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Chapter 3

COMM-1006EL Chapter Notes - Chapter 3: Wheel Alignment, Process Flow Diagram, Mass Customization


Department
Commerce and Administration
Course Code
COMM-1006EL
Professor
Laughren Tannys
Chapter
3

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Operatios Maageet pp. 7 7
Operations is one key to any organization’s success. Along with marketing, operations, often called production,
is where an organization adds value and makes money
The Purpose & Basic Components of Operations
According to the model of operations, a company PURCHASES inputs (materials, customers, information),
TRANSFORMS them in some way through a transformation process, and then SELLS the outputs to
customers. The core of operations is the transformation process.
SOME CONCLUSIONS ABOUT OPERATING PROCESSES ARE:
1. Different organizations process (transform) different types of input
Some enterprises transform materials
Some transform customers
Some transform information
Although almost every organization transforms a mixture of inputs, one type usually dominates
2. Operations is everywhere. It extends to all departments of the enterprise, not just the factory
Accounting depts. need a process to transform transactions into financial records, and marketing depts.
need processes to capture information from and about customers
3. One organization’s outputs often become another’s inputs
Inputs & outputs are a matter of perspective
4. Operations links suppliers and customers by adding value for which customers will pay
Banks buy money form depositors (by paying interest on deposits) and sell it to borrowers (by charging
interest on loans). They survive because there is a spread of several percentage points between these 2
rates and they provide security, information, and pools of funds available
5. Virtually every process has a number of steps
6. Operations needs information. About inputs, outputs, and the process itself is required; this
information may also flow to allow managers to control & evaluate the operation
No process operates completely independently.
OPERATING SYSTEM COMPONENTS
Equipment
Equipment is the machinery needed to make production happen. 4 important features of equipment are:
1. Capability refers to what a piece of equipment can do, and its ability to perform reproducibly
2. Capacity refers to how much a piece of equipment can hold, and the amount of material, number of
customers, or quantity of information that can be processed or produced in a given period of time
Theoretical Capacity what the equipment manufacturer designed & built the unit to do
Operating Capacity what happens in actual use
The extent to which theoretical capacity is achieved is one measure of the equipment’s efficiency
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3. Flexibility refers to an operating system’s ability to cope with changing circumstances with little
penalty in cost, time, effort, or performance. Flexibility refers to many things, such as product range,
rates of output, and speed of change
4. Reliability refers to the likelihood that a piece of equipment will perform as designed
High or increasing downtime and maintenance costs might indicate a decrease in reliability
People
Capability, capacity, flexibility, and reliability also apply to people, who bring muscles, brains, and
interpersonal skills to operations
Physical labour is increasingly being reduced as tasks become automated or otherwise changed
Instead of doing hard physical work, operations employees are increasingly expected to watch dials or
monitors, make quality checks, stop the process, and make minor adjustments to machines
Energy
Energy is a component of almost any operation
Inventory
Inventory is an input, a component, AND a product of most operating systems. Inventory can be defined as
anything that is purchased or acquired for transformation or resale, or that assists in the transformation of
materials into saleable goods
The 3 basic kinds of inventory are:
1. Raw Materials frozen hamburgers and buns @ Wendy’s
2. Work in Process hamburgers cooking on the grill @ Wendy’s
3. Finished Goods assembled and given to the customer @ Wendy’s
Depending on your perspective, an inventory item can be raw materials, work in process, or finished good
simultaneously. The cooked patties are raw material to the assemblers, finished goods to the cook, and work-in-
process to the operation as a whole
Costs of Inventory financing, obsolescence, shrinkage, holding, scrap and rework AND management
Costs of NOT having inventory stock outs, idle resources, and expediting
OPERATIONS TASKS
Operations Tasks are what an organization must do to produce products and/or services to satisfy customers
while realizing its overall objectives
The main function of operations is to transform inputs into the desired outputs, using the necessary (and
available) resources
The GOAL is to provide the right product or service, in the right quantity, at the right price, in the right
place, at the right time… Every time with an acceptable level of side effects
Need
Implication
Function
Will product do what customer needs and wants?
Quality
Will the product perform reliably?
Quantity
How much product should we make and when?
Price
How much should be charged for the product?
Service
What services can be provided to accompany the product?
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