Operations Management Exam Summary

Summary of Operations Management for IBA: H1-20

Operations Management for IBA (Tilburg University) Verspreiden niet toegestaan | Gedownload door Alytas Sinterlaas (ainars.lt@mail.lv) lOMoARcPSD

Operations Management / Exam Summary Chapter 1 – Operations Management · Operations Management is the activity of managing the resources, which produce and deliver products and services. The operations function is the part of the organization that is responsible for this activity.· Operations have to take decisions – how to produce products and services, invest in technology, contract out some of their activities, devise performance measures, and improve their operations performance, and so on.· All operations produce products and services by changing inputs into outputs using an input-transformation-output process.

• Input resources.

O The resources that are treated, transformed, or converted in the process: transformed resources: materials, information (e.g. telecommunication company), customers (e.g. airline).O

The resources that act upon the transformed resources:

transforming resources: facilities, staff.

• The transformation process.
• Output products and services.

O Services together with a product (e.g. aluminium smelters with technical advice) are called facilitating services. Also facilitating products are available.· All operations are service providers, which may produce products as a part of serving their customers.· All operations consist of a collection of processes interconnecting with each other to form a network.· Each process is at the same time an internal supplier and an internal customer for other processes.· Any operation could have several suppliers and several customers and may be in competition with other operations producing similar service to those it produces itself. This network of operations is called the supply network.

· Analyse businesses at three levels: the process, the operation and the

supply network. This is referred to as the hierarchy of operations.· Operations management is relevant for all functions. Operations can be seen as a function (besides marketing, sales, etc.) or as an activity.· Four V’s: o Volume: O High volume can result in lower unit cost. It might be worthwhile to invest in specialized machines etc.O Systemization and repeatability (e.g. McDonalds).

o Variety:

O E.g. taxi-service (in contrary to line bus – fixed route).

o Variation dimension:

O Routine and predictability.Verspreiden niet toegestaan | Gedownload door Alytas Sinterlaas (ainars.lt@mail.lv) lOMoARcPSD

O E.g. summer holiday resort will have more clients in the summer.

o Visibility:

O How much of the operation’s activities its customers experience, or how much the operation is exposed to its customers.O High-visibility operations require staff with good customer contact skills.O

Mixed high- and low- visibility processes: partly front-office

but also back-office.

· Activities of operations management:

• Understanding the operation’s strategic performance objectives.
• Developing an operations strategy for the organization.
• Designing the operation’s products, services and processes.
• Planning and controlling the operation.
• Improving the performance of the operation.
• The social responsibilities of operations management.

Chapter 2 – Operations performance · Operations management is a ‘make or break’ activity.

· All operations have stakeholders: the people and groups that have a

legitimate interest in the operation’s activities. Some stakeholders are internal, for example the operation’s employees; others are external, for example customers, society or community groups, and a company’s shareholders.· Strongly related to the stakeholder perspective of operations performance is that of corporate social responsibility (generally known as CSR).· Of all stakeholder groups, it is the organization’s top management who can have the most immediate impact on its performance. They represent the interest of the owners and therefore are the direct custodians of the organization’s basic purpose.· Operations management can reduce costs, achieve customer satisfaction, reduce the risk of operational failure, reduce the amount of investment and provide the basis for future innovation by learning form its experience.· Broad stakeholder objectives form the backdrop to operations decision- making and top management’s objectives provide a strategic framework, but running operations at an operational day-to-day level requires a more tightly defined set of objectives. These are the five basic performance

objectives that apply to all types of operations:

o Quality – do things right:

O Most visible part of what an operation does, relatively easy to judge about the operation.O Major influence on customer satisfaction.Verspreiden niet toegestaan | Gedownload door Alytas Sinterlaas (ainars.lt@mail.lv) lOMoARcPSD

O Quality reduces costs (fewer mistakes are made), and increases dependability (loss of revenue if product is not able to be bought).

o Speed – do things fast:

O Speed means the elapsed time between customers requesting products or services and receiving them.O Fast response to external customers is greatly helped by speedy decision-making and movement of materials and information inside the operation.O Speed reduces inventories and reduces risk.

o Dependability – do things on time:

O Doing things in time for customers to receive their goods or service exactly when they are needed or at least when they are promised. It can override all other criteria.O Dependability saves time and saves money. It also gives stability and could build up a level of trust.

o Flexibility – be able to change what you do:

O Vary or adapt to unforeseen circumstances or give customers individual treatment.O

Being able to change the operation in some way: flexibility.

O

Types of flexibility:

· Product/service flexibility: ability to introduce new

or modified products or services;

· Mix flexibility: ability to produce a wide range or mix

of products.

· Volume flexibility: ability to change its level of output

or different volumes;

· Delivery flexibility: ability to change the timing of the

delivery of products or services.O One of the beneficial external effects of flexibility is the increased ability of operation to do things different for customers.O Normally, high variety means high cost.O Some companies have developed their flexibility in such a way that products and services are customized for each individual customer. Yet they manage to produce them in high-volume, mass production manner, which keeps costs down. This is called mass customization.O Agility is really a combination of all the five performance objectives, but particularly flexibility and speed. Agility implies that an operation and the supply chain of which it is part can respond to uncertainty in the market.O Flexibility speeds up response (e.g. influx of patients in hospital due to car accident), saves time and maintains dependability (e.g. minimize disruption in this hospital so that normal procedures can continue and can be handled together with sudden influx of patients).

o Cost – do things cheaply:

O Low cost is a universally attractive objective.Verspreiden niet toegestaan | Gedownload door Alytas Sinterlaas (ainars.lt@mail.lv) lOMoARcPSD