Operations Management: Key Concepts and Definitions
Key Concepts in Operations Management
Support Process: Provides vital resources and inputs to the core processes.
Core Process: A set of activities that deliver value to external customers.
Operations: Systems or processes that transform resources into goods and services.
Management: Systematic design, direction, and control of systems or processes that produce goods or services.
Operations Management: The systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external, customers.
Processes: Any activity that takes one or more inputs, transforms them, and provides outputs. Different firms produce a service or product to the satisfaction of the customers.
Operations: A group of resources performing all or part of one or more processes. Operations translates materials and services into outputs. Marketing generates sales of outputs. Finance acquires financial resources and capital for inputs.
Supply Chain: The interrelated series of processes within a firm and across different firms that produce a service or product for customers.
Outputs: Goods and services. Inputs are workers, managers, equipment, facilities, materials, land, and energy.
Operations Strategy
Corporate Strategy: Provides an overall direction that serves as the framework for carrying out all the organization’s functions.
Operations Strategy: Specifies the means by which Operations implements corporate strategy and helps build a customer-driven firm.
Competitive Priorities and Capabilities
Competitive Priorities: The critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future.
Competitive Capabilities: The cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver.
Productivity: A basic measure of performance for economies, industries, firms, and processes. Formula: Value of outputs (services and products) / Value of inputs (wages, cost of equipment, etc.)
Manufacturing and Service Processes: Two main differences are the nature of their output and the degree of customer contact. The similarities are customer expectations for warranty, maintenance, replacement, and financial services.
Order Winner: A criterion that customers use to differentiate the service or products of one firm from those of another. Order winners can include price (which is supported by low-cost operations) and other dimensions of quality, time, and flexibility.
Productivity: Output / Input
Multifactor Productivity: Output / (Labor + Material + Energy + Capital + Miscellaneous)
Process Strategy
Process Strategy: The pattern of decisions made in managing processes so that they will achieve their competitive priorities.
A Process Involves: The use of an organization’s resources to provide something of value.
Factors Affecting Process Choice:
- Product
- Market conditions and competition
- Capital requirements
- Labor supply and cost
- State of technology
Layout: Physical arrangement of operations. Customer Involvement: Ways in which customers become part of the process. Resource Flexibility: Ease that helps employments and equipment to handle a variety of products, output levels, duties, and functions. Capital Intensity: Mix of equipment and human skill process.
Job Process: Flexibility needed to produce a variety of products in big quantity with considerable divergence.
Batch Process: Differs from the job process with volume, variety, and quantity.
Line Process: Lies between batch and continuous process; volumes are high and products standardized.
Continuous Flow Process: Extreme end of high volume standardized production; production does not start and stop for long intervals.
Customer Involvement
Possible Disadvantages: Can be disruptive; managing timing and volume can be challenging. There are quality implications; layouts may have to be revised. Requires interpersonal skills. Multiple locations may be necessary.
Possible Advantages: Can mean better quality, faster delivery, greater flexibility, and lower cost. May reduce product, shipping, and inventory costs. May help coordinate across the supply chain.
Resource Flexibility
Workforce: A flexible workforce can often require higher skills and more training and education.
Worker flexibility can help achieve reliable customer service and alleviate capacity bottlenecks.