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Biological Sciences
Chris Bovaird

CHAPTER 1: PRODUCING GOODS AND SERVICES -service operations: production activities that yield intangible services -goods production: production activities that yield tangible products WHAT DOES “PRODUCTION” MEAN TODAY? -production historically referred to the making of physical goods, now it also means services -service-sector managers focus less on equipment and technology than on the human element in operations -b/c success or failure may depend on provider-customer contact -today, customers are increasingly involved in all kinds of production b/c electronic communications are key components in winning and keeping customers in huge range of competitive industries The Growth of Global Operations -smoke, grease, and danger have been replaced by high-tech machines -production operations have also become much more environmentally friendly -new technologies allow machines to run more cleanly, quickly, and safely and to operate on a global scale -w/ internet, producers of both services and goods are integrating their production activities with those of far-off suppliers and customers CREATING VALUE THROUGH PRODUCTION -products provide businesses with both economic results (wages, profits, good purchased from other companies) and non-economic results (new technology, innovations, pollution) -term production has been replaced recently by operations (reflects services and goods) -operations (production management): systematic direction and control of the processes that transform resources into finished goods and services -thus, production managers are ultimately responsible for creating utility for customers -production managers: managers responsible for ensuring that operations processes create value and provide benefits; bring raw materials, equipment, and labour together under a production plan that effectively uses all resources available in the production facility -as demand for good increases, they must schedule and control work to produce the amount required -must control costs, quality levels, inventory, and plant and equipment Operations Processes -operations process: set of methods and technologies used in the production of good or service -we can describe good according to kind of transformation technology they require or according to whether their operations process combines resources or breaks them into component parts -we can describe services according to extent of customer contact Goods-Producing Processes -all good-manufacturing processes can be classified in 2 diff ways: 1) Types of Transformation Technology that transforms raw materials into finished goods -following types of transformation processes used by manufacturers -in chemical processes, raw materials are chemically altered -in fabrication processes, mechanically alter basic shape or form of product -assembly processes put together various components -in transport processes, goods acquire place utility by being moved from one location to another (ex. Trucks routinely move bikes from manufacturing plants to consumers) -clerical processes transform information (combining data on employee absences and machine breakdowns) 2) Analytic Versus Synthetic Processes -way in which resources are converted into finished goods -analytic process breaks down basic resources into components -synthetic process combines number of raw materials to produce a finished product such as fertilizer or paint Service-Producing Processes -services are classified according to extent of customer contact High-Contact Processes: system in which the service can’t be provided with-out the customer being physically in the system (ex. Public transport) -managers must worry about cleanliness of trains and buses and appearance of stations Low-Contact Processes: system in which the service can be provided w/out the customer being physically in the system (ex. Auto repair shops) Differences Between Service and Manufacturing Operations -service and manufacturing operations both transform raw materials into finished products -in service, raw materials, or inputs aren’t glass or steel but are ppl who choose among sellers b/c they’ve either unsatisfied needs or possessions for which they require some form of care -“finished products” or “outputs” are ppl with needs met and possessions serviced Focus on Performance -goods are produced, services are performed -customer-oriented performance is key factor in measuring the effectiveness of a service company -focus of service operations is more complex than that of goods production -1 , service operations feature a unique link b/w production and consumption—b/w process anndoutcome -2 , services are more intangible and more customized and less storable than most products -3 , quality considerations must be defined, and managed, diffly in service sector than in manufacturing operations Focus on Process and Outcome -manufacturing operations focus on outcome of production process -products offered by most service operations are actually combinations of goods and services -services must focus on both transformation process and its outcome (making and delivering) -service operations require diff skills from manufacturing operations Focus on Service Characteristics -service products are characterized by 3 key qualities 1) Intangibility -services can’t be touched, tasted, smelled, or seen -important value is the intangible value that the customer experiences in the form of pleasure, satisfaction, or feeling of safety -although all services have some degree of intangibility, some provide tangible elements as well (copy of will) 2) Customization -you expect services to be designed for your needs (ie. haircut); services are customized 3) Unstorability -if a service isn’t used when it’s available, it’s usually wasted -services are typically characterized by high degree of unstorability Focus on the Customer-Service Link -service operations often acknowledge customer as part of the operations process itself -ex. You must go to the salon to purchase a haircut -service consumers have unique ability to affect that process (you expect cleanliness) -manager adopts hours of operations, available services and number of employees to meet requirements of customer Focus on Service Quality Considerations -quality of work and quality of service aren’t necessarily synonymous -consumers use diff criteria to judge services and goods OPERATIONS PLANNING -managers start with planning -managers from many departments contribute to firm’s decisions about operations management -no matter how many decision makers are involved, process can be described as series of logical steps -success of any firm depends on final result of this logical sequence of decisions -business plan and forecasts developed by top managers guide operations planning -business plan outlines goals & objectives, including specific goods & services that firm will offer -managers develop a long-range production plan through forecasts -forecast: estimates of future demand for both new and existing products -production plan covers a 2-5 year period and it specifies the # of plants or service facilities and amount of labour, equipment, transportation and storage that’ll be needed to meet demand -also specifies how resources will be obtained -planning activities fall into 1 of 5 categories: 1) Capacity Planning -capacity: amount of a good that a firm can produce under normal working conditions -depends on how many ppl it employs and # and size of its facilities -long range planning must take into account both current and future capacity Capacity Planning for Producing Goods -means ensuring that a manufacturing firm’s capacity slightly exceeds the normal demand for its product -if capacity is too small to meet demand, company must turn away customers -cuts into profits but also alienates customers and salespeople -if capacity greatly exceeds demand, firm’s wasting money by maintaining a plant that’s too large by keeping excess machinery online or by employing too many workers -while expanding fast enough to meet future demand and to protect market share from competitors, it must also weight increased costs of expanding Capacity Planning for Producing Services -in low-contact processes, maintaining inventory allows managers to set capacity at level of average demand -when daily orders exceed this average demand, some orders are placed in inventory -in high-contact processes, managers must plan capacity to meet peak demand 2) Location Planning -location of a factory, office or store affects its production costs and flexibility, sound location planning is crucial -depending on site, company may be capable of producing a low-cost product or may find itself at an extreme cost disadvantage relative to its competitors Location Planning for Producing Goods -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 -rise of industrial parks—created by cities interested in attracting new industry Location Planning for Producing Services -in planning low-contact services, they can be located near resource supplies, labour, customers, or transportation outlets -high-contact services are more restricted…they must locate near the customers who are part of the system 3) Layout Planning -layout of machinery, equipment, and supplies determines whether a company can respond quickly and efficiently to customer requests for more and diff products or finds itself unable to match competitors’ production speed or convenience of service Layout Planning for Producing Goods -in facilities that produce goods, layout must be planned for 3 diff types of space 1) Productive facilities: workstations and equipment for transforming raw materials 2) Non-Productive facilities: storage and maintenance areas 3) Support facilities: offices, restrooms, parking lots, cafeterias, etc. Process Layouts: way of organizing production activities such that equipment and ppl are grouped together according to their function -various tasks are each performed in specialized locations Cellular Layouts: used to produce goods when families of product
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