Operations Management Summary
Operations management is the activity of managing the resources which are devoted to
the production and delivery of products and services.
ITO (Input-transformation-Output) Model – how to make a product or service
If we don’t understand how the process works (inputs, transformation and outputs), then
we won’t be able to see where we need to improve in the business, as then we don´t know
what the process is.
Inputs
• Transformed resources: materials (eggs, cream, sugar), information, ingredients
and customers
• Transforming resources: staff (operators, managers), facilities (factories,
machineries, tank), human baking, the cake, the oven, the pan
Transformation process
• Collecting order
• Cooking the cake
• Packaging
• Delivery vans
• Restaurant
• Tasting
• Catering
Outputs
• Produce the cake
• Deliver to customer
**** The ITO will be different if it is for the baking (production) of the sponge cake only,
and not for the whole company (as done above) as then it is like the tutorial, in which the
transformation process is the mixing, buying ingredients, freezing, packaging, inventory
management etc.
The main outcome of a production where a customer is the main outcome of a resource
(transformed resource): SERVICE
,Operations management uses resources to appropriately create outputs that fulfil defined
market requirements. But operations can be very different.
Goods vs Services
Characteristics of goods/products
• Tangible
• Production proceeds consumption - they can be stored
• Transformed resources – materials
Characteristics of services
• Intangible
• Production at the same time as consumption - cannot be stored
• Transformed resources – the customers
Spectrum of Products and Services
,Why do we need to know the spectrum of products and services? to see where the main
focus of the company should be
For example: Sponge Cake Producer. Where position it?
Pure products <________!!___________________________> Pure Services
A bit half way, but more towards the pure products side. Why? because aside from
cakes, they also have services (organising parties, catering, they have a restaurant, a
cafe, they deliver it to your house etc.) —> the services are mostly FACILITATING
SERVICES
Addition to the Spectrum of Products and Services
Facilitating products: Products that are produced by an operation to support its services,
e.g. reports prepared by a consultancy firm, receipts prepared at a shop.
Facilitating services: Services that are produced by an operation to support its products,
e.g. technical advice provided by an aluminium smelting firm
Process Hierarchy
Process is an arrangement of resources and activities that transform input into outputs that
satisfy customer needs. They are building blocks of all operations and they form an
internal network within an operation
3 Levels:
1. Flow between operations: the level of the supply network à ex: analysis of the
suppliers
2. Flow between processes: the level of the operation à ex: analysis of activities in
production plants; mixing, freezing, packaging, inventory management etc.
, 3. Flow between resources: the level of the process à ex: mixing process; testing,
handing over to packaging, checking availability of resources
The 4 V’s Typology of Operations
• Volume
• Variety
• Variation in demand
• Visibility
Volume
Definition: the level or rate of output from a process
Low volume = Local café, and High volume = KFC
Variety
Definition: the range of different products and services produced by a process
Operations management is the activity of managing the resources which are devoted to
the production and delivery of products and services.
ITO (Input-transformation-Output) Model – how to make a product or service
If we don’t understand how the process works (inputs, transformation and outputs), then
we won’t be able to see where we need to improve in the business, as then we don´t know
what the process is.
Inputs
• Transformed resources: materials (eggs, cream, sugar), information, ingredients
and customers
• Transforming resources: staff (operators, managers), facilities (factories,
machineries, tank), human baking, the cake, the oven, the pan
Transformation process
• Collecting order
• Cooking the cake
• Packaging
• Delivery vans
• Restaurant
• Tasting
• Catering
Outputs
• Produce the cake
• Deliver to customer
**** The ITO will be different if it is for the baking (production) of the sponge cake only,
and not for the whole company (as done above) as then it is like the tutorial, in which the
transformation process is the mixing, buying ingredients, freezing, packaging, inventory
management etc.
The main outcome of a production where a customer is the main outcome of a resource
(transformed resource): SERVICE
,Operations management uses resources to appropriately create outputs that fulfil defined
market requirements. But operations can be very different.
Goods vs Services
Characteristics of goods/products
• Tangible
• Production proceeds consumption - they can be stored
• Transformed resources – materials
Characteristics of services
• Intangible
• Production at the same time as consumption - cannot be stored
• Transformed resources – the customers
Spectrum of Products and Services
,Why do we need to know the spectrum of products and services? to see where the main
focus of the company should be
For example: Sponge Cake Producer. Where position it?
Pure products <________!!___________________________> Pure Services
A bit half way, but more towards the pure products side. Why? because aside from
cakes, they also have services (organising parties, catering, they have a restaurant, a
cafe, they deliver it to your house etc.) —> the services are mostly FACILITATING
SERVICES
Addition to the Spectrum of Products and Services
Facilitating products: Products that are produced by an operation to support its services,
e.g. reports prepared by a consultancy firm, receipts prepared at a shop.
Facilitating services: Services that are produced by an operation to support its products,
e.g. technical advice provided by an aluminium smelting firm
Process Hierarchy
Process is an arrangement of resources and activities that transform input into outputs that
satisfy customer needs. They are building blocks of all operations and they form an
internal network within an operation
3 Levels:
1. Flow between operations: the level of the supply network à ex: analysis of the
suppliers
2. Flow between processes: the level of the operation à ex: analysis of activities in
production plants; mixing, freezing, packaging, inventory management etc.
, 3. Flow between resources: the level of the process à ex: mixing process; testing,
handing over to packaging, checking availability of resources
The 4 V’s Typology of Operations
• Volume
• Variety
• Variation in demand
• Visibility
Volume
Definition: the level or rate of output from a process
Low volume = Local café, and High volume = KFC
Variety
Definition: the range of different products and services produced by a process
