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Chapter 1

Chapter 1


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

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Chapter 1: Producing Goods and Services
Service Operations: Production activities that yield tangible and intangible
service products
Goods Operations: Production activities that yield tangible products.
WHAT DOES PRODUCTION MEAN TODAY?
- as a rule, service-sector managers focus less on equipment and technology than on
the human element in operations because success or failure may depend on
provider-customer contact.
The Growth of Global Operations
Instead of needing to maintain continuous mass production, firms today face
constant change.
smart equipment now used in production process.
With the internet, producers of both services and goods are integrating their
production activities with those of far off suppliers and customer.
CREATING VALUE THROUGH PRODUCTION
products provide businesses with both economic results(profits, wages, goods
purchased) and non-economic results (new technology, innovations, pollution).
Term productions has been replaced by operations because it represents
both goods and services
Operations Management: is the systematic direction and control and of the
proceses that transform resources into finished goods and services.
-thus productions managers are ultimately responsible for creating utility for
customers.
-not all productions managers work in factories; farmers are also productions
managers.
Operations Processes
an operations process: is a set of methods and technologies used in the
production of a good or service.
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We classify types of production according to their different operations
processes a.k.a transformation technology.-> specifically if their operations
process combines resources or breaks them apart.
We can describe services according to the extent of customer contact required.
Goods Producing Processes
All goods-manufacturing processes can be classified in two different ways:
1)Types of Transformation Technology
Manufacturers use the following types of transformation processes to turn raw
materials into finished goods:
Chemical Processes: raw materials are chemically altered. E.g aluminum,
paint and fertilizer industry.
Fabrication Processes: mechanically alter the basic shape or form of a
product. E.g metal forming or textile industry
Assembly processes: put together various components e.g appliance industry
Transport processes: goods acquire place utility by being moved from one
location to another
Clerical processes transform information e.g compiling inventory reports at a
retail outlet.
2)Analytic Versus Synthetic Processes
- the way in which resources are converted into goods.
An analytic process: breaks down the basic resources into components (e,g
extracting metal from ore)
A synthetic process: combines a number of raw materials to produce a finished
product such as fertilizer or paint.
Service-Producing Processes
Services are classified according to the extent of customer contact
High-Contact Processes: A system in which the service cannot be provided
without the customer being physically in the system (e.g transit systems)
Low-Contact Processes: A system in which the service can be provided without
the customer being physically in the system (e.g lawn care or auto repair shops)
Differences Between Service and Manufacturing Operations
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-Service and manufacturing both transform raw materials into finished products
but in services the raw materials are people who have either unsatisfied needs or
possessions which requie some form of care or alteration.
- The finished products’ or outputs are people with needs met and possessions
serviced.
Focus on Performance
Customer-oriented performance is a key factor in measuring the effectiveness
of a service company
The focus of service operations is more complex than goods production
-First, service operations feature a unique link between production and
consumption (process and outcome)
-Second, services are more intangible and less storable than most
products.
–Lastly, quality considerations must be defined and managed
differently for services.
Focus on Process and Outcome:
service operations require different skills from manufacturing operations;
need interpersonal skills when serving in service jobs.
Focus on Service Characteristics:
-Service companies transactions always reflect the fact that service products are
characterzed by three key qualities: intangibility, customization, and unstorability.
Intangibility:
an important value of services is the intangible value that the customer
experiences in the form of pleasure, satisfaction, or a feeling of safety.(e.g
hiring a lawyer)
Customization:
how services are designed for your needs (e.g. hair cut)
Unstorability:
if a service is not used when it is available, it is usually wasted. SO services
have a high degree of unstorability.
Focus on the Customer-Service Link
Service operations often acknowledge the customer as part of the operations
itself because they transform customers or their possessions.
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