Chapter 1.docx

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2 Apr 2012
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MGTA03
Chapter 1: Producing Goods and Services
Service operations: production activities that yield intangible services
Goods operations: production activities that yield tangible products
Service operations focus more on provider-customer contact because success and failure depends on
customers’ involvement.
Global competition faster-paced, more complex
Production operations became environmental friendly (by eliminating process, using smaller
equipments)
Products provide business:
Economic results (profits, wages, goods purchased from other companies)
Non-economic results (technology, innovations, pollution)
Production = manufacturing operations
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 (EX. Farmers)
Bring raw materials and labour under a production plan
Operations process: a set of methods and technologies used in the production of a good or a service
Two different ways of goods-producing process: type of transformation technology and analytic VS
synthetic processes
Types of Transformation Technology:
Chemical processes (alter raw materials: aluminum, steel, fertilizer, petroleum, paint)
Fabrication processes (alter basic shape or form of a product: metal, woodworking, textile)
Assembly processes (put together various components: electronics, appliance, cars)
Transport processes (trucks, from plants to warehouses to stores)
Clerical processes (transform information: from data to reports)
Analytic VS Synthetic Process
Analytic process: any production process in which resources are broken down (ex. Extract minerals from
mine ore called bauxite)
Synthetic process: any production process in which resources are combined
Services-Producing Processes:
High contract process: a system in which the service cannot be provided without the customer being
physically in the system (transit system)
Low contact process: a system in which the service can be provided without the customer being
physically in the system (lawn care services)
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MGTA03
Differences between Service and Manufacturing Operations
Performance:
Goods are produced, services are performed
Customer-orientated performance are used to measure effectiveness of a service company
Services operations has a unique link between production and consumption (process and
outcome)
Services are intangible, more customized, less storable
Quality considerations must be defined and managed
Process and Outcome:
Manufacturing operations focus on the outcome; services operations focus on process and
outcome
Services operations require skills from manufacturing operations
Service characteristics:
Intangibility: cannot be touched, tasted, smelled, or seen
The intangible value is in the form of pleasure, satisfaction, or feeling of safety
Customization: designed to meet customers’ needs (pharmacy, hair cut, vet)
Unstorability: cannot be produced ahead of time and stored (house cleaning, childcare, rubbish
collection)
Customer-Service Link:
Participants in the operation process have the ability to affect the process
Location, time, services, pricing, and extend service
Service Quality Considerations:
Consumers use different criteria to judge services and goods, not only the quality of the services
Operations Planning
The business plan and forecast developed by top managers guide operations planning; it outlines goals,
objective, and specific goods or service offered.
Forecast: estimates of future demand for both new and existing products (2-5 year period)
Capacity:
The amount of a good that a firm can produce under normal working conditions
Depends on the numbers of employees and size of its facilities
Planning must include current and future capacity
Capacity Planning for Producing Goods:
Slightly exceeds the normal demand for its product
Pick the best policy, consider the alternatives
Expanding to meet future demand and protect market share from competitions must weigh in
cost of expanding
Capacity Planning for Producing Services:
Low contact process average demand
High contact process peak demand
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