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Chapter 1

What is operations management? ● operations management uses the organization’s resources to create outputs that fulfil defined market requirements. this is the fundamental activity of any type of enterprise. ● operations management is increasingly important because today’s business environment requires new thinking from operations managers. How Do Operations And Processes Differ? 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 epitome of high-volume hamburger production is McDonald’s, which serves millions of burgers around the world every day. Volume has important implications for the way McDonald’s operations are organized.standard procedures are set down specifying how each part of the job should be carried out. because tasks are systematized and repeated, it is worthwhile developing specialized fryers and ovens. All this gives low unit costs. ● The variety of their output.A taxi company offers a relatively high-variety service. It is prepared to pick you up from almost anywhere and drop you off almost anywhere.Drivers must have a good knowledge of the area, and communication between the base and the taxis must be effective ,the cost per kilometre travelled will be higher than a bus. a bus All is standardized and regular, which results in relatively low costs compared with using a taxi for the same journey. ● The variation in the demand for their output.At the height of ‘the season’ the hotel could be full to its capacity. Off-season demand, however could be a small fraction of its capacity. Such a marked variation in demand means that the operation must change its capacity.The hotel must try to predict the likely level of demand. If it gets this wrong, it could result in too much or too little capacity. Also, recruitment costs, overtime costs and under-utilization of its rooms all have the effect of increasing the hotel’s costs.Staff can be scheduled, food can be bought and rooms can be cleaned in a routine and predictable manner. This results in a high utilization of resources and unit costs ● The degree of visibility which customers have of the creation of their output.means how much of the operation’s activities its customers experience, or how much the operation is exposed to its customers.high-visibility operations require staff with good customer contact skills.a web-based retailer, while not a pure low-contact operation, has far

lower visibility. Behind its website, it can be more ‘factory-like’. The time lag between the order being placed and the items ordered by the customer being retrieved and dispatched does not have to be minutes, as in the shop, but can be hours or even days. inputs to the process Materials – to transform their physical properties (shape or composition , other process materials to change their location (parcel delivery companies,). Some change the possession of the materials. Finally, some operations store materials, such as warehouses. ● Information – transform their informational properties ; accountants .change the possession : market research companies sell information. Some store the information, for example archives and libraries. telecommunication companies, change the location of the information. ● Customers – change their physical properties hairdressers bus companies transform the location of their customers, hospitals transform their physiological state. Some are change the their psychological state :entertainment services such as music, theatre, television,radio and theme parks. the operations in an animal welfare charity, hospital, research organization or government department is essentially the same as in commercial organizations 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. Operations management uses ‘resources to appropriately create outputs that fulfil defined market requirements Operations management used not just machines but also ‘knowledge, people, our and our partners’ resources', and ‘our staffs’ experience and knowledge', to ‘efficiently (or effectively, or creatively) assemble (or produce, change, sell, move, cure, shape, etc.) products (or services or ideas) that satisfy (or match or exceed or delight) customer (or client or citizens' or society) demands (or needs or concerns or even dreams).’ ❯ What is the input–transformation–output process? ● All operations can be modelled as input–transformation–output processes. They all have inputs of transforming resources, which are usually divided into ‘facilities’ and ‘staff’, and transformed resources, which are some mixture of materials, information and customers. ● Most operations create and deliver a combination of services and products, rather than being a ‘pure’ service or ‘product’ product operation. ❯ What is the process hierarchy? ● All operations are part of a larger supply network which, through the individual contributions of each operation, satisfies end customer requirements. ● All operations are made up of processes that form a network of internal customer–supplier relationships within the operation. ● End-to-end business processes that satisfy customer needs often cut across functionally based processes. ❯ What do operations managers do? Directing the overall 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, are prerequisites to the detailed design of operations and process. Designing the operation’s resources and processes. Design is the activity of determining the physical form, shape and composition of operations and processes in line with the services and products that they create 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 Developing process performance. Increasingly it is recognized that operations managers, or any process managers, cannot simply routinely deliver services and products in the same way that they always have done ● Operations and processes differ in terms of the volume of their outputs, the variety of outputs, the variation in demand for their outputs, and the degree of ‘visibility’ they have. ● High volume, low variety, low variation and low customer ‘visibility’ are usually associated with low cost.

❯ How do operations and processes differ? ● Responsibilities can be classed in four categories – direct, design, deliver and develop: ● Direct includes understanding relevant performance objectives, setting an operations strategy, managing innovation and the scope of the operation. ● Design includes the design of the operation and its processes and its resources. ● Delivery includes the planning and controlling of the activities of the operation. ● Develop includes the improvement of the operation over time. ● Increasingly operations managers have a responsibility for an operations environmental performance. Some examples of processes in non-operations functions Organizational function

Some of its processes

Outputs from its processes

Customer(s) for its outputs

marketing and sales

planning process Forecasting process order taking process

marketing plans sales forecasts confirmed orders

senior management sales staff , planners, operations operations, finance

Finance and accounting

Budgeting process capital approval processes invoicing processes

Budgets capital request evaluations invoices

everyone senior management, requesters external customers

human resources management

payroll processes recruitment processes training processes

salary statements new hires trained employees

employees all other processes all other processes

information technology

systems review process help desk process system implementation project processes

system evaluation systems advice implemented working systems and aftercare

all other processes in the business

Chapter 2 The social bottom line (People) – the social account, measured by the impact of the operation on the quality of people’s lives Some ways that operations can impact the social bottom line performance include the following: ● Customer safety from products and services ● Employment impact of an operation’s location ● Employment implications of outsourcing ● Repetitive or alienating work ● Staff safety and workplace stress ● Non-exploitation of developing country suppliers. Some ways that operations can impact the environmental bottom line performance include the following: ● Recyclability of materials, energy consumption, waste material generation ● Reducing transport-related energy ● Noise pollution, fume and emission pollution ● Obsolescence and wastage ● Environmental impact of process failures ● Recovery to minimize impact of failures.

Some ways that operations can impact the financial bottom line performance include the following: ● Cost of producing products and services ● Revenue from the effects of quality, speed, dependability and flexibility ● Effectiveness of investment in operations resources ● Risk and resilience of supply ● Building capabilities for the future. Why is operations performance vital in any organization? Operations management can either ‘make or break’ any business. In most businesses it represents the bulk of its assets. ● The positive effects of a well-run operation include a focus on improvement, the building of ‘difficult to imitate’ capabilities, and an understanding of the processes that are the building blocks of all operations. ● The negative effects of a poorly run operation include failures that are obvious to customers (and expensive for the organization), a complacency that leads to the failure to exploit opportunities for improvement. How is operations performance judged at a societal level? Operations decisions affect a variety of ‘stakeholders’. Stakeholders are the people and groups who have a legitimate interest in the operation’s activities. ● This idea that operations should take into account the impact on a broad mix of stakeholders is termed ‘corporate social responsibility’ (CSR). ● Performance at the societal level often uses the idea of the triple bottom line (TBL, or 3BL, also known as ‘People, Planet and Profit’). It includes the social bottom line, the environmental bottom line and the economic bottom line.

● The social bottom line incorporates the idea that businesses should accept that they bear some responsibility for the impact they have on society and balance the external ‘societal’ consequences of their actions with the more direct internal consequences,such as profit. ● The environmental bottom line incorporates the idea that operations should accept that they bear some responsibility for the impact they have on the natural environment. ● The economic bottom line incorporates the conventional financial measures of performance derived from using the operation’s resources effectively. The type of decisions and activities that operations managers carry out can have a significant strategic impact.

❯ How is operations performance judged at a strategic level? ● In particular, operations can affect economic performance in five ways: ● It can reduce the costs. ● It can achieve customer satisfaction through service. ● It can reduce the risk of operational failure. ● It can reduce the amount of investment that is necessary. ● It can provide the basis for future innovation ❯ How is operations performance judged at an operational level? ● The five ‘performance objectives’ that are used to assess the performance of operations at an operational level are quality, speed, dependability, flexibility and cost. ● Quality is important because: ● By ‘doing things right’, operations seek to influence the quality of the company’s goods and services. ● Externally, quality is an important aspect of customer satisfaction or dissatisfaction. ● Internally, quality operations both reduce costs and increase dependability. ● Speed is important because: ● By ‘doing things fast’, operations seek to influence the speed with which goods and services are delivered. ● Externally, speed is an important aspect of customer service. ● Internally, speed both reduces inventories by decreasing internal throughput time and reduces risks by delaying the commitment of resources. ● Dependability is important because: ● By ‘doing things on time’, operations seek to influence the dependability of the delivery of goods and services. ● Externally, dependability is an important aspect of customer service. ● Internally, dependability within operations increases operational reliability, thus saving the time and money that would otherwise be taken up in solving reliability problems and also giving stability to the operation. ● Flexibility is important because:

● By ‘changing what they do’, operations seek to influence the flexibility with which the company produces goods and services. ● Externally, flexibility can produce new products and services (product/service flexibility). ● Externally, flexibility can produce a wide range or mix of products and services (mix flexibility). ● Externally, flexibility can produce different quantities or volumes of products and services (volume flexibility). ● Externally, flexibility can produce products and services at different times (delivery flexibility). ● Internally, flexibility can help speed up response times, save time wasted in changeovers, and maintain dependability. ❯ How can operations performance be measured? ● It is unlikely that for any operation a single measure of performance will adequately reflect the whole of a performance objective. Usually operations have to collect a whole bundle of partial measures of performance. ● The balanced scorecard (BSC) is a commonly used approach to performance measurement and incorporates measures related to: ● How do we look to our shareholders (financial perspective)? ● What must we excel at (internal process perspective)? ● How do our customers see us (the customer perspective)? ● How can we continue to improve and build capabilities (the learning and growth perspective)? ❯ How do operations performance objectives trade off against each other? ● Trade-off s are the extent to which improvements in one performance objective can be achieved by sacrificing performance in others. The ‘efficient frontier’ concept is a useful approach to articulating trade-off s and distinguishes between repositioning performance on the efficient frontier and improving performance by overcoming trade-off s.

Stakeholder groups with typical operations objectives

Chapter 3 strategy can be described in some of the following ways: ● Setting broad objectives that direct an enterprise towards its overall goal. ● Planning the path (in general rather than specific terms) that will achieve these goals. ● Stressing long-term rather than short-term objectives. ● Dealing with the total picture rather than stressing individual activities. ● Being detached from, and above, the confusion and distractions of day-to-day activities What is strategy and what is operations strategy? Strategy is the total pattern of decisions and actions that position the organization in its environment and that are intended to achieve its long-term goals. ● Operations strategy concerns the pattern of strategic decisions and actions which set the role, objectives and activities of the operation. ● Operations strategy has content and process. The content concerns the specific decisions which are taken to achieve specific objectives. The process is the procedure which is used within a business to formulate its strategy.

What is the difference between a ‘top-down’ and a ‘bottom-up’ view of operations strategy? ● The ‘top-down’ perspective views strategic decisions at a number of levels. Corporate strategy sets the objectives for the different businesses which make up a group of businesses. Business strategy sets the objectives for each individual business and how it positions itself in its marketplace. Functional strategies set the objectives for each function’s contribution to its business strategy. ● The ‘bottom-up’ view of operations strategy sees overall strategy as emerging from day-today operational experience. What is the difference between a ‘market requirements’ and an ‘operations resources’ view of operations strategy? ● A ‘market requirements’ perspective of operations strategy sees the main role of operations as satisfying markets. Operations performance objectives and operations decisions should be primarily influenced by a combination of customers’ needs and competitors’ actions. Both of these may be summarized in terms of the product/service life cycle. ● The ‘operations resources’ perspective of operations strategy is based on the resource-based view (RBV) of the firm and sees the operation’s core competencies (or capabilities) as being the main influence on operations strategy. Operations capabilities are developed partly through the strategic decisions taken by the operation. Strategic decision areas in operations are usually divided into structural and infrastructural decisions. Structural decisions are those which define an operation’s shape and form. Infrastructural decisions are those which influence the systems and procedures that determine how the operation will work in practice. How can operations strategy form the basis for operations improvement? ● An operations strategy can provide the foundation for improvement by achieving a fit between an operation’s market requirements and its operations capabilities. ● A ‘line of fit’ diagram can illustrate this. It is a conceptual model intended to illustrate some ideas around the concept of strategic improvement. ● During improvement it may not be possible to maintain a balance between market requirements and operations performance. When markets expect something that the operation cannot deliver, or when operations have capabilities that cannot be exploited in the market, there are strategic risks deriving from the deviation from the ‘line of fit’. ● The importance–performance matrix positions competitive factors according to their importance and the peration’s success at achieving them to determine relative improvement priorities.

How can an operations strategy be formulated? The process of operations strategy ● Putting an operations strategy together is called ‘the process’ of operations strategy. ● There are four stages in the process of operations strategy, which can be viewed as a cycle: ● Formulation – which is the process of clarifying the various objectives and decisions that make up the strategy, and the links between them. This should produce strategies that are comprehensive, coherent, provide correspondence and prioritize the most critical activities or decisions. Implementation – the way that strategy is operationalized or executed. Three issues are often mentioned by strategy practitioners as being important in achieving successful implementation: the clarity of the strategy, the nature of the leadership provided by top management, and effective project management. ● Monitoring – involves tracking ongoing performance and diagnosing data to make sure that the changes are proceeding as planned and providing early indications of any deviation from the plan. ● Control – involves the evaluation of the results from monitoring the implementation so that activities, plans and performance can be assessed with the intention of correcting future action if that is required. From implementing to supporting to driving strategy Most businesses expect their operations strategy to improve oper...