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Chapter 1

chapter 1 notes


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird
Chapter
1

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Chapter 1 Producing Goods and Services Notes
x service operations—production activities that yield tangible and intangible service products
x goods production—production activities that yield tangible products
What Does “Production” Mean Today?
x today customers are increasingly involved in all kinds of production because electronic communications are key components in
winning and keeping customers in a huge range of competitive industries
The Growth of Global Operations
x many countries have joined global competition that has reshaped production into faster-paced, more complex business activity
x although factory remains centrepiece for manufacturing, it bears little resemblance to its counterpart of a decade ago as smoke,
grease, and danger have been replaced in many companies by glistening high-tech machines, computers, and “clean rooms” that
are contaminant-free and climate controlled
x production operations have also become much more environmentally friendly
x with internet, producers of services and goods are integrating production activities with those of far-off suppliers and customers
Creating Value Through Production
x operations (production) management—systematic direction and control of processes that transform resources into finished goods
x production managers—managers responsible for ensuring that operations processes crate value and provide benefits
Operations Processes
x operations process—a set of methods and technologies used in the production of a good or a service
x describe goods according to kind of transformation technology they require, or according to whether their operations process
combines resources or breaks them into component parts and services according to extent of customer contact required
Goods-Producing Process
x all goods-manufacturing process can be classified in 2 different ways: by type of transformation technology that transforms raw
materials into finished goods and by analytic or synthetic nature of transformation process
x manufacturers use following types of transformation processes to turn raw materials into finished goods:
o Chemical processes—raw materials chemically altered; common in aluminum, steel, fertilizer, petroleum, paint industries
o Fabrication processes—mechanically alter basic shape or form; occurs in metal forming, woodworking, textile industries
o Assembly processes—put together various components; common in electronics, appliance, automotive industries
o Transport processes—goods acquire place utility by being moved from one location to another; for example, trucks
routinely move bicycles from manufacturing plants to consumers through warehouses and discount stores
o Clerical processes—transform information; example includes combining data on employee absences
x analytic process—any production process in which resources are broken down
x synthetic process—any production process in which resources are combined
Service-Producing Processes
x high-contact system—system in which service cannot be provided without customer being physically in system (e.g., transit)
x low-contact system—system in which service can be provided without customer being physically in system (e.g., lawn care)
Differences Between Service and Manufacturing Operations
x in service production, raw materials, or inputs, are not glass or steel, rather, they are people who choose among sellers because
they have either unsatisfied needs or possessions for which they require some form of care or alteration
x in service operations (SO), “finished products” or “outputs” are people with needs met and possessions serviced
Focus on Performance
x customer-oriented performance is key factor in measuring effectiveness of service company
x in many ways, focus of SO is more complex than that of goods production—1st, SO feature unique link between production and
consumption; 2nd, services are more intangible and customized and less storable than most products; finally, quality
considerations must be defined, and managed, differently in service sector than in manufacturing operations (MO)
Focus on Process and Outcome
x products offered by most SO are actually combinations of goods and services
x services must focus on both transformation process and its outcome and thus SO require different skills from MO
Focus on Service Characteristics
x service companies’ transactions always reflect fact that service products are characterized by 3 key qualities: intangibility,
customization, and unstorability
Focus on the Customer-Service Link
x because they transform customers or their possessions, SO often acknowledge customer as part of operations process itself
x growth of ecommerce has introduced “virtual presence”, as opposed to physical presence, of customers in service system
Focus on Service Quality Considerations
x service managers must understand that quality of work and quality of service are not necessarily synonymous
Operations Planning
x success of any firm depends on final result of this logical sequence of decisions
x business plan and forecasts developed by top managers guide operations planning
x business plan outlines goals and objectives, including specific goods and services that firm will offer
x forecasts—estimates of future demand for both new and existing products
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