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Chapter 1

Detailed Chapter 1 - 4 Lecture Notes

Management (MGT)
Course Code
Chris Bovaird

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Intro to Management Part II Notes
Jan, 10, 2011
Chapter 1: Producing Goods & Services Operations Management:
Business: organised efforts to provide things that customers want to
Why is operations called operations and not productions*** MIDTERM
Operation: the direction & control of processes that transform resources into finished
goods/ the management of the creation of g&s, using the factors of production
Why is it called operations management?:
-not called production because the word production implies that Canadian makes
-but the problem is that in Canada we don’t really produce a lot of products
(goods) instead we provide services
-80% of Canadians provide services (something intangible) (e.g. bankers, lawyers,
professors & accountants)
-Yet thoseservices still need to be planned, managed & supplied
-Thus it’s called operations management
Importance of Services:
-services rep. about 69.1 of GDP
-manufacturing rep. about 28.8%
-agriculture rep. about 2.1%
Service Operations: Special Issues:
-products can be stored, services can not (book & restaurant)
-products can be made w/o customers, services can not (bus ride)
-products should be the same, services should not (jeans & hair cuts)
What Operations Managers Do?:
1. Demand planning: forecast the quantity you need (run out coffee @ coffee shop)
2. Capacity planning: ensure enough space& workers to meet demand (TH @
3. Location planning: find the best location for getting materials & good employees,
transport to market (Rex’s Den @ UTSC)
4. Layout planning: arrange store/factory for smooth flow of materials
5. Schedule: to finish on time & start on time (1976 Olympic Stadium, finished

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Jan 17, 2011
Chapter 2: Productivity & Quality:
Quality: (according to textbook) a product’s fitness for use in terms of offering the
features that consumer wants (Prof’s definition) Meeting/ surpassing the
customer’s expectations
- quality is aboutcustomer’s expectation not something fancy, expensive/ lots of
Why’s “Quality” Important?:
- if customers don’t feel they’re getting value they:
-badmouth your business (tells others)
-demand repair/ refund
-stop buying from the business
Quality – Productivity Relationship:
- profit is always greater when there are no complaints/ the customers get what they need
the first time
- additional costs include: (for new computer) labour for Customers Service, the Repair
Department & the new part required, profit then lower by $100
- if computer doesn’t work after the first repair, then additional cost will be the labour of
the Complaints Dept., the original computer thrown away, & the cost of the replacement
computer, total loss of $125 (for detailed numbers view slides 7-10 in chap 2 notes)
Results of Quality Problems:
- 90% of dissatisfied customers don’t complain, they don’t go back to the business
- thus the business loses all future sales from that customer
- 9/10 will tell others about their bad experience
Productivity: measure of efficiency that compares how much is produced w/ the
resources used to produce it
- it is a ratio of inputs: outputs
Common Measures of Productivity:
-retailing: sales/ square foot
-restaurants: meals served/ table
-manufacturing: labour hours/ product
-the higher the ratio, the more likely of the business to become profitable
Total Quality Management (TQM):
- businesses recognise connection betweenquality” (do it right/meet expectations) and
productivity” (fewer defects/fewer repairs)
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