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Chapter 1

MGTA02H3 Chapter Notes - Chapter 1: Materials Management, Critical Path Method, Gantt Chart

Management (MGT)
Course Code
Chris Bovaird

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Chapter 1 Producing Goods and Services
Service operations are production activities that yield intangible services.
oProvides services such as entertainment, transportation, education, and food
Goods production is production activities that yield tangible products.
oFirms make tangible products such as radios, newspapers, buses, and
Although the term production has been referred to as the making of physical goods,
the concept as we now use it also means services.
Many of the things we need or want, from health care to fast food, are produced from
service operations.
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
Consumers today 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.
oOrders are placed faster, schedules are accelerated, and delivery times are
The Growth of Global Operations
Production operations have also become much more environmentally friendly.

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Products provide businesses with both economic results (profits, wages, goods
purchased from other companies) and non-economic results (new technology,
innovations, pollution).
Because the term production has historically been associated with manufacturing, it
has been replaced by operations. Operation is a term reflecting both services and
goods production.
Operation management is the systematic direction and control of the processes that
transform resources into finished goods and services.
Operation managers are ultimately responsible for creating utility for customers.
Production managers are managers responsible for ensuring that operations
processes create value and provide benefits.
oAs demand for good increases, they must schedule and control work to
produce amount required. Meanwhile, they must control costs, quality levels,
inventory, and plant and equipment.
Not all production managers work in factories.
Farmers are also production managers. As production managers, farmers have the
option of employing many workers to plant and harvest their crops.
Operations Processes
An operations process is 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 according to whether their operation process combines resources or
breaks them into component parts.
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: by the
type of transformation technology that transforms raw materials into finished goods

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and by the analytic or synthetic nature of the transformation process.
Types of Transformation Technology
Manufacturers use the following types of transformation processes to turn raw
materials into finished goods:
oChemical processes: raw materials are chemically altered. Such techniques
are common in the aluminum, steel, fertilizer, petroleum, and paint
oFabrication processes: these mechanically alter the basic shape or form of a
product. Fabrication occurs in the metal forming, woodworking, and textile
oAssembly processes: various components are put together. These techniques
are common in the electronics, appliance, and automotive industries.
oTransport processes: goods acquire place utility by being moved from one
location to another.
oClerical processes: these transform information. Combining data on employee
absences and machine breakdowns into a productivity report is a clerical
process. Compiling inventory reports at a retail outlet is also a clerical
Analytic Versus Synthetic Processes
Second way of classifying production processes is by the way in which resources are
converted into finished goods.
An analytic process breaks down the basic resources into components.
A synthetic process combines a number of raw materials to produce a finished
product such as fertilizer or paint.
Service-Producing Processes
One way of classifying services is to ask whether a given service can be provided
without the customer being part of the production system.
Services are classified according to the extent of consumer contact.
High-Contact Processes
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