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RSM 100Y – Chapter 11: Producing Goods and Services
Creating Value through Production: Utility
The power of a product to satisfy a human want; something of value
Time Utility – Value by making a product available when needed
Place Utility – Making an object available where consumers can buy it
Ownership Utility – Satisfies want by being consumed/used
Form Utility – Creates value by being in a useable form
Operation/Production Management – Oversight of production process
Production Managers: Anyone who ensures that processes create value
- Farmer, Supervisor…. ANYONE who transforms shit into other shit
Goods can be described in terms of the transformation technology required.
Chemical Process: Goods are chemically altered (Steel, aluminum, gas)
Fabrication Process: Goods are physically altered (Furniture, textiles)
Assembly Process: Goods are put together (Computer, Car, Cellphone)
Transport Process: Moving of goods from one place to another
Clerical Process: Recording all the information of movements of goods
Analytic Process: Breaking things down
Synthetic Process: Items are combined
Service Producing Process
Classified in terms of Customer Contact
High-Contact Process: Customer must be present for service to work (TTC)
Low-Contact Process: Customer doesn’t have to be there (Car Repair)
Differences between Manufacturing and Service Industry
Focus on Performance: Quality of goods vs. Quality of Customer Satisfaction
Focus on Process/Outcome: Just end good vs. Customer care + End good
Focus on Service Characteristics
Services cannot be touched, thus the intangible value of a service is important.
This includes pleasure, feeling of safety, happiness… EMOTIONS
Services like hair cuts, or dental appointments should be tailored to your needs.
Unstorability: Services must be used NOW or then, cannot be saved over time.
Focus on Customer-Service Link
Expectations that a service will be offered with Time, Place, Form Utility.
Ecommcerce & Virtual Customers
Customers are in contact with the company at all times, at any place.
Capacity: How much a firm can produce under normal conditions
Forecast: Predicting the demand of a product in the future
Capacity should slightly exceed forecast, but not by much.
Capacity Planning for Service Products
Low Contact Processes: Capacity set at average demand
High Contact Process: Capacity set at Peak Demand
Consider putting a factory where the transportation, labour, and other costs are
cheaper to earn more profits or provide cheaper goods. More skilled labour is
also an asset, but that can be imported If needed, other factors cannot.
For Low-Contact Service, location is flexible. For High Contact, not so flexible.
Decide where all your equipment goes to provide efficient service
For good producing firms, three types of space are needed
Productive Facility – Workstations, equipment
Non-Productive Facility – Storage, Maintenance
Support Facility – Washrooms, Parking Lots, Break rooms