Operations management
Chapter 1 Operations Management
What is operations management?
● Operations management: the activity of managing the resources that create and deliver
services and products // each firm has an operations function & operations managers
Operations in the organization
● Operations function creates and delivers services & products → reason for
existing
○ All organizations have ‘operations’ that produce some mix of services/products
● 3 core functions of any organization
○ Marketing (incl. sales) function → communicate the organization’s services
and products to its markets in order to generate customer requests
○ Product/service development function → coming up with new or
modified services and products in order to generate future customer
requests
○ Operation function → creating and delivering services/products based
on customer requests
● Core functions → supporting functions ( accounting/finance, technical, HRM, information systems)
○ In reality → no clear division
● Operations managers need to cooperate with other functions to ensure effective
organizational performance
Why is operations management important in all types of
organizations?
● How to visualize the operations function → any business that ‘creates’ must
use resources so must have an operations activity
● The economic sector of an operation is less important in determining how it should be
managed than its intrinsic characteristics
● Operations Management
uses resources to
appropriately create outputs
that fulfill defined market
requirements
,Operations management in the smaller organization
● Informal structure due to insufficient resources (employees are not
specialized, they can do more jobs at the same time) → quick response vs
overlapping roles
● Hard to separate OM from other issues
Operations management in not-for-profit organizations
● Also have to think about how to create and deliver service and products,
invest in technology, contract out some activities, devise performance
measures, improve performance etc → strategic objectives are more complex
○ Mix of political/economic/social/environmental objectives → conflicting
objectives
The new operations agenda
● Changes in the business environment made operations managers to adjust activities to
cope, especially in:
○ New technologies
■ Internet, 3d printing, robotics, big data analysis
○ Different supply arrangements → globalized supply markets
■ Partnership relations, global operations networks, reputation risk management
○ Increased emphasis on social and environmental issues
■ Environmentally sensitive design, energy saving, flexible working patterns
● Operations management is at the forefront of coping with, and exploiting, developments
in business and technology
What is the input-transformation-output process
● Change inputs into outputs using an input-transformation-output process
● Operations are processes that take in a set of input resources which are used to
transform something/are transformed, into outputs of services and products
,Inputs to the process
● One set of inputs are transformed resources, which are treated/transformed/converted
in the process and usually a mixture of:
○ Materials → transfer physical properties / change location / change
possession
○ Information → transform informational properties / change possession /
store / change location
○ Customers → change physical properties / store (accommodate) / change
location / transform psychological state
○ Usually one of these is dominant
● Other set of inputs are transforming resources, which are the resources which act
upon the transformed resources and there are 2 types which form the ‘building blocks’:
○ Facilities → buildings, equipment, plant and process technology of the
operation
○ Staff → people who operate/maintain/manage the operation
● Transformed resource inputs to a process are materials, customers, or information
● All processes have transforming resources of facilities and people
Outputs from the process
● Products are tangible things whereas services are activities or
processes
● Most operations produce both products and services
○ Spectrum of pure products to pure services
○ the output from most operations is a mixture of products
and services
● Product or service?
○ Integrated products and services → offerings
○ Whether an operation produces tangible products or
intangible services is becoming increasingly irrelevant. In
a sense, all operations produce service for their
customers
● Servitization is how operations are becoming more service-conscious
○ Servitization involves firms developing the capabilities to provide services and
solutions that supplement their tradition product offerings
● Subscription services: An operation’s customers pay a fixed amount each time period
to receive a pre-agreed service
● Customers: The nature of outputs involve consideration of the customers for
whom they are intended → can both be input and reason for existence
● B2B operations provide products/services to other business < > B2C
operations provide direct to individual customers → different concerns and
differently organized
, What is the process hierarchy
● All operations consist of a collection of processes interconnecting to form a network
○ Each process is a smaller version of the whole operation of which it forms a part,
and transformed resources flow in between them
● Process: arrangement of resources & activities transforming inputs into outputs that
satisfy (internal/external) customer needs→ building blocks of an operation, but at
○ At the same time, a process → internal supplier & customer for other
processes
● Within each process, another network of individual units of resources are needed
○ Again, transformed resources flow between each unit of transforming resources
● An operation can be viewed as part of a bigger network of operations: supply network
● 3 levels to analyse businesses: the process, the operation and the supply network →
process hierarchy
○ A process perspective can be used at these 3 levels
Operations management is relevant to all parts of the business
● Not only operation functions, all functions manage processes
● All parts of the business manage processes, so all parts of the business have an
operations role and need to understand operations management principles
● distinguish 2 meanings of operations:
○ Operations as a function: the part of the organization which creates and delivers
services and products for the organization’s external customers
○ Operations as an activity: the management of the processes within any of the
organization’s functions
● Business processes: whenever a business attempts to satisfy its customers needs it will
use many processes, contributing some part to fulfilling customer needs
○ Processes = defined by how organization chooses to draw process boundaries
How do operations and processes differ → 4 V’s
● The volume dimension: the level or rate of output from a process
● The variety dimension:the range of different products and services produced by a
process
● The variation (in demand) dimension:the degree to which the rate or level of output
from a process varies over time
● The visibility dimension:the amount of value-added activity that takes place in the
(virtual) presence of the customer
○ Some operations have both high and low visibility within the same operation
● All low cost implications are on the right (hence volume is turned around)
Chapter 1 Operations Management
What is operations management?
● Operations management: the activity of managing the resources that create and deliver
services and products // each firm has an operations function & operations managers
Operations in the organization
● Operations function creates and delivers services & products → reason for
existing
○ All organizations have ‘operations’ that produce some mix of services/products
● 3 core functions of any organization
○ Marketing (incl. sales) function → communicate the organization’s services
and products to its markets in order to generate customer requests
○ Product/service development function → coming up with new or
modified services and products in order to generate future customer
requests
○ Operation function → creating and delivering services/products based
on customer requests
● Core functions → supporting functions ( accounting/finance, technical, HRM, information systems)
○ In reality → no clear division
● Operations managers need to cooperate with other functions to ensure effective
organizational performance
Why is operations management important in all types of
organizations?
● How to visualize the operations function → any business that ‘creates’ must
use resources so must have an operations activity
● The economic sector of an operation is less important in determining how it should be
managed than its intrinsic characteristics
● Operations Management
uses resources to
appropriately create outputs
that fulfill defined market
requirements
,Operations management in the smaller organization
● Informal structure due to insufficient resources (employees are not
specialized, they can do more jobs at the same time) → quick response vs
overlapping roles
● Hard to separate OM from other issues
Operations management in not-for-profit organizations
● Also have to think about how to create and deliver service and products,
invest in technology, contract out some activities, devise performance
measures, improve performance etc → strategic objectives are more complex
○ Mix of political/economic/social/environmental objectives → conflicting
objectives
The new operations agenda
● Changes in the business environment made operations managers to adjust activities to
cope, especially in:
○ New technologies
■ Internet, 3d printing, robotics, big data analysis
○ Different supply arrangements → globalized supply markets
■ Partnership relations, global operations networks, reputation risk management
○ Increased emphasis on social and environmental issues
■ Environmentally sensitive design, energy saving, flexible working patterns
● Operations management is at the forefront of coping with, and exploiting, developments
in business and technology
What is the input-transformation-output process
● Change inputs into outputs using an input-transformation-output process
● Operations are processes that take in a set of input resources which are used to
transform something/are transformed, into outputs of services and products
,Inputs to the process
● One set of inputs are transformed resources, which are treated/transformed/converted
in the process and usually a mixture of:
○ Materials → transfer physical properties / change location / change
possession
○ Information → transform informational properties / change possession /
store / change location
○ Customers → change physical properties / store (accommodate) / change
location / transform psychological state
○ Usually one of these is dominant
● Other set of inputs are transforming resources, which are the resources which act
upon the transformed resources and there are 2 types which form the ‘building blocks’:
○ Facilities → buildings, equipment, plant and process technology of the
operation
○ Staff → people who operate/maintain/manage the operation
● Transformed resource inputs to a process are materials, customers, or information
● All processes have transforming resources of facilities and people
Outputs from the process
● Products are tangible things whereas services are activities or
processes
● Most operations produce both products and services
○ Spectrum of pure products to pure services
○ the output from most operations is a mixture of products
and services
● Product or service?
○ Integrated products and services → offerings
○ Whether an operation produces tangible products or
intangible services is becoming increasingly irrelevant. In
a sense, all operations produce service for their
customers
● Servitization is how operations are becoming more service-conscious
○ Servitization involves firms developing the capabilities to provide services and
solutions that supplement their tradition product offerings
● Subscription services: An operation’s customers pay a fixed amount each time period
to receive a pre-agreed service
● Customers: The nature of outputs involve consideration of the customers for
whom they are intended → can both be input and reason for existence
● B2B operations provide products/services to other business < > B2C
operations provide direct to individual customers → different concerns and
differently organized
, What is the process hierarchy
● All operations consist of a collection of processes interconnecting to form a network
○ Each process is a smaller version of the whole operation of which it forms a part,
and transformed resources flow in between them
● Process: arrangement of resources & activities transforming inputs into outputs that
satisfy (internal/external) customer needs→ building blocks of an operation, but at
○ At the same time, a process → internal supplier & customer for other
processes
● Within each process, another network of individual units of resources are needed
○ Again, transformed resources flow between each unit of transforming resources
● An operation can be viewed as part of a bigger network of operations: supply network
● 3 levels to analyse businesses: the process, the operation and the supply network →
process hierarchy
○ A process perspective can be used at these 3 levels
Operations management is relevant to all parts of the business
● Not only operation functions, all functions manage processes
● All parts of the business manage processes, so all parts of the business have an
operations role and need to understand operations management principles
● distinguish 2 meanings of operations:
○ Operations as a function: the part of the organization which creates and delivers
services and products for the organization’s external customers
○ Operations as an activity: the management of the processes within any of the
organization’s functions
● Business processes: whenever a business attempts to satisfy its customers needs it will
use many processes, contributing some part to fulfilling customer needs
○ Processes = defined by how organization chooses to draw process boundaries
How do operations and processes differ → 4 V’s
● The volume dimension: the level or rate of output from a process
● The variety dimension:the range of different products and services produced by a
process
● The variation (in demand) dimension:the degree to which the rate or level of output
from a process varies over time
● The visibility dimension:the amount of value-added activity that takes place in the
(virtual) presence of the customer
○ Some operations have both high and low visibility within the same operation
● All low cost implications are on the right (hence volume is turned around)
