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Chapter 1

MGTA02H3 Chapter Notes - Chapter 1: Critical Path Method, Capacity Planning, Customer Satisfaction

Management (MGT)
Course Code
Chris Bovaird

of 7
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
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
oOrders are placed faster
oSchedules are accelerated
oDelivery 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
Production operations have become much more environmentally friendly
2- Explain the two classifications of operation processes
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
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:
oType 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
oAnalytic 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
Service- Producing Processes
oHigh-contact system- a system in which the service cannot by provided
without the customer being physically in the system (Ex: transit systems)
oLow-contact system- a system in which the service can be provided
without the customer being physically in the system (Ex: lawn care
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
Several key areas where service operations differ from production operations
Focus on performance
Goods are produced, services are performed
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
Quality considerations must be defined, and managed differently in the service
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 must focus on both the transformation process and its outcome
Focus on service characteristics
oThe 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)
oServices are customized to fit your needs (Ex: getting a haircut)
oBecause many services cant 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
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
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