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Chapter 1
What is operations management?
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What is operations management?
Operations management is the activity
Operations management defined
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.
three core functions of any organization
● the marketing (including sales) function – which is responsible for communicating the organization’s products and services to its markets in order to generate customer requests for service;
● the product/service development function – which is responsible for creating new and modified products and
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
responsible for creating new and modified products and services in order to generate future customer requests for service;
● the operations function – which is responsible for fulfilling customer requests for service through the production and delivery of products and services.
Example for three core functions of any organization
●
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some interfunctional relationships between the operations function and other core and support functions
Engineering/ technical function
Accounting and finance
function
Understanding of the capabilities and
constraints of the operations process
New product and service ideas
Understanding of the capabilities and
constraints of the Financial analysis
Provision of relevant
data
Analysis of new technology options Understanding of
process technology needs
Product/service development
function
Operations
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Human resources function
Information technology (IT) function
operations processMarket
requirements
Financial analysis for performance and decisions
Recruitment development and training
Understanding of human resource needs
Provision of systems for design, planning and
control, and improvementUnderstanding
of infrastructural and system
needs
Marketing function
pfunction
They are all
operations
Back office operation in a bank
Kitchen unit manufacturing
operation
Retail operation
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Take-out / restaurant operation
The best way to start understanding the nature of ‘operations’ is to look around you
Everything you can see around you (except the flesh and blood) has been processed by an operation
Every service you consumed today (radio station, bus
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
y y y (service, lecture, etc.) has also been produced by an operation
Operations Managers create everything you buy, sit on, wear, eat, throw at people, and throw away
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management uses resources to appropriately create outputs that fulfil defined market requirements
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The new operations agenda
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Design a store layout which gives smooth and effective flowDesign elegant
products which can be flat-packed efficiently
Site stores of an appropriate size in the most effective
Continually examine and improve operations practice
Ensure that the jobs of all staff encourage their contribution to business success
Operations management at IKEA
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
the most effective locations
Maintain cleanliness and safety of storage area
Arrange for fast replenishment of products
Monitor and enhance quality of service to customers
operations practice
Prêt a Manger
‘High-end’ sandwich and snack retailer
Uses only ‘wholesome’ ingredients
All shops have own kitchens, which make fresh sandwiches every day
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
y y
Fresh ingredients delivered early every morning
The same staff who serve you at lunch made the sandwiches that morning
“We don’t work nights, we wear jeans, we party …”
The three basic functions at Prêt a Manger
Product /Service
Development
Nutritional ‘mechanical’ and aesthetic design of the
sandwiches and snacks
Design, locationd t f
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Marketing OperationsPromotional
activities, market
research, etc.
and management of stores and in-store processes and the
network that supplies them
All operations are transformation processes …
Transformation processInputs Outputs
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
that transform inputs …
into outputs
Transformed resources …
�Materials �Information �Customers
CustomersOutput
products Input resources
Some inputs are transformed resourcesSome inputs are transforming resources
Transformation process
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transforming resources …
�Facilities �Staff
Customersand services
resources
Outputs are products and services that add value for customers
Transformation process
Transformed resources …
�Ingredients �Packaging �Customers
Served and satisfied
t
Input resources
At Prêt a Manger
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
customers
Transforming resources …
�Equipment �Fittings �Staff
Transformed and transforming resources
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transformed resourcesOne set of inputs to any operation’s processes are transformed resources. These are the resources that are treated, transformed or converted in the process
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transforming resources
The other set of inputs to any operations process are transforming resources.
These are the resources which act upon the transformed resources. There are
two types which form the ‘building blocks’ of all operations:
● facilities – the buildings, equipment, plant and process technology of the
operation;
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
p
● staff – the people who operate, maintain, plan and manage the operation.
(Note that we use the term ‘staff ’ to describe all the people in the operation, at
any level.)
Outputs from the process
�Although products and services are different, the distinction can be subtle.
�The most obvious difference is in their respective tangibility. Products are
usually tangible. Services are usually intangible.
� Also, services may have a shorter stored life.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
� Products can usually be stored, at least for a time. The life of a service is often
much shorter. For example, the service of ‘accommodation in a hotel room for
tonight’ will perish if it is not sold before tonight – accommodation in the same
room tomorrow is a different service
The output from most operations is a mixture of products and services
Mixture of products and services – Outputs
that are a mixture of
Prêt a Manger
Acme WhistlesCrude oil production
Aluminium smelting
Specialist machine tool production
Restaurant
Pure products – Outputs that are exclusively
tangible
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
the tangible and the intangible
Mwagusi Safari Lodge
Restaurant
Information systems provider
Management consultancy
Psychotherapy clinicPure services – Outputs
that are exclusively intangible
IKEA
Operations can be analyzed at three levels
Flow between operations
The level of the supply network
The level of the operation
Flow between processes
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The level of the operation
The level of the processFlow between resources
Operations can be analyzed at three levels
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Some operations described in terms of their processes
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations management is relevant to all parts of the business
All managers should have something to learn from theprinciples, concepts, approaches and techniques ofoperations management.
we must distinguish between two meanings of‘operations’:
● ‘Operations’ as a function, meaning the part of the
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
organization which produces the products and services forthe organization’s external customers;
● ‘Operations’ as an activity, meaning the management ofthe processes within any of the organization’s functions.
Operations management is relevant to all parts of the business
Some examples of processes in non-operations functions
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Business processes�Satisfying customers’ needs is accomplished throughusing many processes, in both operations and otherfunctions.
�Each of the processes contributes some part to fulfillingcustomer needs.
�A i its tions that h
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
�A company may re-organize its operations so that eachproduct is produced from start to finish by a dedicatedprocess that contains all the elements necessary for itsproduction.
�Customer needs for each product are entirely fulfilledfrom within what is called an ‘end-to-end’ businessprocess.
Business process Reengineering�end-to-end BP often cut across conventionalorganizational boundaries.
�Reorganizing (or ‘re-engineering’) process boundariesand organizational responsibilities around these businessprocesses is the philosophy behind business process re-engineering (BPR).
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
engineering (BPR).
A Typology of Operations
Variety of outputHigh Low
HighVolume of output
Low High
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Variation in demand
High Low
Visibility for customers
High Low
A Typology of Operations
Implications Implications
High
Low repetitionEach staff member performs more of jobLess systemizationHigh unit costs
High repeatabilitySpecializationCapital intensiveLow unit costs
VolumeLow High
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
a local cafeteria vs. McDonald
A Typology of Operations
Implications Implications
FlexibleComplexMatch customer needsHigh unit costs
Well definedRoutineStandardizedRegularLow unit costs
VarietyHigh Low
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Taxi agency vs. bus services
A Typology of Operations
Implications Implications
Changing capacityAnticipationFlexibilityIn touch with demandHigh unit costs
StableRoutinePredictableHigh utilizationLow unit costs
Variation in demand High Low
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Summer resort hotel vs. a hotel in business center
A Typology of OperationsImplications Implications
VisibilityHigh Low
Short waiting toleranceSatisfaction governed by customer perceptionCustomer contact skills neededReceived variety is highHigh unit costs
Time lag between production and consumptionStandardizationLow contact skillsHigh staff utilizationCentralizationLow unit costs
R t iler vs. e biz
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Retailer vs. e-biz
�How much of the operation’s activities its customers experience, orhow much the operation is exposed to its customers
� customer-processing operations are more exposed to theircustomers than material- or information-processing operations
implications of the four Vs�All four dimensions have implications for the cost ofcreating the products or services.
�high volume, low variety, low variation and low customercontact all help to keep processing costs down.
�low volume, high variety, high variation and hight t t lly kind f t lty
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
customer contact generally carry some kind of cost penaltyfor the operation.
�The position of an operation in the four dimensions isdetermined by the demand of the market it is serving.
�Most operations have some discretion in movingthemselves on the dimensions.
Volume
Variety
Variation
Visibility
Low
High
High
High
High
Low
Low
Low
4 V’s profile of two operations
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Important to understand how different operations are positioned on the 4 V’s.
Is their position where they want to be?
Do they understand the strategic implications?
VisibilityHigh LowMwagusi
Safari LodgeFormule 1
Hotel
The activities of operations management
● Understanding the operation’s strategic performance objectives: to understand what it
is trying to achieve. This means understanding how to judge the performance of the operation
at different levels, from broad and strategic to more operational performance objectives.
(Chapter 2)
● Developing an operations strategy for the organization: operations management
involves hundreds of minute-by-minute decisions, so it is vital that there is a set of general
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
principles which can guide decision-making towards the organization’s longer-term goals.
This is an operations strategy (Chapter 3)
● Designing the operation’s products, services and processes: Design is the activity of
determining the physical form, shape and composition of products, services and processes. It
is a crucial part of operations managers’ activities (Chapters 4 to 9).
The activities of operations management
● Planning and controlling the operation: the activity of deciding what the
operations resources should be doing, then making sure that they really are doing
it. (Chapters 10 to 17)
● Improving the performance of the operation: to improve the performance of
their operation. (Chapters 18 to 20)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
● The social responsibilities of operations management: It is increasingly
recognized by many businesses that operations managers have a set of broad
societal responsibilities and concerns beyond their direct activities. The general
term for these aspects of business responsibility is ‘corporate social responsibility’
or CSR. It should be of particular interest to operations managers, because their
activities can have a direct and significant effect on society. (Chapter 21).
A general model of operations management
Transformed resources …
�Materials �Information �Customers
ImprovementDesign
Operations strategy
The operation’s strategic
objectives
The operation’s competitive role
and positionOperations
strategy
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Transforming resources …
�Facilities �Staff
CustomersOutput
products and
services
Input resources
Planning and
control
Operations management
Key Terms Test
Operations managementThe activities, decisions and responsibilities of managing
the production and delivery of products and services.
Operations functionThe t f that d t d t the
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The arrangement of resources that are devoted to theproduction and delivery of products and services.
Operations managersThe staff of the organization who have particular
responsibility for managing some or all of the resourceswhich comprise the operation’s function.
Key Terms TestSupport functionsThe functions that facilitate the working of the core
functions, for example, accounting and finance, humanresources, etc.
Broad definition of operations
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
All the activities necessary for the fulfilment of customerrequests.
Transformation process modelModel that describes operations in terms of their input
resources, transforming processes and outputs of goodsand services.
Key Terms TestTransformed resourcesThe resources that are treated, transformed or converted in a
process, usually a mixture of materials, information andcustomers.
Input resourcesThe transforming and transformed resources that form the input
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The transforming and transformed resources that form the inputto operations.
Transforming resourcesThe resources that act upon the transformed resources, usually
classified as facilities (the buildings, equipment and plant ofan operation) and staff (the people who operate, maintain andmanage the operation).
Key Terms Test
TangibilityThe main characteristic that distinguishes products (usually
tangible) from services (usually intangible).
Facilitating services
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Facilitating servicesServices that are produced by an operation to support its
products.
Facilitating productsProducts that are produced by an operation to support its
services.
Key Terms TestProcessesAn arrangement of resources that produces some mixture
of goods and services.
Supply networkThe network of supplier and customer operations that have
relationships with an operation.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Hierarchy of operationsThe idea that all operations processes are made up of
smaller operations processes.
‘End-to-end’ business processesProcesses that totally fulfil a defined external customer
need.
Key Terms Test
Business process reengineeringThe philosophy that recommends the redesign of
processes to fulfil defined external customer needs.
VolumeThe level or rate of output from a process, a key
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The level or rate of output from a process, a key characteristic that determines process behaviour.
VarietyThe range of different products and services produced by a
process, a key characteristic that determines process behaviour.
Key Terms Test
SystemizationThe extent to which standard procedures are made explicit.
StandardizationThe degree to which processes, products or services are
t d f i time.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
prevented from varying over time.
Customer contact skillsThe skills and knowledge that operations staff need to meet
customer expectations.
Key Terms Test
Front-officeThe high-visibility part of an operation.
Back-office
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The low-visibility part of an operation.
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