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MGTA02H3 (363)
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Chapter 1

MGTA04 Chapter 1.docx

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Management (MGT)
H Laurence

MGTA04 Chapter 1: Producing Goods and Services  Service operations: production activities that yield intangible services  Goods production: production activities that yield tangible products  Service sector managers focus less on equipment and technology than on the human element in operations success/failure depends on customer-provider contact  Operations (production management): the systematic direction and control of processes that transform resources into finished goods and services  Production managers: managers responsible for ensuring that operations processes create value and provide benefit ultimately responsible for creating utility for customers bring raw materials, equipment, and labor together under a production plan that effectively uses all the resources available in the production facility  Operations processes: a set of methods and technologies used in the production of a good or service  We can describe goods according to the kind of transformational technology they require or according to whether their operations process combines resources or breaks them into component parts o Types of transformation technology: chemical (chemically altered) , fabrication (shape or form is altered) , assembly (putting together various components) , in transport (goods acquire place utility by being moved from one location to the next) and clerical processes (transformation of information) o Analytic process: any production in which resources are broken down o Synthetic process: any production process in which resources are combined together  we can also classify services according to the extent of customer contact requires service- producing processes: o High contact system: a system in which the service cannot be provided without the customer being physically in the system i.e. TTC o Low contact system: a system in which the service can be provided without the customer being physically in the system (e.g. lawn care services) o Focus on performance: performance is very important and helps to measure success and profitability o Focus on process and outcome o Focus on service characteristics: service companies’ transactions always reflect the fact that service products are characterized by three qualities: intangibility, customization, and unstorability (i.e. of service not used when it is available it goes to waste) o Focus on service quality considerations Operations Planning:  The business plan and forecasts developed by top managers guide operations planning  Business plan outlines goals and objectives, including the specific goods and services that the firm will offer  Managers also develop a long range production plan through forecasts: estimates of future demand for both new and existing products  Business plan and forecasts long range operations planoperations schedulesoperations control  output to customers (all include information results i.e. feedback)  Capacity: the amount of a good that a firm can produce under normal working conditions  Operations planning includes: capacity, location, layout, quality, and methods planning o Capacity planning for producing goods: ensures that a manufacturing firm’s capacity slightly exceeds the normal demand for its products. Stakes are high on the company’s capacity decisions o Capacity planning for producing services: 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 Location Planning For Producing Goods: o Location planning for producing services: location decisions are influenced by proximity to raw materials and markets, availability of labor, energy, and transportation costs. Some location decisions are now being simplified by the rise of industrial parks o Location planning for producing services: Low contact services: companies have some options and can be located near resource supplies, labor, customers, or transportation outlets. High contact services: more restricted as they must be located near the customers who are part of the system o Layout planning: layout of machinery, equipment, and supplies determines whether a company can respond quickly or efficiently to customer requests for more and different products or finds itself unable to match competitors production speed or convenience of service  Layout Planning for producing goods  Productive facilities: work stations and equipment for transforming raw materials  Non-productive facilities: storage and maintenance areas  Support Facilities : offices, restrooms, parking lots, cafeterias, etc o Process layout: a way of organizing production activities such that equipment and people are grouped together according to their function i.e. wood working shop o Cellular layout: used to produce goods when families of products can follow similar flow paths i.e. family of pockets near continuous flow on a fixed flow path o Product layout: a way of organizing production activities such that equipment and people are set up to produce only one type of good i.e. assembly line in which a partially finished product moves through a plant on a conveyer belt or other equipment i.e. car manufacturing  Layout Planning for producing services: For low contact system: facility should be used to enhance the production of the service i.e. mail processing facility organized like a product layout  assembly line. Kinko’s copy centers use process layouts for different custom jobs. High contact systems should be arranged to meet customer needs and expectations i.e. restaurants o Quality planning: managers must keep in mind the firms quality  any complete production plan includes systems for ensuring that goods are produced to meet the firms quality standards o Methods Planning: managers must clearly identify every production step and the specific methods for performing them. They can then work to reduce waste, inefficiency, and poor performance by examining procedures on a step by step basis ca
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