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Chapter 1

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BIOL 376
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Business Chapter #1 – Producing Goods and Services Service Operations – Producing activities that yield tangible and intangible service products Goods Production – Production activities that yield tangible products Operations (Production) Management - The systematic direction and control of the processes that transform resources into finished goods. Production Managers – Managers responsible for ensuring that operations processes create value and provide benefits Operations Process – a set of methods and technologies used in the production of a good or a service. All goods-manufacturing processes can be classified in two different ways: by the type of transformation technology that transforms raw materials into finished goods and by the analytic or synthetic nature of the transformation process. - In chemical processes, raw materials are chemically altered. Such techniques are common in the aluminum, steel, fertilizer, petroleum, and paint industries - Fabrication processes mechanically alter the basic shape or form of a product. Fabrication occurs in the metal forming, woodworking, and textile industries - Assembly processes put together various components. These techniques are common in the electronics, appliance, and automotive industries. - In transport processes, goods acquire place utility by being moved from one location to another. For example, trucks routinely move bicycles from manufacturing plants to consumers through warehouses and discount stores. - Clerical processes transform information. Combining data on employee absences and machine breakdowns into a productivity report is a clerical process. So is compiling inventory reports at a retail outlet. Analytic Process – any production process in which resources are broken down Synthetic Process – any production process in which resources are combined High Contact System – A system in which the service cannot be provided without the customer being physically in the system (e.g. transit systems) Low Contact System – A system in which the service can be provided without the customer being physically in the system (e.g. lawn care services There are several key areas where service operations differ from production operations. One very obvious difference exists between service and manufacturing operations: Whereas goods are produced, services are performed. First, service operations feature a unique link between production and consumption-between process and outcome. Second, services are more intangible and more customized and less storable than most products. Finally, quality considerations must be defined and managed, differently in the service sector than in manufacturing operations. Service companies’ transactions always reflect the fact that service products are characterized by three key qualities: intangibility, customization and unstorability. Intangibility – the intangible value that the customer experiences in the form of pleasure, satisfaction, or a feeling of safety. Customization – When you visit a physician, you expect to be examined for your symptoms, or have your haircut, or purchase insurance are all services to be designed for your needs. Typically, therefore, services are customized Unstorability – Services such as rubbish collection, transportation, childcare and house cleaning cannot be produced ahead of time and then stored. If a service is not used when it is available, it is usually wasted. Services, then, are typically characterized by a high degree of unstorability. Forecast – Estimates of future demand for both new and existing products Capacity – the amount of a good that a firm can produce under normal working conditions The capacity of a goods or service firm depends on how many people it employs and the number and size of its facilities. Long range planning must take into account both current and future capacity. Because the location of a factory, office, or store affects its production costs and flexibility, sound location planning is crucial. In goods-producing operations, location decisions are influenced by proximity to raw materials and markets, availability of labour; energy and transportation costs, local and provincial regulations and taxes, and community living conditions. Once a site has been selected, managers must decide on plant layout. Layout of machinery, equipment, and supplies determines whether a company can respond quickly and efficiently to customer requests for more and different products or finds itself unable to match competitors’ production speed or convenience of service. In facilities that produce goods, layout must be planned for three different types of space: Productive facilities: workstations and equipment for transforming raw materials, for example. Non-productive facilities: storage and maintenance areas Support Facilities: offices, restrooms, parking lots, cafeterias and so forth Process Layout – a way of organizing production activities such that equipment and people are grouped together according to their function Cellular Layout – Used to produce goods when families of products can follow similar flow paths Product Layout – A way of organizing production activities such that equipment and people are set up to produce only one type of good Assembly Line – A type of product layout in which a partially finished product moves through a plant on a conveyor belt or other equipment U-Shaped Production Line – Production layout in which machines are placed in a narrow U shape rather than in a straight line Flexible Manufacturing System (FMS) – A production system that allows a single factory to produce small batches of different goods on the same production line Soft Manufacturing – reducing huge FMS operations to smaller, more manageable groups of machines In planning production systems and facilities, managers must keep in mind the firm’s quality goals. Thus any complete production plan includes systems for ensuring that goods are produced to meet the firm’s quality standards. In designing operations systems, managers must clearly identify every production step and the specific methods for performing them. They can then work to reduce waste, inefficiency, and poor performance by examining procedures on a step by step basis – an approach called methods improvement. Service Flow Analysis – An analysis that shows the process of flows that are necessary to provide a service to customers; it allows managers to determine which processes are necessary In some cases, however, the purpose of service design is to limit the range of activities of both employees and customers. By careful planning- and sometimes even by automating to control human discretion – managers can make services more customer oriented because they can ensure product consistency. In a high-contact service, the demands on system designs are somewhat different. Here, managers must develop procedures that clearly spell out the ways in which workers interact with customers. These procedures must cover such activities as exchanging information or money, delivering, and receiving materials, and even making physical contact. Once plans identify needed resources and how they will be used to reach a firm’s goals, managers must develop timetables for acquiring resources for production. This aspect of operations is called scheduling. Master Production Schedule – schedule showing which products will be produced, when production will take place, and what resources will be used. Gantt Chart – Production schedule diagramming the steps in a project and specifying the time required for each. PERT Chart – Production schedule specifying the sequence and critical path for performing the steps in a project Operations Control – Managers monitor production performance by comparing results with plans and schedules Follow Up – Checking to ensure that production decisions are being implemented Operations control features materials management and production process control. Both activities ensure that schedules are met and that production goals are fulfilled, both in quantity and in quality. Materials Management – Planning, organizing, and controlling the flow of materials from purchase through distribution of finished goods Standardization – Using standard and uniform components in the production process Once the product has been designed, materials managers purchase the necessary materials and monitor the production process through the distribution of finished goods. There are four major areas in materials management: - Transportation includes the means of transporting resources to the company and finished goods to buyers - Warehousing is the storage of both incoming materials for production and finished goods for physical distribution to customers - Inventory Control includes the receiving, storing, handling, and counting of
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