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MGTA02H3 (363)
Chapter 1

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Department
Management (MGT)
Course
MGTA02H3
Professor
Chris Bovaird
Semester
Summer

Description
Chapter 1- Producing Goods and Services Terms: Service operations: production activities that yield tangible and intangible service products. Goods operations: production activities that yield tangible products. Creating Value through Production Terms: Operation (production) management: the systematic direction and control of the processes that transform resources into finished goods. They are ultimately responsible for creating utility for customers. Production managers: managers responsible for ensuring that operations processes create value and provide benefits. As demand increases, they must schedule and control work to produce amount required. Meanwhile they must control costs, quality levels, inventory, and plant and equipment. An example of a production manager who does not work in a factory is a farmer (converting soil, seeds, human labour and gas into agricultural products, livestock and related products (eggs, milk). They have the option of employing many workers to help them with the work, or use automated machinery in order to do most of it for them. Examples of Production System Farm: Inputs: land, tractors, equipment, labour, buildings, fertilizer, farmer’s management skills Transformation: cultivation of plants and livestock Outputs: food products, profit for owner, jobs for farmer’s family Jewellery Store Input: fashion-conscious customers, merchandise, sales clerks, showroom, fixtures, equipment Transformation: exchange of merchandise between buyer and seller Output: satisfied jewellery customers Tire Producer Inputs: rubber and chemical compounds, blending equipment, tire moulds, factory, and human skills Transformation: chemical reactions of raw materials Output: tires for autos, airplanes, trucks, trailers, and other vehicles Goods-Producing Processes Types of Transformation Technology:  Chemical Processes: raw materials that are chemically altered. Such techniques are common in the aluminium, steel, fertilizer, petroleum and paint industries.  Fabrication Processes: the basic shape or form of a product that is mechanically altered. Fabrication occurs in the metal form, woodworking and textile industries.  Assembly Processes: put together various components. These techniques are common in the electronics, appliance and automotive industries.  Transport Processes: goods acquire place utility by being moved from one location to another. An example can be seen in trucks moving finished bicycles from manufacturing plants to consumers through warehouses and discount stores.  Clerical processes: transform information. Combining data on employee absences and machine breakdown into a productivity report is a clerical process. So is compiling inventory reports at a retail outlet. Analytic versus Synthetic Processes:  Analytic Process: any production process in which resources are broken down.  Synthetic Process: any production process in which resources are combined. Service-Producing Processes:  High-Contact System: a system in which the service cannot be provided without the customer being physically in the system (example: transits systems)  Low-Contact System: a system in which the service can be provided without the customer being physically in the system (example: lawn care services) Differences between Service and Manufacturing Operations:  Focus on Performance: whereas goods are produced, services are performed, since they are more intangible, and less storable than goods.  Focus on Service Characteristics: products offered by most service operations are combinations of goods and services.  Focus of Service Characteristics:  Intangibility: services cannot be seen, touched, smelled or tasted. However an important value is the intangible feeling of pleasure, satisfaction and/or safety that the customer feels when they purchase the service. There are also some tangible aspects of services, (example: wills are an example of a service).  Customization: what a customer expects when they purchase and/or receive a service. For an example, a person visiting a dentist will expect the dentist to check their teeth, and if necessary, perform the required processes to clean their teeth.  Unstorability: Services such as rubbish collection, transportation, childcare and housecleaning cannot be produced ahead of time and then stored. If a service is not used when it is available, it is usually wasted. Services are typically characterized by a high degree of unstorability.  Focus on the Customer-Service Link: because they transform customers or their possessions, service operations often acknowledge as part of the operations process itself. An example can bee seen in a barbershop. Since a customer is a physical participant in the operations process, service consumers have a unique ability to affect that processes. In other words, the consumers expect the salon to be conveniently located, to offer needed services at reasonable prices, and to extend prompt services.  Focus on Service Quality Considerations: consumers use different criteria to judge services and goods. Service managers must understand that quality of work and quality of service are not necessarily synonymous. For example although a car may have been repaired perfectly, the fact that it was finished a day late may cause some dissatisfaction for the customer. Operations Planning Terms:  Forecasts: estimates of future demand for both new and existing products. Capacity Planning  Capacity: the amount of a good that a firm can produce under normal working conditions.  Capacity planning for producing goods: capacity planning for goods means ensuring that a manufacturing firm’s capacity slightly exceeds the normal demand for its product. To see why this policy is best, consider the alternatives. If capacity is too small to meet demand, the company must turn away customers- a situation that not only cuts into profits, but also alienates customers and salespeople. If capacity greatly exceeds demand, it means the firm is wasting money, by maintaining a plant that are too large, keeping excessive machinery online, and/ or by employing too many workers.  Capacity planning for producing services: in low-contac
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