CHAPTER ELEVEN : OPERATIONS
MANAGEMENT
22 September 2024 14:31
IMPORTANCE OF OPERATIONS MANAGEMENT: EFFECTIVE AND EFFICIENT
• Can reduce costs of making products or services
• Can increase the revenue the business receives for offering its products and services to its
customers
• Can reduce the amount of investment needed to manufacture the type and quantity of products or to
offer the service required.
• Can provide the impetus for innovation by using its solid base of operational skills and knowledge to
develop new products and services
OTHER REASONS THAT OPERATIONS MANAGEMENT IS IMPORTANT:
• It can improve productivity
○ Productivity is measured as the ratio of output to input
○ High productivity increases profitability
• Can help satisfy the needs of its customer
○ Customer is important to the business and operations manager should see to it that quality
products or services are provided at a reasonable price
• Operations management can be decisive for the general reputation of the business.
WHAT IS OPERATIONS MANAGEMENT?
• Operations management focuses on how to transform inputs into outputs in the most efficient way
possible, balancing costs with revenue to achieve the highest possible profit for the organization.
OPERATIONS MANAGEMENT STRATEGIES AND PERFORMANCE OBJECTIVES:
• High quality
○ The objective measures how well a product or service meets specified standards and customer
expectations
○ High quality leads to customer satisfaction, brand loyalty and reduced costs associated with
returns and repairs.
• Lower costs
○ Costs refers to managing operational expenses while maintaining quality, speed, dependability,
and flexibility
○ Lowering costs allows organisations to offer competitive pricing while maintaining profitability.
• Flexibility
○ Is the ability of an organisation to adapt its operations to meet changing customer demands and
market conditions
○ This includes the capacity to produce different product varieties, adjust production volumes and
modify delivery schedules times quickly.
○ Flexibility can provide a competitive advantage by allowing businesses to respond effectively to
market changes.
• Reliability
○ Consistent performance builds trust with customers, encouraging repeat business.
Organisations that excel in dependability are often preferred by customers who value reliability.
TRANSFORMATION MODEL:
• Illustrates how organisations convert inputs into outputs through various processes.
KEY COMPONENTS OF TRANSFROMATION MODEL:
• INPUTS
○ These are the resources used in the production process , which include raw materials, labour,
information and technology
New Section 3 Page 1
, ○
information and technology
○ They are essential for creating goods and services
• TRANSFORMATION PROCESS
○ This is where inputs are transformed into outputs. It involves various activities that add value to
the inputs, such as manufacturing, assembly, or service delivery.
• OUTPUTS
○ Are the final products or services delivered to customers.
○ They represent the end result of the transformation process should meet quality standards and
customer expectations.
DIFFERENT OPERATIONS HAVE DIFFERENT CHARACTERISTICS:
The four V's:
The four V's help to manage and understand their operations effectively.
• VOLUME OF OUTPUT:
○ This refers to the quantity of products or services produced by an organisation.
○ For example: A fast food chain like McDonalds operates at a high volume, producing large
quantities of similar items efficiently.
• VARIETY OF OUTPUT:
○ Relates to the range of different products or services offered by an organisation.
○ High variety means that the organisation produces a wide range of products while low variety
indicates a more limited selection.
○ For example: CraftMaster offers a high variety of customizable furniture options (eg; different
styles, materials and finishes) in larger quantities.
• VARIATION OF OUTPUT:
○ is the term used to describe how the demand for goods and services changes over time.
External variables like the seasons, market trends, or economic situations might have an impact
on it.
○ Example: CraftMaster Furniture may experience variation in demand based on seasonal trends
(e.g., increased sales during holidays) or economic shifts (e.g., housing market changes).
• VISIBILITY OF OUTPUT:
○ relates to the point to which clients may view and engage with the operational process. High
visibility allows consumers to see important details about the production and delivery processes
of goods and services.
○ Example: In the case of CraftMaster Furniture, visibility can be enhanced through showroom
displays where customers can see the quality and craftsmanship of the furniture firsthand.
THE CLASSIFICATION OF PROCESS TYPES FOR MANUFACTURERS:
• Project processes:
○ Are used for unique, one-off products or services that require significant planning and
coordination
○ Characteristics: long duration with specific timelines and involves multiple stakeholder and
resources
○ Example: Construction projects ( building a custom home)
• Jobbing processes:
○ Involves producing small quantities of customized products.
○ Characteristics: low to medium volume and high variety and customization
○ Example: A machine shop that creates custom parts for various clients or customers.
• Batch processes:
○ produce goods in groups or batches. This method allows for some level of customization while
maintaining efficiency.
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MANAGEMENT
22 September 2024 14:31
IMPORTANCE OF OPERATIONS MANAGEMENT: EFFECTIVE AND EFFICIENT
• Can reduce costs of making products or services
• Can increase the revenue the business receives for offering its products and services to its
customers
• Can reduce the amount of investment needed to manufacture the type and quantity of products or to
offer the service required.
• Can provide the impetus for innovation by using its solid base of operational skills and knowledge to
develop new products and services
OTHER REASONS THAT OPERATIONS MANAGEMENT IS IMPORTANT:
• It can improve productivity
○ Productivity is measured as the ratio of output to input
○ High productivity increases profitability
• Can help satisfy the needs of its customer
○ Customer is important to the business and operations manager should see to it that quality
products or services are provided at a reasonable price
• Operations management can be decisive for the general reputation of the business.
WHAT IS OPERATIONS MANAGEMENT?
• Operations management focuses on how to transform inputs into outputs in the most efficient way
possible, balancing costs with revenue to achieve the highest possible profit for the organization.
OPERATIONS MANAGEMENT STRATEGIES AND PERFORMANCE OBJECTIVES:
• High quality
○ The objective measures how well a product or service meets specified standards and customer
expectations
○ High quality leads to customer satisfaction, brand loyalty and reduced costs associated with
returns and repairs.
• Lower costs
○ Costs refers to managing operational expenses while maintaining quality, speed, dependability,
and flexibility
○ Lowering costs allows organisations to offer competitive pricing while maintaining profitability.
• Flexibility
○ Is the ability of an organisation to adapt its operations to meet changing customer demands and
market conditions
○ This includes the capacity to produce different product varieties, adjust production volumes and
modify delivery schedules times quickly.
○ Flexibility can provide a competitive advantage by allowing businesses to respond effectively to
market changes.
• Reliability
○ Consistent performance builds trust with customers, encouraging repeat business.
Organisations that excel in dependability are often preferred by customers who value reliability.
TRANSFORMATION MODEL:
• Illustrates how organisations convert inputs into outputs through various processes.
KEY COMPONENTS OF TRANSFROMATION MODEL:
• INPUTS
○ These are the resources used in the production process , which include raw materials, labour,
information and technology
New Section 3 Page 1
, ○
information and technology
○ They are essential for creating goods and services
• TRANSFORMATION PROCESS
○ This is where inputs are transformed into outputs. It involves various activities that add value to
the inputs, such as manufacturing, assembly, or service delivery.
• OUTPUTS
○ Are the final products or services delivered to customers.
○ They represent the end result of the transformation process should meet quality standards and
customer expectations.
DIFFERENT OPERATIONS HAVE DIFFERENT CHARACTERISTICS:
The four V's:
The four V's help to manage and understand their operations effectively.
• VOLUME OF OUTPUT:
○ This refers to the quantity of products or services produced by an organisation.
○ For example: A fast food chain like McDonalds operates at a high volume, producing large
quantities of similar items efficiently.
• VARIETY OF OUTPUT:
○ Relates to the range of different products or services offered by an organisation.
○ High variety means that the organisation produces a wide range of products while low variety
indicates a more limited selection.
○ For example: CraftMaster offers a high variety of customizable furniture options (eg; different
styles, materials and finishes) in larger quantities.
• VARIATION OF OUTPUT:
○ is the term used to describe how the demand for goods and services changes over time.
External variables like the seasons, market trends, or economic situations might have an impact
on it.
○ Example: CraftMaster Furniture may experience variation in demand based on seasonal trends
(e.g., increased sales during holidays) or economic shifts (e.g., housing market changes).
• VISIBILITY OF OUTPUT:
○ relates to the point to which clients may view and engage with the operational process. High
visibility allows consumers to see important details about the production and delivery processes
of goods and services.
○ Example: In the case of CraftMaster Furniture, visibility can be enhanced through showroom
displays where customers can see the quality and craftsmanship of the furniture firsthand.
THE CLASSIFICATION OF PROCESS TYPES FOR MANUFACTURERS:
• Project processes:
○ Are used for unique, one-off products or services that require significant planning and
coordination
○ Characteristics: long duration with specific timelines and involves multiple stakeholder and
resources
○ Example: Construction projects ( building a custom home)
• Jobbing processes:
○ Involves producing small quantities of customized products.
○ Characteristics: low to medium volume and high variety and customization
○ Example: A machine shop that creates custom parts for various clients or customers.
• Batch processes:
○ produce goods in groups or batches. This method allows for some level of customization while
maintaining efficiency.
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