Chapter 1

What is operations management?

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

Operations management defined

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

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

The consultancy services market % of world

revenues of 40 largest consultancy firms
Financial
6
Organizational
design
11

Marketing / sales
2

Operations and process

management
31

Benefits / actuarial
16
IT strategy
17

Corporate strategy
17

The operations function is fashionable!

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

Back office operation

in a bank

Retail operation

Kitchen unit
manufacturing
operation

They are
all
operations
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

Operations management at IKEA

Design elegant
products which can be
flat-packed efficiently

Design a store layout

which gives smooth
and effective flow

Site stores of an
appropriate size in
the most effective
locations

Maintain cleanliness
and safety of storage
area

Ensure that the jobs of

all staff encourage
their contribution to
business success

Continually examine
and improve
operations practice

Arrange for fast

replenishment of
products

Monitor and enhance

quality of service to
customers

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

All operations are transformation processes

Inputs

Transformation process

Outputs

that transform inputs

into outputs

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

Some inputs are transformed resources

Some inputs are transforming resources
Transformed
resources

Input
resources

Transformation process

Output
products
and
services

Customers

Transforming
resources

Outputs are products and services that add

value for customers

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

At Prt a Manger
Transformed
resources

?
Input
resources

Served and
satisfied
customers

Transforming
resources

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

Characteristics of Goods v Services

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

Manufacturing

<>

Product
Inventory
Customer Contact
Response times
Markets
Facilities
Capital
Labour
Quality

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
Low

Volume

High
High

High

Variety

Low

High

Variation in
demand

Low

High

Visibility

Low

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

Implications
Low repetition
Each staff member
performs more of job
Less systemization
High unit costs
Flexible
Complex
Match customer needs
High unit costs
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit costs
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit costs

A Typology of Operations
Low

High

High

High

Volume

Variety

Variation in
demand

Visibility

Implications

High
High

High repeatability
Specialization
Capital intensive
Low unit costs

Low

Well defined
Routine
Standardized
Regular
Low unit costs

Low

Stable
Routine
Predictable
High utilization
Low unit costs

Low

Time lag between

production and
consumption
Standardization
Low contact skills
High staff utilization
Centralization
Low unit costs

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