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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, example:
store clerk, instructors, bus drivers
Goods production- production activities that yield tangible products, example: newspapers, buses, books
What Does Production Mean Today?
-production also means services
-service sector managers focus less on equipment and technology than on the human element in
operations
-success or failure may depend on provider-customer contact
-a key difference between production and service operations is the customer’s involvement in the latter
-customers are increasingly involved in all kinds of production because electronic communications are key
components in winning and keeping customers in a range of competitive industries
The growth of global operations
-global competition has reshaped production into a faster paced, more complex business activity.
-companies are advancing by using high tech machines, computers, and “clean rooms
-companies are becoming much more environmentally friendly
-firms today face constant change
-new technologies allow machines to run more cleanly, quickly, and safely
-modern factories with online manufacturing, are able to communicate with other machines in the
company (via an intranet) and with other companies machines without human help
-so-called smart equipment stores performance data that become available at desktops around the world
-designers can click on machine date, simulate machine action, and evaluate performance
-with aid from the internet, producers are including their production activities with far-off suppliers and
customers
Creating Value Through Production
-products provide businesses with both economic results (profits, wages, goods purchased from other
countries) and non-economic results (new technology, innovations, pollution)
-Operations (production) management- the systematic direction and control of the processes that
transform resources into finished goods
-Production managers- managers responsible for ensuring that operations processes create value and
provide benefits
-they must bring raw materials, equipment, and labour together under a production plan that effectively
uses all the resources available
- they must control costs, quality levels, inventory, and plant and equipment
-farmers are considered to be production managers
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Operation processes
-operation process: a set of methods and technologies used in the production of a good or service
- goods can be described according to the kind of transformation technology they require or according to
whether their operations process combines resources or breaks them down
- services can described according to the extent of customer contact required
Goods-Producing Processes
-all goods manufacturing process can be classified into two ways
-first way is type of transformation technology that transforms raw materials into finished goods
-second way is by the analytic or synthetic nature of the transformation process
Types of transformation technology
(1)Chemical processes: raw materials are chemically altered, example- steel, aluminum
(2)Fabrication processes: mechanically alter the basic shape or form of a product, example-
woodworking
(3)Assembly processes: put together various components, example-electronics, appliances, cars
(4)Transport processes: goods acquire place utility by being moved from one location to another
(5)Clerical processes: transform information. Combination of employee absences and machine
breakdowns are put into a productivity report
Analytic vs. Synthetic processes
-a second way of classifying production processes is by the way in which resources are converted into
finished goods
-analytic process: any production process in which resources are broken down into components, such as
aluminum
-synthetic process: any production process in which resources are combined, such as paint
Service-Producing Processes
-services are classified according to the extent of customer contact
- the two processes are high-contact and low-contact
-high contact system: a system in which the service cannot be provided without the customer being
physically in the system
-example: transit systems
-transit managers must worry about the cleanliness and appearance of the buses and stations
-low contact system: a system in which the service can be provided without the customer being physically
in the system
-example: lawn care services
-customers are not in contact while the service is being provided
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Differences Between Service and Manufacturing Operations
-in goods production, the raw materials/inputs are not steel or glass
-in service production, the raw materials/inputs are people who chose among sellers because they have
either unsatisfied needs or possessions in which they require some form of care or alteration
-in service operation, the outputs are people with needs met and possessions serviced
Focus on Performance
-goods are produced, services are performed
-customer oriented performance is a key factor in measuring the effectiveness of a service company
-Wal mart has speedy delivery and its keen customer focus emphasizes avoiding unnecessary inventories,
and getting fast response from suppliers
-the focus of service operation is more complex than good production
-service operations feature a unique link between production and consumption
-also a unique link between process and outcome
-services are more intangible and more customized and less storable
-quality considerations must be defined, and managed, differently in the service sector than goods
production
Focus on Process and Outcome
-the products offered by most service operations, are combinations of goods and services
-services must focus on both the transformation process and its outcome
-example: both on making the pizza, and on delivering it to the customer
-service operations require different skills from manufacturing operations
Focus on Service Characteristics
-service products are characterized by three key qualities: intangibility, customization, and unstorability
(1)Intangibility: an important value is the intangible value that the customer experiences in the form
of pleasure, satisfaction, or feeling of safety. Some services provide tangible elements as well.
(2)Customization: when you visit a doctor, you expect to be treated from your symptoms. You expect
the services to be designed for your needs.
(3)Unstorability: services cannot be produced ahead of time and then stored. If a service is not used
when available, it is usually wasted. Services are characterized by a high degree of unstorability
Focus on the Customer-Service Link
-the growth of ecommerce has introduced a virtual presence”
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