitors, there is an increase in the number of
time-to-market, customer satisfaction, and competitive distribution outlets and sales are augmented due to
advantage. the fact that resellers build inventories. Since
Translate customer wants and needs into product and promotion costs are now spread over a larger
service requirements (marketing, operations) volume and because of the decrease in unit
Refine existing products and services (marketing) manufacturing costs, profits increase during the
Develop new products and/or services (marketing, growth stage. The main objective in the growth
operations) stage is to maximize the market share. Several
Formulate quality goals (marketing, operations) product life cycle strategies for the growth stage
Formulate cost targets (accounting, finance, operations) can be used to sustain rapid market growth as long
Construct and test prototypes (operations, marketing, as possible. Product quality should be improved
engineering) and new product features and models added. The
Document specifications: Translate product and service firm can also enter new market segments and new
specifications into process specifications (engineering, distribution channels with the product. Prices
operations remain where they are or decrease to penetrate the
Product and service design has typically had strategic market. The company should keep the promotion
implications for the success and prosperity of an spending at the same or an even higher level.
organization. 3. The maturity stage is the stage in which the
Facilities product’s sales growth slows down or levels off
- are the physical locations where products or after reaching a peak. The maturity stage lasts
services are created, stored, and distributed. The longer than the two preceding stages.
physical positioning or geographic site of facilities Consequently, it poses strong challenges to
and must be determined by the needs and marketing management and needs a careful
requirements of the organization. selection of product life cycle strategies. The
Fixed-Position Layout company’s main objective should be to maximise
- used when the organization is creating a few very profit while defending the market share. Products
large and complex products in the maturity stage seem to remain unchanged
Process Layout for long periods, most successful ones are actually
- used in operations settings that create or process a adapted constantly to meet changing consumer
variety of products needs. The firm should consider to modify the
Product Layout market, product and marketing mix. Modifying
- is appropriate when large quantities of a single the market means trying to increase consumption
product are needed. by finding new users and new market segments
Product Life Cycle for the product.
4. The decline stage is the stage in which the
product’s sales decline. This happens to most
product forms and brands at a certain moment.
The decline can either be slow, such as in the case
of postage stamps, or rapid, as has been the case
with VHS tapes. Sales may plummet to zero, or
they may drop to a low level where they continue
for many years. The main objective in the decline
stage should be to reduce expenditure and “milk”
1. The introduction stage is the stage in which a the brand. General strategies for the decline stage
new product is first distributed and made available include cutting prices, choosing a selective
for purchase, after having been developed in the distribution by phasing out unprofitable outlets
product development stage. The introduction stage and reduce advertising as well as sales promotion
starts when the product is first launched. But to the level needed to retain only the most loyal
introduction can take a lot of time, and sales customers. If management decides to maintain the
growth tends to be rather slow. In the introduction product or brand, repositioning or reinvigorating it
stage, the focus is on selling to those buyers who may be an option. The purpose behind these
are the most ready to buy (innovators). options is to move the product back into the
Advertising should aim at building product growth stage of the PLC.
awareness among innovators and early adopters.
Prepared By: John Lennard Costuna