Chapter 1 Business.docx

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12 Apr 2012
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Chapter 1: Producing Goods and Services
Service operation production activities that yield intangible services
Goods production - Production activities that yield tangible products
What Does “Production” Mean Today?
Service-sector managers focus less on equipment and technology than on the human element in
operations
Success or failure may depend on provider-customer feelings about the service
The Growth of Global Operations
Production operations have become much more environmentally friendly
Firms today face constant change
New technologies allow machines to run more cleanly, quickly, and safely, and to operate on a
global scale
Creating Value through Production
Products provide businesses with both economic results and non-economic results
Production historically associated with manufacturing replaced by operations
Operation a term that reflects both services and goods production
Operations (production management) the systematic direction and control of the processes
that transform resources into finished goods and services
Production managers are ultimately responsible for creating utility for customers
Production managers managers responsible for ensuring that operations processes create
value and provide benefits
Farmers are production managers
Farmers have the option of employing workers
Operations Processes
Operations process a set of methods and technologies used in the production of a good or a
service
We can describe goods according to the kind of transformation technology they require or their
operations process combines resources or breaks them into component parts
We can describe services according to the extent of customer contact required
Goods-Producing Processes
Good-manufactiring processes classified in two different ways: type of transformation
technology and the analytic or synthetic nature of the transformation process
Transformation technology transforms raw materials into finished goods
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Types of Transformation Technology
Raw materials into finished goods
Chemical processes raw materials are chemically altered
Fabrication processes mechanically alter the basic shape or form of a product
Assembly processes put together various components
Transport processes goods acquire place utility by being moved from one location to another
Clerical processes transform information
Analytic Versus Synthetic Processes
Second way of classifting production processes the way in which resources are converted into
finished goods
Analytic process any production process in which resources are broken down
Synthetic process reverse approach, any production process in which resources are combined
Service-Producing Processes
Whether a given service can be provided without the customer being part of the production
system
Services are classified according to the extent of customer contact
High-Contact Processes
Public transit is a high-contact system
High-contact system a system in which the service cannot be provided without the customer
being physically in the system
Low-Contact Processes
Workers sort the cheques that have been cashed low-contact system
Low-contact system A system in which the service can be provided without the customer
being physically in the system
Differences Between Service and Manufacturing Operations
Service production are people who choose among sellers because they have either unsatisfied
needs or possessions for which they require some form of care or alternation
Focus on Performance
Goods are produced, services are performed
Customer-oriented performance is a key factor in measuring the effectiveness of a service
company
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Service operations feature a unique link between production and consumption between
process and outcome
Services are more intangible and more customized and less storable than most products
Quality considerations must be defined, and managed, differently in the service sector than in
manufacturing operations
Focus on Process and Outcome
Manufacturing operations focus on the outcome of the production process
Products offered by most service operations are combinations of goods and services
Services must focus on both the transformation process and its outcome
Service operations require different skills from manufacturing operations
Focus on Service Characteristics
Service products are characterized by three key qualities: intangibility, customization, and
unstorability
Intangibility
Services cannot be touched, tasted, smelled, or seen
The intangible value that the customer experiences in the form of pleasure, satisfaction, or a
feeling of safety
Customization
When you purchase insurance, doctor, haircut etc.
Expect services to be designed for your needs
Services are customized
Unstorability
Cannot be produced ahead of time and then stored
Services are characterized by a high degree of unstorability
Focus on the Customer-Service Link
Service operations often acknowledge the customer as part of the operations process itself
The manager adopts hours of operations, available services, and an appropriate number of
employees to meet the requirements of the customer
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
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