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MGTA02H3 (363)
Chapter 1

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Management (MGT)
Chris Bovaird

Chapter 1- Producing Goods and Services Service operation- production activities that provides intangible services • Bus driver provide transportation • Teachers provide education Good production- production activities that provides tangible products 1- Explain the meaning of the terms production and operations WHAT DOES “PRODUCTION” MEAN TODAY? • Service-sector managers focus less on equipment and technology, and more on the human element in operations because success and failure may depend on provider-customer contact • Customers are more involved in production because of electronic communications by placing orders for products o Orders are placed faster o Schedules are accelerated o Delivery times are smaller The Growth of Global Operations • Companies had replaced the smoke, grease, and danger with high-tech machines, computers and “clean rooms” that are contaminant-free and climate controlled • Production operations have become much more environmentally friendly 2- Explain the two classifications of operation processes CREATING VALUE THROUGH PRODUCTION • Products provide businesses with both economic results (Ex: profit, wages, goods purchased from other companies) and non-economic results (Ex: new technology, innovations, pollution) 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 • Bring raw materials, equipment, and labour together under a production plan that effectively uses all the resources available in the production facility • Must control costs, quality levels, inventory, and plant and equipment Operations Processes 1 www.notesolution.com Operations process- a set of methods and technologies used in the production of a good or a service • Goods Transformation Technology • Services Customer Contact Goods- Producing Processes • Good-manufacturing processes can be classified in 2 different ways: o Type on transformation technology that transform raw materials into finished goods Chemical processes- raw materials are chemically altered (Ex: aluminum, steel, etc) Fabrication processes- mechanically alter the basic shape or form of a product (Ex: metal forming, woodworking, textile industries) Assembly processes- put together various components (Ex: electronics, appliances, etc) Transport processes- goods acquire place utility by being moved from one location to another Clerical processes- transform information o Analytic or synthetic nature of the transformation process Analytic process- any production process in which resources are broken down Synthetic process- any production process in which resources are combined Service- Producing Processes o High-contact system- a system in which the service cannot by provided without the customer being physically in the system (Ex: transit systems) o Low-contact system- a system in which the service can be provided without the customer being physically in the system (Ex: lawn care services) 3- Identify the characteristics that distinguish service operations from goods production and explain the main differences in the service focus Differences between Service and Manufacturing Operations • In service production, raw materials (inputs) are people who choose among sellers because they have either unsatisfied needs or possessions for which require some form of care or alternation • The finished product (outputs) are people with needs met and possessions serviced • Several key areas where service operations differ from production operations Focus on performance • Goods are produced, services are performed 2 www.notesolution.com • Customer-oriented performance is a key factor in measuring the success of a service company • Service operations feature a unique link between production and consumption- between process and outcome • Services are more intangible and customized and less storable than most products • Quality considerations must be defined, and managed differently in the service sector Focus on process and outcome • Manufacturing operations focus on the outcome of the production process, but products offered by most service operations are a combination of goods and services • Services must focus on both the transformation process and its outcome Focus on service characteristics • Intangibility o The intangible value that the customer experiences in the form of pleasure, satisfaction, or a feeling of safety (Ex: hiring an attorney to have the equally intangible reassurance the help is at hand) • Customization o Services are customized to fit your needs (Ex: getting a haircut) • Unstorability o Because many services can’t be produced ahead of time and then stored, they have a high degree of unstorability Focus on the customer-service link • Service operations often acknowledge the customer as part of the operations process • Service consumers have a unique ability to affect the process Focus on service quality considerations • Consumers use different criteria to judge services and goods 4- Describe the factors involved in operations planning OPERATIONS PLANNING • The business plan outlines goals and objectives, including the specific goods and services that the firm will offer Forecast- estimates of future demand for both new and existing products Capacity Planning 3 www.notesolution.com • Capacity planning- the amount of a good that a firm can produce under normal working conditions Capacity Planning for Producing Goods • Ensuring that a manufacturing firm’s capacity slightly exceeds the normal demand for its products Capacity Planning for Producing Services • In low-contact services, maintaining inventory allows managers to set capacity at the level of average demand (can be placed in inventory to use later) • In high-contact services, managers must plan capacity to meet peak demand Location Planning • The location affects its production costs and flexibility Location Planning for Producing Goods • 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 Location Planning for Producing Services • In Low-contact services, the companies have some options to be near resource supplies, labour, customers, or transportation outlets • In high-contact services, the companies are more restricted to near the customers who are a part of the system Layout Planning
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