Operations
Operations: the business processes that involve transformation or, more generally, production
Operations Management: all the activities in which managers engage to produce a good or service
• Business goals, especially profit maximisation, are achieved through the efficient production of a good or service
• Operations management involves creating, operating and controlling a transformational process that takes inputs from a variety of resources and produces outputs of goods and services that are needed by customers
• Productions = bringing together resources (financial, physical, informational and human) to create finished goods or services through a series of operations
• Operations management will directly affect competitive advantage, because it will:
- Establish level of quality of the good/service
- Influence overall costs of production
- Determine whether sufficient products are available to satisfy consumer demand
Case Study: Toyota
• Utilise JIT (Just-in-time) – right parts and materials are manufactured and provided in the exact amount they are needed, and at the time they are needed
• Undergoes continuous improvement - company activities are continually scrutinised, and efficient and more effective methods of production are introduced
• Uses technology to their advantage – uses a combination of labour intensive and technological resources to maximise economies of scales Goods and Services
Tangibles: goods that can be touched
Intangibles: services that cannot be touched
• A manufacturer will transform inputs into goods: tangible products
• A service organisation will transform inputs into services: intangibles
• Most modern businesses produce a combination of both manufactured goods and services Production process
Three elements of production in any business: inputs, processes and outputs
Inputs
Inputs: resources used in the process of production
• Six types of resources:
- Material inputs: raw materials consumed or converted by the transformational process
- Capital equipment: included plant, machinery and property necessary to conduct operations
- Labour: people involved in the operations function
- Information from a variety of services
- Time: coordinating resources within appropriate time frames [limits costs and wastage]
- Money: flexible resource because it can easily be converted into any quantity or combination of materials, capital or labour
Processes/Transformation
Transformation: the conversion of inputs (resources) into outputs (goods or services
• E.g. Sony:
Plastics, metal, glass and electronic parts are transformed into numerous electronic products using an innovative approach and processes of design, manufacturing and assembly
• INSERT TABLE 8.1
• Transformation process varies from business to business
Transformation process in manufacturing businesses
Elaborately transformed manufactures (ETMs): manufactured goods that are highly processed and valued. They are complex because of the amount of processing they have undergone
Simply transformed manufactures (STMs): characterised by their ability to be further processed in a wide range of processes. STMs are manufactured goods that are intermediate by nature. Due to the limited amount of transformation they have undergone, STMs have only a small amount of value added.
Value added: the creation of extra or added value as raw materials are transformed into intermediate or finished products through the various stages of production
• The manufacturing process involves differing processes
• One type takes the most basic resources and transforms them into the final goods for the use of consumers
• Other types involve the step-like transformation across a range of processors and businesses
• Some of these processors assemble components from manufacturers (who act as their supplier) , while other processors further manufacture the components into more ETMs
• INSERT FIGURE 8.9
• STMs are sold for
