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Chapter 1

Management II Chapter 1.doc

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Management (MGT)
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MGTA02H3
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Chapter 1: Producing Goods and Services Service operations: production activities that yield tangible and intangible service products (e.g. entertainment, transportation, education & food preparation). Goods production: activities that yield tangible products (e.g. radios, newspapers, books & text books). WHAT DOES PRODUCTION MEAN TODAY? Historically applied to goods only, but now includes productions of services. Many of the things we need or want are produced by service operations. Therefore, service-sector managers now focus more on the human element in operations rather than the equipment and technology. This is because the success or failure now relies on the provider-customer contact. Happier consumers lead to a more successful firm. To ensure happier customers, firms are now placed faster, schedules are accelerated and delivery times are shrinking. Growth of Global Operations o Many countries have joined the global competition. o Although the factory remains the centrepiece for manufacturing, it plays a smaller role than it did a decade ago. Its labourers have been replaced by high-tech machines, computers and clean rooms. o Production operations have become more environmentally friendly. (Read example on Interface Inc. on page 7) o New technologies allow machines to run more cleanly, quickly & safely and can operate on a global scale. Machines have the capabilities to make minor decisions without human assistance. Internet has become an important player in the role of global business. 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 (e.g. wages, profits and goods purchased) and non economic results (e.g. new technology, innovations, pollution). The term production has been replaced in recent years by operations because of its historical association with manufacturing. Thus operations (production) management the systematic direction and control of the processes that transform resources into finished goods and serviceshas become the new term. It is ultimately responsible for creating utility for the customers. Look at figure 1.1. It shows that production managers responsible for ensuring that operations processes create value and provide benefitsmust bring raw materials, equipment, and labour together under a production plan that effectively uses all resources available. As well, they must schedule and control work to produce the amount required and at the same time must control costs, quality levels, inventory, and plant & equipment. Operations Processes o Operations process a set of methods and technologies used in the production of a good or a service. We classify various types of production according to differences in their operations processes. o Goods-Producing Processes: all good-manufacturing processes can be classified in two different ways: by the type of transformation technology that transforms raw materials into finished goods and the analytic or synthetic nature of the transformation process. st Types of Transformation Technology (1 way of classifying production). Chemical Processes: Raw materials are chemically altered. Common in the aluminum, steel and paint industries. Fabrication Processes: Mechanically alter the basic shape or form of a product. It occurs in the metal forming, woodworking and the textile industries. Assembly Processes: Put together various components. Common in the electronics, appliance & automotive industries. Transport Processes: Goods acquire place utility by being moved from one location to another (e.g. trucks routinely move bicycles from plants to consumers through warehouses). Clerical Processes: transform information (e.g. combining data on employee absences and machine breaking downs into a productivity report or compiling inventory reports). Analytic Versus Synthetic Processes (2 ndway of classifying production). An analytic process breaks down the basic resources into components (e.g. manufacture aluminum by extracting it from an ore called Bauxite). The reverse is synthetic process which combines a number of raw materials to produce a finished product (e.g. paint). o Service-Producing Processes (services are classified by the extent of customer contact). High-Contact Processes: A system in which the service cannot be provided without the customer being physically in the system (e.g. transit systems). There managers must worry about issues such as cleanliness and appearance. Low-Contact Processes: A system in which the service can be provided with the customer being physically in the system (e.g. lawn care services). o Differences between Services and Manufacturing Operations: Both transform raw materials into finished products. However, in service production, the raw materials are not glass or steel but rather, they are people who choose among sellers. There their finished products are people with needs met and possessions serviced. o Focus on Performance: While goods are produced, services are performed. Thus, customer-oriented performance is key factor in measuring the effectiveness of a service company. Read example on Wal-Mart (pg. 11). In many ways the focus of service operations is more complex than that of goods. First, service operations feature a unique link between production and consumption. Second, services are more intangib
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