Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Chapter 1

What is operations management?

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.

Operations management defined

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

The operations function is fashionable!

The consultancy services market – % of world revenues of 40 largest consultancy firms

Marketing / sales2

Operations and process management

31

Corporate strategy17

IT strategy17

Benefits / actuarial16

Organizational design

11

Financial6

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

They are all

operations

Back office operation in a bank

Kitchen unit manufacturing

operation

Retail operation

Take-out / restaurant operation

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Creating Customer Value

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Design a store layout which gives smooth and effective flowDesign elegant

products which can be flat-packed efficiently

Site stores of an appropriate size in the most effective locations

Maintain cleanliness and safety of storage area

Arrange for fast replenishment of products

Monitor and enhance quality of service to customers

Continually examine and improve operations practice

Ensure that the jobs of all staff encourage their contribution to business success

Operations management at IKEA

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

All operations are transformation processes …

Transformation processInputs

that transform inputs …

Outputs

into outputs

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Transformed resources …

Transforming resources …

Customers

Output products

and services

Input resources

Some inputs are transformed resources

Some inputs are transforming resources

Outputs are products and services that add value for customers

Transformation process

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Transformed resources …

?Served and

satisfied customers

Input resources

Transforming resources …

?

At Prêt a Manger

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

The output from most operations is a mixture of products and services

Mixture of products and services – Outputs

that are a mixture of the tangible and the

intangible

Prêt a Manger

Acme Whistles

Mwagusi Safari Lodge

Crude oil production

Aluminium smelting

Specialist machine tool production

Restaurant

Information systems provider

Management consultancy

Psychotherapy clinic

Pure products – Outputs that are exclusively

tangible

Pure services – Outputs that are exclusively

intangible

IKEA

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Characteristics of Goods v Services

ProductInventory

Customer ContactResponse times

MarketsFacilitiesCapitalLabourQuality

Contrast the characteristic differences between Manufacturing and Services over the following factors:-

Manufacturing <> Service

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Differences within sectors are often greater than the differences between sectors

Financial services

An account management centre at a large retail bank

Financial analyst advising a client at an

investment bank

Furniture manufacturing

Mass production of kitchen units

Craft production of reproduction

‘antique’ furniture

Hotels

Value-for-money hotel

Lobby of an international

luxury hotel

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

A Typology of Operations

Variation in demand

High Low

VisibilityHigh Low

VarietyHigh Low

HighVolumeLow High

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

A Typology of OperationsImplications Implications

Changing capacityAnticipationFlexibilityIn touch with demandHigh unit costs

StableRoutinePredictableHigh utilizationLow unit costs

Variation in demand

High Low

VisibilityHigh Low

Short waiting toleranceSatisfaction governed by customer perceptionCustomer contact skills neededReceived variety is highHigh unit costs

Time lag between production and consumptionStandardizationLow contact skillsHigh staff utilizationCentralizationLow unit costs

FlexibleComplexMatch customer needsHigh unit costs

Well definedRoutineStandardizedRegularLow unit costs

VarietyHigh Low

High

Low repetitionEach staff member performs more of jobLess systemizationHigh unit costs

High repeatabilitySpecializationCapital intensiveLow unit costs

VolumeLow High

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Volume

Important to understand how different operations are positioned on the 4 V’s.

Is their position where they want to be?

Do they understand the strategic implications?

Variety

Variation

Visibility

Low

High

High

High

High

Low

Low

Low

Mwagusi Safari Lodge

4 V’s profile of two operations

Formule 1 Hotel

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Decisions in Operations

Process

Quality

Work force

Inventory

Capacity

Five major decision areas:

Schroeder Section 1.6 - page 16

Operations Management R G Schroeder, Operations Management, 4th edition,1993, McGraw Hill

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Some interfunctional relationships between the operations function and other core and support functions

Engineering/ technical function

Accounting and finance

function

Human resources function

Information technology (IT) function

Marketing function

Product/service development

function

Operations function

Micro Environment

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Case : Too Short The DayAnalysis

What is Giles trying to do ?

What is Giles actually doing ?

What are the problems within the organisation ?

RecommendationsWhat should Giles do ?

What changes if any should the organisation make ?

Identify the functions of a manager

Identify the levels of management

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007

Case : The Glastonbury Festival

1 What is the role of an operations manager such as Michael Eavis in this situation? How does this change at different stages of the festival organisation?

2 List the different types of transformation processes involved in the festival activities within the classifications: Materials/Information/Customer

3 Relate the 5 decision areas as outlined in R G Schroeder’s Operations Management, to the Glastonbury case.