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MGTA01H3 (583)
Chapter 1

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Management (MGT)
Chris Bovaird

Chapter 1- producing goods and services  Service operations: production activities that yield intangible services  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 and services  Production managers: managers responsible for ensuring that operations processes create value and provide benefits -they must bring raw materials, equipment, and labour together under a production plan that effectively uses all the resources available in the production facility -not all production managers work in factories (farms, jewellery store, tire producer, and furniture manufacturer are all examples of production systems)  Operations process: a set of methods and technologies used in the production of a good or a service o We classify various types of production according to differences in their operations processes. In other words, we can describe goods according to the 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 the extent of customer contact required o All goods-manufacturing processes can be classified in two different ways: -type of transformation technology that transforms raw materials into finished goods -analytic or synthetic nature of the transformation process o 1. Types of transformation processes include: chemical, fabrication, assembly, transport, and clerical o In chemical processes, raw materials are chemically altered (steel industry, paint industry, etc) o Fabrication processes mechanically alter the basic shape or form of a product (woodworking industry, metal forming industry, etc) o Assembly processes put together various components. (These techniques are common in electronics industries, appliance industries, automotive industries etc) o In transport processes, goods acquire place utility by being moved from one location to another (trucks routinely move bikes from manufacturing plants to consumers through warehouses) o Clerical processes transform information. (compiling inventory reports at a retail outlet)  2. Analytic process: any production process in which resources are broken down  Synthetic process: any production process in which resources are combined o Service-producing processes are classified according to the extent of customer contact  High-contact system: a system in which the service cannot be provided without the customer being physically in the system (ex. Transit system) -for this reason, transit managers must worry about the cleanliness of the trains and busses and the appearance. This is usually not the case in low-contact systems  Low-contact system: a system in which the service can be provided without the customer being physically in the system (ex. Lawn care services, auto repair shops, or cheque-processing operations at a bank) o Service and manufacturing operations both transform raw materials into finished products. In service production, however, the raw materials, or inputs, are not glass or steel. Rather, they are people who choose among sellers because they have either unsatisfied needs or possessions for which they require some form of care or alteration. In service operations, then, "finished products" or "outputs" are people with needs met and possessions serviced. Key areas where service operations differ from goods production include: focus on performance, focus on process and outcome, focus on service characteristics, focus on the customer-service link, and focus on service quality considerations o 1. One very obvious difference exists between service and manufacturing operation: whereas goods are produced, services are performed. Therefore, customer-oriented performance is a key factor in measuring the effectiveness of a service company o 2. Manufacturing operations focus on the outcome of the production process. The products offered by most service operations, however, are actually combinations of goods and services. Services, therefore, must focus on both the transformation process and its outcome (--both on making a pizza and on delivering it to the buyer). Service operations thus require different skills from manufacturing operations (repairing defective pipes, but also interpersonal skills necessary to calm and reassure frightened customers about possible gas leaks) o 3. Service companies' transactions always reflect the fact that service products are characterized by three key qualities intangibility, customization, and unstorability -often services cannot be touched, tasted smelled, or seen. An important value, therefore is the intangible value that the customer experiences in the form of pleasure, satisfaction, or a feeling or safety -typically, services are customized (expecting services to be designed for your needs --ex. hair cut according to your style or being examined by a physician for your symptoms) -services are typically characterized by a high degree of unstorability o 4. Because they transform customers or their possessions, service operations often acknowledge the customer as part of the operations process itself. As physical participants in the operations process, service consumers have a unique ability to affect that process (ex. Business conveniently located, hours of operations, etc) o 5. Service managers must understand that quality of work and quality of service are not necessarily synonymous (ex. Although your car may have been flawlessly repaired, you might feel dissatisfied with the service if you were forced to pick it up a day later than promised) (operations planning)  Like all good managers, we start with planning  Forecasts: estimates of future demand for both new and existing products o The main elements of operations planning involve planning activities that fall into one of five categories: capacity, location, layout, quality, and methods planning  1. Capacity: the amount of a good that a firm can produce under normal working conditions o Capacity planning for goods means ensuring that a manufacturing firm's capacity slightly exceeds the normal demand for its product. In low-contact processes, maintaining inventory allows managers to set capacity at the level of average demand. In high-contact processes, managers must plan capacity to meet peak demand o 2. 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 (means closeness) to raw materials and markets, availability or labour, energy and transportation costs, local and provincial regulations and taxes, and community living conditions. -in planning low-contact services, companies have some options. Services can be located near resource supplies labour, customers, or transportation outlets -on the other hand high-contact services are more restricted. They must locate near the customers who are a part of the system o 3. 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 o Alternatives for layout planning include: process, cellular, and product layouts  Process layout: a way of organizing production activities such that equipment and people are grouped together according to their function -the various tasks are each performed in specialized locations (in a woodworking shop, machines cut the wood in an area devoted to sawing sanding occurs in a dedicated area, etc). process layout is well suited to job shops (machine shops, custom bakeries, and dry cleaning shops)  Cellular layout: used to produce goods when families of products can follow similar flow paths -cellular layouts have several advantages. Because similar products require less machine adjustment, equipment set-up time in the cell is reduced, as compared with set-up times in process layouts. Because flow distances are usually shorter, there is less material handling and transit time. Finally, inventories of goods in progress are lower and paperwork is simpler because material flows are more orderly. A disadvantage of cells is the duplication of equipment  Product layout: a way of organizing production activities such that equipment and people are set up to produce only one type of good (it's when equipment and people are set up to produce one type of product in a fixed sequence of steps are arranged according to its production requirements) -product layouts are efficient for producing large volumes of product quickly and often use assembly lines: a type of product layout in which a partially finished product moves through a plant on a conveyor belt or other equipme
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