Operations Management

Introduction to operations management

• Definition: a Company is any entity that engages in business.

A number of persons united or incorporated for joint action, especially for business. With that being said, a company also needs multiple functions to run, such as:

Human Resources.

Operations.

Logistics

Quality Assurance.

Sales.

Marketing.

Finance & Accounting.

Research & Development.

These companies can produce and make either good or services. Which brings us to talk about the difference between these two.

Attributes of goods are: (Tangible products)

• Product can be resold, it can be also inventoried, some aspects of quality and measurable, selling is distinct from production, product is transportable, site of facility is important for cost, Often easy to automate, Revenue is generated primarily from the tangible product.

In the Other hand.

Attributes of services: (Intangible products)

• Reselling a service is unusually, and it’s also often produced and consumed immediately, many aspects of quality are difficult to measure, Selling is often a part of the service, the service provider, not the product, is transportable, site of facility is important for customer contact, service is often difficult to mechanize or automate, revenue is generated primarily from the intangible services.

What is Operations management?

• Operations management is the activity of managing the resources that create and deliver services and products.
• Every organization has operations function because every organization creates some type of services and/or products. However, not all types of organizations will necessarily call the operations function by this name.

How APICS defines Operations management?

• operations management is the activity of managing the resources which are devoted to the production and delivery of products and services. This involves, designing, planning, processing, monitoring and controlling sequenced activities of a productive system in view of creating value.
• Operations management focuses on the systematic direction of the processes involved in the sourcing, production, and delivery of products and services. it calls for a holistic or systems view of the processes with major impact on the costs required to operate a firm.

Short term and long term operational activities.

• Developing and maintaining the system’s infrastructure.
• Managing the system inputs & distribution of outputs.
• Controlling material inputs within the system.
• Managing customer inputs within the system.
• Managing the rate of flow through the system.
• Assuring the quality of system outputs.
• Developing and enhancing the system’s processes.
• Designing and developing human work systems.
• Developing new outputs.

Market Structures.

Markets are basically ‘structures’ enabling the exchange of the goods and services for money (usually), they can be physical or virtual markets.

Markets characteristics:

• Level and type of competition.
• Relative strength of buyers and sellers.
• Level of industry concentration.
• Extent of product differentiation.
• Ease of entry into and exit from the market.

Types of market structures:

• Perfect competition.
• Imperfect competition which is divided to the following:

~ Oligopoly: arises when a small number of large firms have all or most of the sales in an industry.

~ Duopoly: a situation in which two suppliers dominate the market for a commodity or service.

~ Monopoly: Structure characterized by a single seller, selling a unique product in the market.

~ Oligopsony: A state of the market in which only a small number of buyers exist for a certain product.

~ Monopsony: Market condition in which there is only one buyer.

Power of Sellers:

• Extreme case: Monopoly.
• Factors making sellers powerful:

~ Industry concentration.

~High switching costs.

~Suppliers capacity to forwardly integrate.

• Factors making sellers Weaker:

~Many suppliers.

~Product is highly standardized or a commodity.

~Threat of backward integration.

Power of buyers:

• Factors making buyers Powerful:

~Few buyers.

~Buyers purchase a significant proportion of total demand.

~Threat of backward integration.

• Factors making buyers Weaker:

~Buyers are fragmented.

~Switching costs are high.

~Buyer rely on one supplier or a few suppliers.

~Threat of forward integration.

Customers and market segments.

• Identify the differences between buyers so that each specific cluster of consumers, OQs and OWs become apparent.
• Order Qualifiers: Characteristics of a product or services that are required for it to be considered by a customer.
• Order Winners: Characteristics of a product or service which directly contribute to winning business from customers.

Consumer market segmentation:

Four main categories:

• Geographic variables.
• Demographic variables.
• Psychographic variables (Personality, lifestyle, social status, AIO, Activities, Interests, Opinions and Attitudes).
• Behavioral variables (benefits sought, user status, usage rate, loyalty status and buyer readiness stage).

Competitiveness.

Quality (OW): Ability to provide products or services that meet customers satisfaction.

~ Dimensions of quality:

• Performance — the primary operation characteristics.
• Features — optional extras (the ‘bells’ and ‘whistles’).
• Reliability — likelihood of breakdown.
• Conformance — conformance to specification.
• Technical durability — length of time before the product becomes obsolete.
• Serviceability — ease of service.
• Aesthetics — look, smell, feel, taste.
• Perceived quality — reputation.
• Value for money.

Flexibility (OW): Ability to change a product or service offering to suit costumers’ needs .

~ Dimensions of flexibility:

• material quality — ability to cope with incoming materials of varying quality.
• Output quality — Ability to satisfy demand for products of varying quality.
• New products — ability to cope with the introduction of new products.
• Modification — ability to modify existing products.
• Deliverability — ability to change delivery schedules.
• Volume — Ability to accept varying demand volumes.
• product mix- Ability to cope with changes in the product mix.
• resources mix — Ability to cope with changes in the resource mix.

Speed (OW): Ability to provide products or services with as short of a time delay as possible between customers order and delivery.

~forms of speed:

• Quote generation: time to prepare a quotation once the specifications are agreed upon.
• Delivery speed: time to deliver the product/service to the customer.
• Delivery frequency: number of deliveries made per day/week/month.
• Production speed: time it takes to produce the product/ service internally.
• New product/ service development speed: Time it takes to introduce a new product/ service to the market.

Dependability (OW): The ability of an organization to consistently meet its promises to the customer.

~Dependability types:

• Schedule adherence: ability to meet customers’ schedules requirements.
• Delivery performance: ability to meet a required standard for delivering the product/ service.
• Price performance: Ability to meet commitments to customers for delivering at the agreed price.
• Ability to keep promises: to Supply its products/ services at the agreed time.
• Safety: ensure that user comes to no harm.