Dr. Harvey A.

Singer
School of Management George Mason University

OM 301 Operations Management

Types of Operations

2009 by Harvey A. Singer

Operations Management
Production is the creation of goods and services. Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs.

2009 by Harvey A. Singer

Economic Sectors
Production and manufacturing. Services. Extraction (mining). Construction. Agriculture.

2009 by Harvey A. Singer

Manufacturing Operations
Produces physical, tangible, goods. Goods may be materials, components, and/or products at all stages of production (from raw materials to finished products). Value is added at every stage of production.

2009 by Harvey A. Singer

Types of Manufacturing Operations

Project. Job shop. Batch production. Repetitive or mass production. Continuous production.

2009 by Harvey A. Singer

Project Shop
Custom, unique, one-of-a-kind items for an individual customer.
E.g., custom suits.

Prototypes.
New product design and development.
E.g., R&D labs.

On-going work:
Case studies or special studies.
What-if analysis. T&E labs.

2009 by Harvey A. Singer

Job Shop
Small production lot or limited production run for a single customer.
Intermittent or episodic jobs or work.
Intermittent process.

Examples:
Repair and general contracting services. Print shop printing personal business cards or business forms.

2009 by Harvey A. Singer

Batch Production
Production of similar items in small groups or batches.
Uses general purpose equipment that can satisfy a variety of similar processing requirements. Characterized by fluctuating demand, short production runs of a wide variety of products, some customization, and skilled workers. More fabrication than assembly. Jobs sent through based on their production requirements. Jobs may be routed through different workstations. Examples:
Ice cream manufacturer makes batches of different flavors. Cannery cans batches of different vegetables, etc. Similar prescription pharmaceuticals.
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Repetitive or Mass Production

One or a few highly standardized products.
More standardized products in larger quantities than batch processing can economically make. Products are made-to-stock for a mass market. Demand is stable and volume is high. Dedicated equipment and production lines to a particular product. Capital intensive: specialized equipment and limited labor skills. Assembly line (or line flow) production.
E.g., automobiles, appliances, electronics.

Lot production of big lots.

E.g., bakeries, microbreweries, OTC pharmaceuticals.
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Continuous Production
One or a few very highly standardized products are continuously made.
Very high volume of output. Non-stop, 24/7, production. Highly automated system.
Workers supervise the production.

The output is continuous, not discrete. Output is measured, not counted as in mass production. Very capital intensive. Non-adaptive to changes in product, demand, technology, quality improvement. But: limited variety of products
E.g., refined oil products, electricity, paint, steel, paper, mining.
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Manufacturing Operation Classification

By amount of standardization
Decreasing customization Increasing standardization

Project manufacturing. Job shop. Batch production. Line flow production (assembly line). Continuous.
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Manufacturing Operation Classification

By flexibility of production
Decreasing flexibility

Project manufacturing Job shop Batch production Line flow production (assembly line) Continuous
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2009 by Harvey A. Singer

Increasing volume

Manufacturing Operation Classification

By amount of processing
Make-to-order (MTO)
Product customization per order.
E.g., custom tailored suits, prototypes.

Make-to-stock (MTS)
Mass production of standard products.
Household appliances and electronics, off-the-rack clothes.

Assemble-to-order (ATO)
Assemble ordered combination of standardized options.
E.g., automobiles, PCs.
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Remarks
Mass customization.
A strategy for producing basically standardized products, but incorporating some limited degree of customization or a limited amount of variety to suit a large target submarket of the overall product market.
Slight variants of the basic product for target submarkets of which a customer may belong to one or another. Not individualized choices as for ATO.

As a means of providing some variety in mass production. Additional costs of variety outweighed by the additional revenue earned from additional customers.
Usually the additional costs of adding some variety are small.

Examples: Orange juice, milk, automobiles.

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What are services?

A service is an act performed on the behalf of and for the benefit of the customer. Services are:
Intangible. Perishable. Inseparable. Variable.

Similar classification of operations for services as for manufacturing.

With some very important differences.
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Service Operations
Services are economic activities that produce benefits and/or utilities for the customer. Benefits to the customer in:
Time.
Service attributes. Pay for services to save personal time and labor.

Place.
Convenient location and facilities.

Form.
Enhanced usability and functionality.

Psychological and physical.

Food, entertainment, health care.
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Classifying Services
Classify services by:
Core vs. value-added services. Specific operations types. Service sector. NAICS.

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Types of Services Offered

Within any of the types of service operations, have the following types of services offered: Core services. Value-added services.

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Core Services
Fundamentally, who is the service provider and what is (are) their primary services.
The server defines themselves in terms of the services they provide.
Core services are what is done primarily and foremost.

Defined in terms of:

Mission and function. Quality. Flexibility. Speed. Price (or service cost).
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2009 by Harvey A. Singer

Value-Added Services
Additional services offered by the service provider to augment their core service(s).
But not the primary services.

In terms of:
Information. Problem solving. After sales support. Field support. Customer convenience.

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Remark
The concept of core vs. value added is not used much in manufacturing. Manufacturers may provide different products, as separate product lines, for different specialty markets.
Each group finds its own value in the products.
Ford Motor Co. primarily makes cars and trucks. But as a separate line of business, they also make school busses. School busses do not to bring added value to their line of cars. But there is a large market for school busses. So they use their technical expertise to make a special product for a special market.

The value-added concept in manufacturing also pertains to additional services provided by the manufacturer to the customer to facilitate the sale of the product.
E.g., financing, service-after-sale.
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Types of Service Operations

Individual specialists. Professional services. Service shop. Mass service. Service factory.

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Professional Services
Several on-going activities, functions, and/or projects being performed concurrently.
A project is a set of related and coordinated tasks, with a definite start and stop, and specific deliverables at stages of the project and/or its completion. The activities are generally related by the service provided. Each project has its own customers and funding.

Services require a highly educated and highly trained service staff.

Service providers must have a high level of skill, knowledge, and/or technical expertise. Service providers continue their education and training.

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Professional Services
Diverse mix of services offered.
New services may be added often.
Expand service repertoire to gain a competitive edge, fill a niche, better utilize labor talent, or gain market share.

Very large job content.

Each service provider may perform much of the entire service.
The server owns the service.

Managers and staff wear many different hats.

Very highly customized and individualized service.

May require high interaction with the customer.
Depending in the customer and the service provided.

Very high service labor intensity.

Many professionals working many hours.
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Professional Services
May be organized and operated as service shops, depending on the service provided.
Individual business units may be regarded as service shops. Some service shops provide professional services. Similar to a job shop in manufacturing.

Examples:
Contract technical services providing scientific, engineering, IT/IS, and management services (like SAIC). Professional services, like medical, dental, legal, advertising, engineering, consulting, architectural, and management firms.

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Service Shop
Several on-going activities, functions, and/or projects being performed concurrently.
Generally, non-professional services.
E.g., data processing, human resources, payroll, property.

The activities are generally related by the service provided. Each project has its own customers and funding. Similar to a job shop in manufacturing.

Services performed require an educated and well trained service staff.

Requires a high level of skill, knowledge, and/or technical expertise. Service providers continue their education and training.

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Service Shop
Diverse mix of services offered.
New services may be added often.
Expand service repertoire to gain a competitive edge, fill a niche, better utilize labor talent, or gain market share.

Large job content.

Each server may perform much of the entire service.

Relatively high service labor intensity.

Need a lot of people to provide service.

Customized and individualized service.

May require high interaction with the customer.
Depending in the customer and the service provided.

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Service Shop
Examples:
Hospitals.
And hospital departments, like radiology and ICU.

Schools (classroom education).

As regards office hours, research, etc.

Repair, installation, and maintenance services.

And some and general contracting services.

Skilled custom services.

I.e., clothing shops with custom fitting and tailoring.

Some professional services may be organized and operated as service shops.

Government contractors (i.e., contract technical services, like SAIC).
Each project is funded by the sponsoring agency under its own contract.

Advertising, engineering, architectural, and management firms, may be regarded as service shops.
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Mass Service
Mostly the same services as provided by a service shop but delivered to a large body of customers.
Often, serve everybody all at once. Classroom teaching. But sometimes not all at the same time. Provide the same service or the same kinds of service customer after customer, as in retail merchandising.

May have some limited contact and interaction with individual customers during the performance of the service.
E.g., Q&A during classroom teaching, Q&A during retail selling.

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Mass Service
Simply put, mass service is delivered to a large group but with limited individual contact.
Generally, low level services. Little individualization of the service.
Limited interaction with the customer.
Just within the scope of the service.

Relatively low labor intensity. Limited mix of services offered. Moderate job content.
Service staff can perform several or many functions.

Limited addition of new services.

On an experimental or pilot basis.

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Mass Service
Examples:
Retail merchandising. Commercial and personal banking. Classroom teaching. Hotels and resorts. Fast food restaurants (i.e., McDonalds, Burger King). But not mass services like mass transit or mass media.
These are service factories.

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Service Factory
Exactly the same service delivered to a large body of customers all at the same time.
Serve everybody all together and serve everybody all at once
TV programs reach all viewers at the same time.

Generally, no interaction with the customer during the performance of execution of the service.
This is the quintessential difference with mass service. Little or no individualization of the service to any individual customer.
Little or no contact or interaction with individual TV viewers.
TV programs are generally non-interactive. Some shows take phone-in questions or run a phone-in poll. Questions asked without follow-up or rebuttal. Polls to register a preference between limited choices, without debate or commentary.
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Service Factory
Exactly the same service delivered to a large body of customers all at the same time.
Often, low level services.
But some high-level services like airlines.

Little or no individualization of the service.

Little and/or brief interaction with the customer.

Lowest labor intensity.

Need many people working many hours to provide the service.

Limited mix of services offered. A greater fraction of the service costs are associated with the facility and its equipment rather than with service labor. Low job content.
High division of labor into identifiable, non-overlapping, tasks. Each staff person performs one or just a few functions.

New services are infrequently added.

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Service Factory
Examples:
Mass media.
E.g., newspapers, broadcast radio, broadcast TV.

Transportation (airlines, trains, mass transit, etc.). NOTE: But by the definition of service factory, classroom education and entertainment could also be considered service factories.

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Problems
Problems associated with mass services and service factories (and maybe some service shops too):
Primarily, boredom on the job.
Job is intellectually unchallenging, unrewarding, and/or unfulfilling.

Leads to the secondary problems of:

Absenteeism. Tardiness. Turnover. Workplace violence.

Remedies:
Replace repetitive, boring, jobs with robots and automation.
Humans supervise and control equipment.

Cross-train employees. Offer valued incentives.

Recognition by Employee of the Month contests, with benefits. Monetary rewards, e.g., bonuses.

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Individual Specialists
Individuals performing unique, highly specialized, or one-of-a-kind, activities.
Specialists in a very narrow field. Self-employed. Freelancing.

One activity is performed at a time.

The service provider is dedicated to performing that single activity or serving that single customer.

Requires a very high level of special skills, knowledge, and/or technical expertise. Very high job content.

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Individual Specialists
Examples:
Troubleshooters. Consultants. Feature free-lance writers and authors. Bodyguards and private detectives.

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Types of Service Operations

Increasing amount of requisite skill and knowledge

Individual specialists.
Decreasing flexibility Increasing volume

Professional services.

Service shop.
Mass service. Service factory.

2009 by Harvey A. Singer

Decreasing productivity
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Types of Service Operations

Service Factory Low labor, low interaction/customization Mass Service High labor, low interaction/customization Service Shop Low labor, high Interaction/customization Professional Service High labor, high interaction/customization

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Types of Service Operations

Degree of Interaction and Customization

Degree of Labor Intensity

Low Service Factory Airlines Trucking Hotels Resorts/recreation Mass Service Retailing Wholesaling Schools Retail banking

High Service Shop Hospital Auto repair Other repair services Professional Service Physicians Lawyers Accountants Architects

2009 by Harvey A. Singer

High

Low

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Types of Service Operations

Degree of Service Worker Judgment in Meeting Customer Needs
Degree of Customization High Professional services Surgery Taxi service Beautician Plumber Education (tutorials) Upscale restaurant Low Education (large classes) Preventive health programs College food service

High

Telephone service Hotel service Retail banking Family restaurant

Public transportation Routine appliance repair Movie theatre Spectator sports Fast-food restaurant
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2009 by Harvey A. Singer

Low

Service Sectors
Another service classification scheme: by sector. A macro or large view of the categories traditionally used in determining employment by various industries in the economy. Includes:
Service industries. Ancillary and support services. Services in manufacturing.
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Service Industries
Organizations that fall within this category focus on providing a specific type of service as their main line of business.
Their primary business mission or objective.

Includes:
Health care. Hospitality. Financial services. Professional services and consulting. Retail. Transportation.
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2009 by Harvey A. Singer

Ancillary and Support Services

Under the umbrella of service supply chain management.
These services are performed or provided within the organization, but are not its primary mission. Some ancillary services may be outsourced instead of managing them in-house.

Includes:
Temporary help. Janitorial and custodial services. Security Food service.
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2009 by Harvey A. Singer

Services in Manufacturing
To facilitate the purchase of the manufactured product.
As remarked previously as value-added services for manufacturing.

Includes:
Financing. Service after sale. Warranties. Product updates and upgrades.

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Operation Classification by Industry

North American Industry Classification System (NAICS) *
Agriculture, Forestry, Fishing and Hunting Mining, Quarrying, and Oil and Gas Extraction Utilities Construction Manufacturing Wholesale Trade Retail Trade Transportation Warehousing * Green denotes service sector industries. Information
Blue denotes non-service industries.
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Operation Classification by Industry

NAICS, continued.
Finance and Insurance Real Estate and Rental and Leasing Professional, Scientific, and Technical Services Management of Companies and Enterprises Administrative and Support and Waste Management and Remediation Services Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Other Services (except Public Administration) Public Administration
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2009 by Harvey A. Singer

Types of Operations

The End

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