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Chapter 1

Chapter 1- Producing Goods and Services.docx

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Management (MGT)
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Chapter 1: Producing Goods and Services Service operations- production activities that yield tangible and 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? -production also means services -service sector managers focus less on equipment and technology than on the human element in operations -success or failure may depend on provider-customer contact -a key difference between production and service operations is the customer’s involvement in the latter -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 -firms today face constant change -new technologies allow machines to run more cleanly, quickly, and safely -modern factories with online manufacturing, are able to communicate with other machines in the company (via an intranet) and with other companies’ machines without human help -so-called “smart” equipment stores performance data that become available at desktops around the world -designers can click on machine date, simulate machine action, and evaluate performance -with aid from the internet, producers are including their production activities with far-off suppliers and customers 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 finished goods -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 - they must control costs, quality levels, inventory, and plant and equipment -farmers are considered to be production managers Operation processes -operation process: 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 -all goods manufacturing process can be classified into two ways -first way is type of transformation technology that transforms raw materials into finished goods -second way is by the analytic or synthetic nature of the transformation process Types of transformation technology (1) Chemical processes: raw materials are chemically altered, example- steel, aluminum (2) Fabrication processes: mechanically alter the basic shape or form of a product, example- woodworking (3) Assembly processes: put together various components, example-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 -a second way of classifying production processes is by the way in which resources are converted into finished goods -analytic process: any production process in which resources are broken down into components, such as aluminum -synthetic process: any production process in which resources are combined, such as paint Service-Producing Processes -services are classified according to the extent of customer contact - the two processes are high-contact and low-contact -high contact system: a system in which the service cannot be provided without the customer being physically in the system -example: transit systems -transit managers must worry about the cleanliness and appearance of the buses and stations -low contact system: a system in which the service can be provided without the customer being physically in the system -example: lawn care services -customers are not in contact while the service is being provided Differences Between Service and Manufacturing Operations -in goods production, the raw materials/inputs are not steel or glass -in service production, the raw materials/inputs are people who chose among sellers because they have either unsatisfied needs or possessions in which they require some form of care or alteration -in service operation, the outputs are people with needs met and possessions serviced Focus on Performance -goods are produced, services are performed -customer oriented performance is a key factor in measuring the effectiveness of a service company -Wal mart has speedy delivery and its keen customer focus emphasizes avoiding unnecessary inventories, and getting fast response from suppliers -the focus of service operation is more complex than good production -service operations feature a unique link between production and consumption -also a unique link between process and outcome -services are more intangible and more customized and less storable -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 -example: both on making the pizza, and on delivering it to the customer -service operations require different skills from manufacturing operations Focus on Service Characteristics -service products are characterized by three key qualities: intangibility, customization, and unstorability (1) 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. (2) Customization: when you visit a doctor, you expect to be treated from your symptoms. You expect the services to be designed for your needs. (3) 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 -the growth of ecommerce has introduced a “virtual presence” -consumers interact electronically with seller collecting information on product features, delivery availability -they have around-the-clock access to information -internet technology also enables firms to build relationships with industrial customers Focus on Service Quality Considerations -service managers must understand that quality of work and quality of service are not the same thing -for example, your car may have been nicely repaired, you might feel dissatisfied with the service if you were forced to pick it up late Operations Planning -the process can be described as a serious of logical steps (Figure 1.2) -the success of any firm depends on the final result of this logical sequence of decisions -business plan and forecasts guide operation planning -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 -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 -also specifies how resources will be obtained Capacity Planning -capacity: the
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