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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 service products, example: store clerk, instructors, bus drivers  Goods production: production activities that yield tangible products, example: newspapers, buses, books What Does ‘Production’ Mean Today? - success or failure may depend on provider-customer contact - customers are increasingly involved in all kinds of production because electronic communications are key components in winning and keeping customers in a range of competitive industries The growth of global operations - global competition has reshaped production into a faster paced, more complex business activity. - companies are advancing by using high tech machines, computers, and “clean rooms” - companies are becoming much more environmentally friendly - so-called “smart” equipment stores performance data that become available at desktops around the world Creating Value Through Production - products provide businesses with both economic results (profits, wages, goods purchased from other countries) and non-economic results (new technology, innovations, pollution) - Operations (production) management: the systematic direction and control of the processes that transform resources into 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 Operations processes: a set of methods and technologies used in the production of a good or service - goods can be described according to the kind of transformation technology they require or according to whether their operations process combines resources or breaks them down - services can described according to the extent of customer contact required Goods-Producing Processes:classified into two ways 1. Type of transformation technology that transforms raw materials into finished goods 2. The analytic or synthetic nature of the transformation process Types of transformation technology: 1. Chemical processes: raw materials are chemically altered (i.e. steel, aluminum) 2. Fabrication processes: mechanically alter the basic shape of a product (i.e. woodworking) 3. Assembly processes: put together various components, (i.e. electronics, appliances, cars) 4. Transport processes: goods acquire place utility by being moved from one location to another 5. Clerical processes: transform information. Combination of employee absences and machine breakdowns are put into a productivity report Analytic vs. Synthetic processes: the way in which resources are converted into finished goods - Analytic process: any production process in which resources are broken down into components - Synthetic process: any production process in which resources are combined Service-Producing Processes: services 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 (i.e. transit systems) - Low contact system: a system in which the service can be provided without the customer being physically in the system (i.e. lawn care services) Differences Between Service and Manufacturing Operations Focus on Performance - goods are produced, services are performed - customer oriented performance is a key factor in measuring the effectiveness of a service company - the focus of service operation is more complex than good production 1. service operations feature a unique link between production and consumption 2. services are more intangible and more customized and less storable 3. quality considerations must be defined, and managed, differently in the service sector than goods production Focus on Process and Outcome - the products offered by most service operations, are combinations of goods and services - services must focus on both the transformation process and its outcome - (i.e. both on making the pizza, and on delivering it to the customer) Focus on Service Characteristics: service products are characterized by three key qualities: intangibility, customization, and unstorability - Intangibility: an important value is the intangible value that the customer experiences in the form of pleasure, satisfaction, or feeling of safety. Some services provide tangible elements as well. - Customization: when you visit a doctor, you expect to be treated from your symptoms. You expect the services to be designed for your needs. - Unstorability: services cannot be produced ahead of time and then stored. If a service is not used when available, it is usually wasted. Services are characterized by a high degree of unstorability Focus on the Customer-Service Link - Service operations often achnowledge the customer as part of the operations process itself - the growth of ecommerce has introduced a “virtual presence” - consumers have around-the-clock access to information Focus on Service Quality Considerations - service managers must understand that quality of work and quality of service are not the same thing Operations Planning - business plan outlines goals and objectives, including the specific goods and services that the firm will offer - the production plan specifies the number of plants or service facilities and the amount of labour equipment, transportation, and storage that will needed to meet demand and also specifies how resources will be obtained - Forecast: estimate of future demand for both new and existing products. Basic business plan:  Business plan and forecasts  Long range operations plan (capacity, location, layout, quality, methods)  Operations schedules (master production schedule, detailed schedules)  Operations control (quality control, materials
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