MNB1601 NOTES
OPERATIONS MANAGEMENT
The operations function is that function of the business aimed at executing the
transformation process.
The importance of operations management:
It can reduce the cost of making products or offering services
It can increase the revenue the business receives for offering its products and services
to its customers/clients
It can reduce the amount of investment (capital) needed to manufacture the type and
quantity of products or to offer the service required/
It can provide the impetus for new innovation by using its solid base of operational skills
and knowledge to develop new products and services
Other reasons Op’s Management are important to a business:
Operations management can improve productivity
Operations management can help a business to satisfy the needs of its
customers/clients more effectively
Operations management can be decisive for the general reputation of the business
Defining terms used in operations management:
The operations function is that function in the business primarily aimed at the utilisation
of resources to manufacture products or render services.
Operations management involves operations managers’ activities, decisions and
responsibilities that tie in with the execution of the operations function.
Operation-management strategies and performance objectives:
All businesses formulate business objectives, and if a business intends surviving in the long
term, consumers who are satisfied with the business’s products or services should be a top-
priority objective. Although there are numerous customer needs that can be reduced to 6
main elements:
Higher quality
Lower costs
Shorter lead time (quicker manufacturing or provision of services)
Greater adaptability (flexibility)
Lower variability with regard to specifications (reliability)
High level of service (better overall service).
With these 6 customer/client requirements as a basis, operations management performance
objectives can be formulated to give the business an “operations-cased advantage” over
other businesses. Operations management performance objectives must indicate the
specific areas with the domain of the operations function that will be emphasised when
products and/or services are produced or provided. The operations-management
1
,performance objectives are formulated in such a way that they are applicable to both
manufacturers and service providers. To acquire operations based advantages, the
following 6 general operations-management performance objectives can be followed:
Do things right the first time
Do things cost effectively
Do things fast
Make changes quickly
Do things right every time
Do things better
Operations management guideline Positive result
Do things right the first time Higher quality
Do things cost effectively Lower cost
Do things fast Shorter lead time
Changing things quickly Greater Adaptability
Do things right every time Lower variability
Do things better Better service
The transformation model:
The operations function is primarily concerned with using resources (inputs) to provide
outputs by means of a transformation process. Therefore the transformation model
comprises 3 main components: Inputs, the transformation process itself and outputs.
Inputs:
Inputs used in the transformation process comprise both the resources that are to be
transformed (processed, changed or converted) and the resources required to make the
transformation possible. The resources to be transformed include the following:
Material
Customers/clients
Information
The resources required to make transformation possible include:
Human Resources
Equipment and facilities
Technology
The Transformation Process:
The transformation process converts inputs to outputs. The nature of the process is
determined by what input is predominantly being processed.
2
,Outputs:
The ultimate goal of any transformation process is to transform inputs into outputs. Outputs
assume the form of products or services.
Characteristics of products and services:
Products produced by manufacturer Services produced by service provider
Physically tangible and durable Intangible and perishable
Output kept in stock Output not kept in stock
Little customer contact Plenty of client contact
Manufactured before use Provision and consumption
simultaneous
Long response time Short response time
Local & International markets Mainly local markets
Large production Facilities Small service-provision facility
Capital-intensive production Labour intensive
Quality easily measurable Quality difficult to measure
Different operations have different characteristics:
While the basic purpose of all operations is similar in that they transform inputs into outputs,
the processes may differ fundamentally in 4 ways:
The volume of output may differ (amount)
The variety of the output may differ (range)
The variation of output may differ (demand pattern)
The visibility of output may differ (refers to how much of the operations activities the
customers experience themselves or are exposed to)
The classification of process types for manufacturers:
In manufacturing the most common classification system classifies different operations
processes according to the volume of output and the variety of products. According to the
classification system 5 main categories are identified:
Project Processes: Projects represent operational processes that are highly individual
and unique, but that are normally tackled on a large scale. It can take several months or
years to complete such projects (i.e. constructions projects, upgrading or building of
airport, road, bridge etc.)
Jobbing Processes: Jobbing normally represents operational processes conducted on
a small scale with a low volume of output. The nature of the work is the same
throughout, but the specific requirements differ from 1 task to the next. (Egg goldsmith
manufacturing jewellery, each piece is usually unique)
Batch Processes (job lots): In batch production a limited range of products are
manufactured by the business and production occurs in batches. Similar to jobbing but
doesn’t have same degree of variety. i.e. batch production of domestic appliances such
as kettles, toasters, irons etc.
3
, Mass Processes: Mass production is the production of products in high volume with
relatively little variety. There is some variety in the product itself but the basic process of
production is the same, repetitive in nature, largely predictable and easier to manage
that jobbing and batch processes.
Continuous processes: Continuous production is a step beyond mass production
because the volumes are even greater but there is very little variety in the type of
product. E.g. cement manufacturer PPS cement, ESKOM for electricity.
The classification of process types for service providers:
The same classification criteria used for manufacturers can be used for service providers .
According to such a classification system 3 main categories can be identified:
Professional Services: represent operational processes provided on a high client-
contact basis, where the client is usually present within the service process for a
considerable period of time. Contact often occurs on a one-to-one basis. Volume is
usually low while variety of services offered high e.g. doctors, lawyers, dentists
Service shops: Service shops represent operational processes where the characteristics
of service provision fall between those of professional services and those of mass
services. There is a fair amount of client contact & services are standardised to a
degree e.g. Banks, hotels, shops etc
Mass services: represent operational processes where many client transactions occur
with limited client contact and nature of services provided is largely standardised e.g.
post services, rail & transport services.
Operations Design
The nature of operations design entails two interdependent aspects:
The design of products and services (product design)
The design of operations product or services processes to manufacture or provide these
products or services (process design)
The primary aim of operations design is to provide products and or services and processes
that satisfy the needs of customers/clients in the best possible way.
The design of products and services:
Competitive advantage of good design:
If products are well designed, produces and provided so that the expectations of customers
are met or exceeded then business’s competitive positions will be reinforced through
increased sales of these products/services.
The Components of products and services:
All products and services consist of 3 interdependent components: A concept, a package
and a process.
4
OPERATIONS MANAGEMENT
The operations function is that function of the business aimed at executing the
transformation process.
The importance of operations management:
It can reduce the cost of making products or offering services
It can increase the revenue the business receives for offering its products and services
to its customers/clients
It can reduce the amount of investment (capital) needed to manufacture the type and
quantity of products or to offer the service required/
It can provide the impetus for new innovation by using its solid base of operational skills
and knowledge to develop new products and services
Other reasons Op’s Management are important to a business:
Operations management can improve productivity
Operations management can help a business to satisfy the needs of its
customers/clients more effectively
Operations management can be decisive for the general reputation of the business
Defining terms used in operations management:
The operations function is that function in the business primarily aimed at the utilisation
of resources to manufacture products or render services.
Operations management involves operations managers’ activities, decisions and
responsibilities that tie in with the execution of the operations function.
Operation-management strategies and performance objectives:
All businesses formulate business objectives, and if a business intends surviving in the long
term, consumers who are satisfied with the business’s products or services should be a top-
priority objective. Although there are numerous customer needs that can be reduced to 6
main elements:
Higher quality
Lower costs
Shorter lead time (quicker manufacturing or provision of services)
Greater adaptability (flexibility)
Lower variability with regard to specifications (reliability)
High level of service (better overall service).
With these 6 customer/client requirements as a basis, operations management performance
objectives can be formulated to give the business an “operations-cased advantage” over
other businesses. Operations management performance objectives must indicate the
specific areas with the domain of the operations function that will be emphasised when
products and/or services are produced or provided. The operations-management
1
,performance objectives are formulated in such a way that they are applicable to both
manufacturers and service providers. To acquire operations based advantages, the
following 6 general operations-management performance objectives can be followed:
Do things right the first time
Do things cost effectively
Do things fast
Make changes quickly
Do things right every time
Do things better
Operations management guideline Positive result
Do things right the first time Higher quality
Do things cost effectively Lower cost
Do things fast Shorter lead time
Changing things quickly Greater Adaptability
Do things right every time Lower variability
Do things better Better service
The transformation model:
The operations function is primarily concerned with using resources (inputs) to provide
outputs by means of a transformation process. Therefore the transformation model
comprises 3 main components: Inputs, the transformation process itself and outputs.
Inputs:
Inputs used in the transformation process comprise both the resources that are to be
transformed (processed, changed or converted) and the resources required to make the
transformation possible. The resources to be transformed include the following:
Material
Customers/clients
Information
The resources required to make transformation possible include:
Human Resources
Equipment and facilities
Technology
The Transformation Process:
The transformation process converts inputs to outputs. The nature of the process is
determined by what input is predominantly being processed.
2
,Outputs:
The ultimate goal of any transformation process is to transform inputs into outputs. Outputs
assume the form of products or services.
Characteristics of products and services:
Products produced by manufacturer Services produced by service provider
Physically tangible and durable Intangible and perishable
Output kept in stock Output not kept in stock
Little customer contact Plenty of client contact
Manufactured before use Provision and consumption
simultaneous
Long response time Short response time
Local & International markets Mainly local markets
Large production Facilities Small service-provision facility
Capital-intensive production Labour intensive
Quality easily measurable Quality difficult to measure
Different operations have different characteristics:
While the basic purpose of all operations is similar in that they transform inputs into outputs,
the processes may differ fundamentally in 4 ways:
The volume of output may differ (amount)
The variety of the output may differ (range)
The variation of output may differ (demand pattern)
The visibility of output may differ (refers to how much of the operations activities the
customers experience themselves or are exposed to)
The classification of process types for manufacturers:
In manufacturing the most common classification system classifies different operations
processes according to the volume of output and the variety of products. According to the
classification system 5 main categories are identified:
Project Processes: Projects represent operational processes that are highly individual
and unique, but that are normally tackled on a large scale. It can take several months or
years to complete such projects (i.e. constructions projects, upgrading or building of
airport, road, bridge etc.)
Jobbing Processes: Jobbing normally represents operational processes conducted on
a small scale with a low volume of output. The nature of the work is the same
throughout, but the specific requirements differ from 1 task to the next. (Egg goldsmith
manufacturing jewellery, each piece is usually unique)
Batch Processes (job lots): In batch production a limited range of products are
manufactured by the business and production occurs in batches. Similar to jobbing but
doesn’t have same degree of variety. i.e. batch production of domestic appliances such
as kettles, toasters, irons etc.
3
, Mass Processes: Mass production is the production of products in high volume with
relatively little variety. There is some variety in the product itself but the basic process of
production is the same, repetitive in nature, largely predictable and easier to manage
that jobbing and batch processes.
Continuous processes: Continuous production is a step beyond mass production
because the volumes are even greater but there is very little variety in the type of
product. E.g. cement manufacturer PPS cement, ESKOM for electricity.
The classification of process types for service providers:
The same classification criteria used for manufacturers can be used for service providers .
According to such a classification system 3 main categories can be identified:
Professional Services: represent operational processes provided on a high client-
contact basis, where the client is usually present within the service process for a
considerable period of time. Contact often occurs on a one-to-one basis. Volume is
usually low while variety of services offered high e.g. doctors, lawyers, dentists
Service shops: Service shops represent operational processes where the characteristics
of service provision fall between those of professional services and those of mass
services. There is a fair amount of client contact & services are standardised to a
degree e.g. Banks, hotels, shops etc
Mass services: represent operational processes where many client transactions occur
with limited client contact and nature of services provided is largely standardised e.g.
post services, rail & transport services.
Operations Design
The nature of operations design entails two interdependent aspects:
The design of products and services (product design)
The design of operations product or services processes to manufacture or provide these
products or services (process design)
The primary aim of operations design is to provide products and or services and processes
that satisfy the needs of customers/clients in the best possible way.
The design of products and services:
Competitive advantage of good design:
If products are well designed, produces and provided so that the expectations of customers
are met or exceeded then business’s competitive positions will be reinforced through
increased sales of these products/services.
The Components of products and services:
All products and services consist of 3 interdependent components: A concept, a package
and a process.
4
