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B207 Reading 11: Introduction to Operations Management - Coggle Diagram
B207 Reading 11: Introduction to Operations Management
1. Definition and Core Role of OM
Definition:
The function responsible for the efficient delivery of goods and services to customers through effective management of the organisation's resources.
Importance:
OM is hugely important for both short- and long-term success. More people who occupy managerial positions are actually operations managers than might be realised; if you manage any kind of resource, you are an operations manager.
Integration:
OM must be fully integrated and involved in any new developments, as operations managers are often the implementers of strategies.
Efficiency:
An effective OM manages processes to ensure assets (like materials, work-in-progress) are not kept unnecessarily or wasted, thereby preventing cash flow problems.
2. The Input-Process-Output Model (The Transformation Process)
This model characterises all operations, covering manufacturing and service, in all sectors.
1. Input (Management Input Resources):
Resources that OM must collect and use efficiently.
Examples: Facilities, Equipment, Staff, Customers, Suppliers, Transport, Materials, Energy, Information .
2. Process (Managing Processes):
The set of activities that converts inputs into outputs.
OM effort goes into managing this transformation process.
3. Output (Managing Outputs):
Operations are responsible for the final goods and services.
Goals:
Produce the right goods/services, at the right time, in the right location.
Measures:
Products and services, Customer satisfaction, Unit costs (profitability), and Environmental impact.
3. Types of Transformation Processes
The process nature depends partly on the resource being transformed and the type of change taking place.
Three Main Types of Resources Transformed:
Material Processing:
Predominantly transforms materials (e.g., manufacturing, mining, logistics, postal services).
Information Processing:
Predominantly processes information (e.g., banking, accounting, news services).
Customer Processing:
Involves processing customers (e.g., hotel, hospital, theme park)
Types of Transformational Change:
Physical
: Altering the physical characteristics (e.g., food preparation, machining metal).
Informational
: Transforming data (e.g., converting data into company reports, recording booking info).
Possession
: Change in ownership of goods (e.g., retail operations, conveyancing property).
Location
: Moving resources from one place to another (e.g., logistics, customer transport services).
Storage
: Storing resources (inventory, people in waiting rooms, data on servers). OM views unnecessary storage as waste.
Physiological/Psychological:
Transformation of the customer (e.g., medical treatment, counselling, spa, scary theme park ride).
4. The Operations Manager's Role
The role divides into three main areas (Design, Planning & Control, and Improvement)
Organising Inputs
Deciding what resources (people, facilities, equipment) to obtain to meet market requirements.
Managing Outputs
Providing products/services on time, to a high standard; meeting delivery promises.
Design of Processes
Working with other functions to develop efficient processes; performance is largely dictated by design.
Planning and Control
Scheduling activities, managing resources, checking conformity to plans.
Improvement
Leading continuous process improvement activities to ensure performance improves over time
5. Strategic Importance and Risk
Impact of OM:
OM can reduce costs, enhance revenues (through quality, service, and innovation), minimise capital needs, and develop capabilities to enter new markets.
Hayes and Wheelwright Four-Stage Model (The Role of Operations Strategy):
Stage 1 (Internally Neutral):
OM is seen as holding the organisation back, underperforming, and making mistakes; objective is to minimise negative impact.
Stage 2 (Externally Neutral):
OM is as good as competitors (parity), but not a specific source of advantage; big development comes from outside OM. (A high proportion of operations are here.)
Stage 3 (Internally Supportive):
OM offers the best capabilities in the sector; objective is to provide credible support for business strategy (e.g., better prices, faster delivery, greater flexibility).
Stage 4 (Externally Supportive):
OM provides such a strong competitive advantage that the entire organisation's strategy can be built around it; OM changes market expectations
OM as a Source of Risk:
Failures can severely impact revenues, competitiveness, and reputation (e.g., the BP Deepwater Horizon oil spill resulting in tragic loss of life, ecological disaster, and massive financial penalties due to poor operations practices motivated by cost-cutting)