Chapter 11 Notes
Service Operations: Production activities that yield tangible and intangible
oFood, entertainment, transportation
Goods Production: Production activities that yield tangible products
oRadios, newspaper, busses
•Production is the making of physical goods and services.
The Growth of Global Operations
•Machines have largely taken over in manufacturing
•Production operations have also become a lot more environmentally friendly.
Creating Value Through Production
•Utility (4 Kinds): the power of a product to satisfy a human want;
something of value.
oTime Utility: the quality of a product satisfying a human want
because of the time at which it was made available.
•Ornaments during Christmas
oPlace Utility: the quality of a product satisfying a human want
because of where it is made available
•Different departments in stores
oOwnership (Possession) Utility: That quality of a product satisfying
a human want during its consumption or use.
oForm Utility: That quality of a product satisfying a human want
because of its form; requires raw materials to be transformed into a
•Production Managers: Managers responsible for ensuring that operations
processes create value and provide benefits.
Operation Processes (Classified in 2 Ways)
•Operation Process: a set of methods and technologies used in the
production of a good or a service.
•Types of transformations (turning raw materials into finished goods)
oChemical Process: raw materials are chemically altered
•Ex. Aluminum, steel, fertilizer
oFabrication Process: mechanically alter the basic shape or form of a
•Ex. Metal working, woodworking, and textile industries
oAssembly Process: put together various components
•Car, airplane building
oIn Transport Process: goods acquire place utility by being moved from
one location to another.
•Trucks moving bikes from manufacturing plants to consumers
oClerical Processes transformation information: combining data on
employee absences and machine breakdowns into productivity report.
•Analytical Process: any production process in which resources are broken
oA company manufactures aluminum by extracting it from an ore.
•Synthetic Process: any production process in which resources are combined
to create a final product
Service Providing Processes
• High Contact System (process): a system in which the service cannot be
provided without the customer being physically in the system
oTransit Systems. Managers must worry about the cleanliness of the
buses and trains.
•Low Contact Processes: a system in which the service can be provided
without the customer being physically in the system
oEx. Lawn care, auto repair, cheque processing in banks
Business Strategy as the Driver of Operations
•Operations Capability (Production Capability): the activity or process
that production must do especially well, with high proficiency.
oEach company's operations capability matches up with its business
oFeature a unique link between production and consumption - between
process and outcome.
oAre intangible and more customized and less storable than most
oIntangibility: come through the form of customer satisfaction, pleasure,
or a feeling of safety.
oCustomization: services are designed towards the needs of the
oUnstorability: services such as hair cuts cannot be produced ahead of
time and then stored.
•It is a series of logical steps.
•Forecast: Estimate of future demand for both new and existing products.
•5 main categories of operation planning
1Capacity (Planning): the amount of a good that a firm can produce
under normal working conditions.
•Capacity Planning For Producing Goods: managers must decide
whether to create a large facility to create more goods, but this is all
depending on the future demand of the good.
•Capacity Planning For Producing Services: depends on the
Low Contact Processes: have inventory checklists, "to be
High Contact Processes: supermarkets will have lots of
cashiers on the days leading up to a big holiday, such as thanksgiving
Influenced by proximity to raw materials and markets,
availability of labor, energy and transportation.
•Industrial parks are a good advantage for a
company because many of them already have the necessary tools
to run a company.
Located near resource supplies, labour, customers, or
High Contact Services are placed in areas with large
•Ex. Mcdonalds and fast food restaurants open up
in malls, hospital cafeterias, museums.
Service operations: production activities that yield tangible and intangible products o. Goods production: production activities that yield tangible products: radios, newspaper, busses, production is the making of physical goods and services. The growth of global operations: machines have largely taken over in manufacturing, production operations have also become a lot more environmentally friendly. Creating value through production: utility (4 kinds): the power of a product to satisfy a human want; something of value. o. Time utility: the quality of a product satisfying a human want because of the time at which it was made available. Ornaments during christmas: place utility: the quality of a product satisfying a human want because of where it is made available. Different departments in stores: ownership (possession) utility: that quality of a product satisfying a human want during its consumption or use. o. Fabrication process: mechanically alter the basic shape or form of a product.