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Operations Management
8th edition
Part One
Directing the operation
Chapter 1
Operations Management
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
What is operations management?
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Slack et al.â??s model of operations management
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Key questions
In Chapter 1 â?? Operations management â?? Slack et al.
identify the following key questionsâ?¦
 What is operations management?
 Why is operations management important in all types of
organization?
 What is the input-transformation-output process?
 What is the process hierarchy?
 How do operations and processes differ?
 What do operations managers do?
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management defined
Operations management is the activity
of managing the resources which are
devoted to the production and delivery of
products and services.
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
The activities of core functions in some organizations
Core functional Internet service
activities
provider (ISP)
Fast food
chain
International
aid charity
Furniture
manufacturer
Operations
Maintain hardware
software and
content
Implement new
links and services
Make
burgers, etc.
Serve
customers
Maintain
equipment
Give service
to the
beneficiaries
of the charity
Make
components
Assemble
furniture
Marketing
and sales
Promote services
to users and get
registrations
Sell advertising
space
Advertise on
TV
Devise
promotional
materials
Develop funding
contracts
Mail out
appeals for
donations
Advertise in
magazines
Determine
pricing policy
Sell to stores
Product /
service
development
Devise new
services and
commission
new information
content
Design
hamburgers,
pizzas, etc.
Design decor
for restaurants
Develop new
appeals
campaigns
Design new
assistance
programmes
Design new
furniture
Co-ordinate
with fashionable
colours
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations are everywhere
The best way to start understanding the nature of
â??Operationsâ? is to look around you.
Everything you can see around you (except the flesh and
blood) has been produced by an operation.
Every service you consumed today (radio station, bus
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.
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Example â?? Pret A Manger
â??High-endâ?? sandwich and snack retailer
Use only â??wholesomeâ?? ingredients
Source: Getty Images: Bloomberg / Chris Ratcliffe
All shops have own kitchens which makes fresh
sandwiches every day
Fresh ingredients delivered early every morning
Same staff who serve you at lunch made the sandwiches
that morning
â??We donâ??t work nights, we wear jeans, we partyâ?¦ â??
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management in all types of organization
Automobile assembly factory â?? Operations
management uses machines to efficiently
assemble products that satisfy current
customer demands
Source: Shutterstock.com: Supergenijalac
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management in all types of organization
Physician (General practitioner)
â?? Operations management uses
knowledge to effectively diagnose
conditions in order to treat real
and perceived patient concerns
Source: Shutterstock.com: Stuart Jenner
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management in all types of organization
Management consultant â?? Operations
management uses people to effectively
create the services that will address
current and potential client needs
Source: Shutterstock.com: Indianstockimages
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management in all types of organization
Disaster relief
charity â?? Operations
management uses
ours and our partnersâ??
resources to speedily
provide the supplies
and services that
relieve community
suffering
Source: Getty Images: AFP / Romeo Gacad
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management in all types of organization
Advertising agency â?? Operations
management uses our staffâ??s knowledge
and experience to creatively present
ideas that delight clients and address
their real needs
Source: Alamy Images: Adrian Sherratt
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management usesâ?¦
machines
knowledge
people
ours and our
partnersâ??
resources
our staffâ??s
knowledge and
experience
to
efficiently
assemble
products
to
effectively
diagnose
conditions
to treat real and
perceived patient
concerns
to
effectively
create
services that will
address current and
potential client
needs
to
speedily
provide
supplies and
services that relieve
community suffering
creatively
present
ideas that delight
clients and address
their real needs
to
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations management is changing
The business environment is
changing, for exampleâ?¦
 Increased cost-based competition
Prompting operations responses, for
exampleâ?¦
Globalization of operations networking
 Higher quality expectations
Information-based technologies
 Demands for better service
Internet-based integration of operations
activities
 More choice and variety
Supply chain management
 Rapidly developing technologies
 Frequent new product/service
introduction
Customer relationship management
Flexible working patterns
Mass customization
Fast time-to-market methods
 Increased ethical sensitivity
Lean process design
 Environmental impacts are more
transparent
Environmentally sensitive design
 More legal regulation
Failure analysis
 Greater security awareness
Supplier â??partnershipâ?? and development
Business recovery planning
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations input resources and outputs
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Examples of dominant transformed resource inputs
Predominantly
Predominantly
Predominantly
processing inputs of
processing inputs of
processing inputs of
materials
information
customers
All manufacturing
Accountants
Hairdressers
operations
Bank headquarters
Hotels
Mining companies
Market research
Hospitals
Retail operations
company
Mass rapid transports
Warehouses
Financial analysts
Theatres
Postal services
News service
Theme parks
Container shipping line
University research unit Dentists
Trucking companies
Telecoms company
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Figure 1.4
Changes in the business environment are
shaping a new operations agenda
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Most operations produce products and services
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Some operations described in terms of their processes
Operation
Airline
Department
store
Police
Some of the operationâ??s Some of the operationâ??s
inputs
processes
Aircraft
Check passengers in
Pilots and air crew
Board passengers
Ground crew
Passengers and freight
Fly passengers and freight
around the world
Products for sale
Care for passengers
Source and store products
Sales staff
Display products
Information systems
Give sales advice
Customers
Police officers
Computer systems
Information systems
Public (law-abiding and
criminals)
Fresh food
Sell products
Crime prevention
Frozen food
manufacturer Operators
Crime detection
Information gathering
Detaining suspects
Source raw materials
Some of the
operationâ??s outputs
Transported
passengers and freight
Customers and
products â??assembledâ??
together
Lawful society, public
with a feeling of
security
Frozen food
Prepare food
Processing technology
Freeze food
Cold storage facilities
Pack and freeze food
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Example of analysis at three levels (1 of 3)
The supply network-flow between operations
Studios
Casting
agency
Creative
agency
Promotion
agency
Programme
/ video
maker
Broadcasting
company
The programme
and video
supply network
The operation-flow between processes
The
programme
and video
operation
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Example of analysis at three levels (2 of 3)
The supply network-flow between
operations
Programme
and video
operation
The operation-flow between processes
Engineer
-ing
Marketing
and sales
Finance and
accounting
Production
unit
Post
production
Set and props The programme and
manufacture
video operation
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Example of analysis at three levels (3 of 3)
The supply networkflow between
operations
Programme
and video
maker
The operationflow between
processes
Set and props
manufacture
The â??Set and
props
manufacturingâ??
process
Set
design
Set
construction
Props
acquisition
Set
finishing
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Table 1.4
Some examples of processes in non-operations functions
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Two â??end-to-endâ?? business processes
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
A typology of operations and processes (1 of 4)
The implications of high and low Volume in operations and
processesâ?¦
Implications
â?¢ Low repetition
â?¢ Each staff member
performs more of
each task
â?¢ Less systemization
â?¢ High unit costs
Implications
Low
Volume
High
High
â?¢
â?¢
â?¢
â?¢
High repeatability
Specialization
Capital intensive
Low unit costs
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
A typology of operations and processes (2 of 4)
The implications of high and low Variety in operations and
processesâ?¦
Implications
â?¢ Flexible
â?¢ Complex
â?¢ Match customer
needs
â?¢ High unit costs
Implications
High
Variety
High
Low
â?¢ Well defined
â?¢ Routine
â?¢ Standardized
â?¢ Regular
â?¢ Low unit costs
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
A typology of operations and processes (3 of 4)
The implications of high and low Variation in operations and
processesâ?¦
Implications
â?¢ Changing
capacity
â?¢ Anticipation
â?¢ Flexibility
â?¢ In touch with
demand
â?¢ High unit costs
Implications
Variation in
High
High
Low
demand
â?¢
â?¢
â?¢
â?¢
â?¢
Stable
Routine
Predictable
High utilization
Low unit costs
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
A typology of operations and processes (4 of 4)
The implications of high and low Visibility in operations and
processesâ?¦
Implications
Implications
â?¢ Short waiting
tolerance
â?¢ Satisfaction
governed by
customer
perception
â?¢ Customer contact
skills needed
â?¢ Received variety is
high
â?¢ High unit costs
â?¢ Time lag between
production and
consumption
â?¢ Standardization
â?¢ Low contact skills
â?¢ High staff
utilization
â?¢ Centralization
â?¢ Low unit costs
High
Visibility
Low
High
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
It is important to understand how different operations are
positioned on the four Vs.
Is their position where they want to be?
Do they understand the strategic implications of their position?
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Slack et al.â??s general model of operations
management
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
To be a great Operations Manager you need toâ?¦
â?¢ Enjoy getting things done â?? Operations management is about doing things.
â?¢ Understand customer needs â?? Operations management is about
understanding what â??valueâ?? means for customers.
â?¢ Communicate and motivate â?? Operations managers must be â??people peopleâ??.
â?¢ Learn all the time â?? Operations management is about learning, because
without learning there can be no improvement.
â?¢ Commit to innovation â?? Operations management is about being creative,
imaginative, and (sometimes) unconventional.
â?¢ Know your contribution â?? Operations management is about contributing to
the effective working of other functions.
â?¢ Be capable of analysing â?? Operations management is about evaluating
decisions.
â?¢ Keep cool under pressure â?? Operations managers need to be able to remain
calm no matter what problems occur.
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Operations Management
8th edition
Chapter 2
Operations Performance
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Slack et al.â??s model of operations management
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Key questions
In Chapter 2 â?? Operations performance â?? Slack et al. identify
the following key questionsâ?¦
 Why is operations performance vital in any organization?
 How is operations performance judged at a societal level?
 How is operations performance judged at a strategic level?
 How is operations performance judged at an operational
level?
 How can operations performance be measured?
 How do operations performance objectives trade off against
each other?
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Three levels of operations performance
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Stakeholder groups with typical operations objectives
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
How operations can impact TBL performance (1 of 3)
â?¢ Recyclability of materials, energy consumption and waste material
generation
â?¢ Reducing transport-related energy
â?¢ Noise pollution, fume and emission pollution
â?¢ Obsolescence and wastage
â?¢ Environmental impact of process failures
â?¢ Recovery to minimize impact of failures
Planet â?? The environmental account,
measured by environmental impact of
the operation
People â?? The social
account, measured by
the impact of the
operation on the quality
of peopleâ??s lives
Sustainability
Profit â?? The economic
account, measured by
profitability, return on
assets, etc. of the
operation
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
How operations can impact TBL performance (2 of 3)
Planet â?? The environmental account,
measured by environmental impact of
the operation
People â?? The social
account, measured by
the impact of the
operation on the quality
of peopleâ??s lives
â?¢
â?¢
â?¢
â?¢
â?¢
â?¢
Sustainability
Profit â?? The economic
account, measured by
profitability, return on
assets, etc. of the
operation
Customer safety from products and services
Employment impact of an operationâ??s location
Employment implications of outsourcing
Repetitive or alienating work
Staff safety and workplace stress
Non-exploitation of developing country suppliers
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
How operations can impact TBL performance (3 of 3)
Planet â?? The environmental account,
measured by environmental impact of
the operation
People â?? The social
account, measured by
the impact of the
operation on the quality
of peopleâ??s lives
Sustainability
Profit â?? The economic
account, measured by
profitability, return on
assets, etc. of the
operation
â?¢ Cost of producing products and services
â?¢ Revenue from the effects of quality, speed,
dependability, and flexibility
â?¢ Effectiveness of investment in operations resources
â?¢ Risk and resilience of supply
â?¢ Building capabilities for the future
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
OMâ??s contribution to the â??economic bottom lineâ??
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Company A has operations managers whoâ?¦
Employ skilled, enthusiastic people, and encourage them to contribute
ideas for cutting out waste and working more effectively.
Carefully monitor their customersâ?? perception of the quality of service they
are receiving and learn from any examples of poor service and always
apologise and rectify any failure to give excellent service.
Have invested in simply but appropriate systems of their own that allow
the business to plan and control its activities effectively.
Hold regular meetings where staff share their experiences and think
about how they can build their knowledge of customer needs, new
technologies and how their services will have to change in the future to
add value for their customers and help the business to remain
competitive.
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Last yearâ??s financial details for Company A
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Company B has operations managers whoâ?¦
Employ only people who have worked in similar companies before and
supervise them closely to make sure that they â??earn their salariesâ??.
Have rigid â??completions of serviceâ?? sheets that customers sign to say that
they have received the service, but they never follow up to check on
customersâ?? views of the service that they have received.
Have bought an expensive integrative system with extensive functionality,
because â??you might as well invest in state-of-the art technologyâ??.
At the regular senior managersâ?? meeting always have an agenda item
entitled â??Future businessâ??.
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Last yearâ??s financial details for Company B
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
The effects of three options at Kandy Kitchens
Original â??
Option 1 â??
(sales volume = sales campaign
50,000 units) Increase sales
Option 2 â??
Option 3 â??
operations efficiency â??speedy serviceâ??
Reduce operating
volumes by 30% expenses by 20%
to 65,000 units
Increase price
by 10%
(â?¬,000)
(â?¬,000)
(â?¬,000)
(â?¬,000)
Sales
revenue
5,000
6,500
5,000
5,500
Operating
expenses
4,500
5,550
3,800
4,500
EBIT
500
1,000
1,200
1,000
Investment
required
100
70
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Typical stakeholdersâ?? performance objectives (1 of 2)
Stakeholder
Shareholders
Directors/top
management
Staff
Staff representative
bodies (e.g. trade
unions)
Suppliers (of
materials, services,
equipment, etc.)
What stakeholders want from the What the operation wants from
operation
stakeholders
Return on investment
Investment capital
Stability of earnings
Long-term commitment
Liquidity of investment
Low/acceptable operating costs
Coherent, consistent, clear and
Secure revenue
achievable strategies
Well-targeted investment
Appropriate investment
Low risk of failure
Future innovation
Fair wages
Good working conditions
Safe work environment
Personal and career development
Conformance with national
agreements
Consultation
Early notice of requirements
Long-term orders
Fair price
On-time payment
Attendance
Diligence/best efforts
Honesty
Engagement
Understanding
Fairness
Assistance in problem solving
Integrity of delivery, quality and
volume
Innovation
Responsiveness
Progressive price reductions
Copyright © 2016, 2013, 2010 Pearson Education, Inc. All Rights Reserved
Typical stakeholdersâ?? performance objectives (2 of 2)
Stakeholder
What stakeholders want from What the operation wants …
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