Week 2 Module 1 - Operations Management in Context PDF

Week 2. Introduction to Operations Management Module 1: Operations Management in Context **LEARNING OUTCOMES** After the completion of the chapter, students will be able to: **CHAPTER PRE-TEST** Direction: Write TRUE if the statement is correct and FALSE if incorrect. \_\_\_\_\_\_\_\_1. Oper...

Week 2. Introduction to Operations Management Module 1: Operations Management in Context **LEARNING OUTCOMES** After the completion of the chapter, students will be able to: **CHAPTER PRE-TEST** Direction: Write TRUE if the statement is correct and FALSE if incorrect. \_\_\_\_\_\_\_\_1. Operations Management is the activity of managing the resources which produce and deliver products and services to meet the needs of the organization's customers \_\_\_\_\_\_\_\_2. The Operations Manager is the person responsible of managing the operations of an organization \_\_\_\_\_\_\_\_3. Organization staff has the sole responsibility for all activities in the organization which contribute to the effective production of products and services \_\_\_\_\_\_\_\_4. Not all operations are part of a larger supply network \_\_\_\_\_\_\_\_5. A process is 'an arrangement of resources that produce some mixture of products and services **DISCUSSION PROPER** Operations Management is about how organizations produce goods and services. Everything you wear, eat, sit on, use, read or knock about on the sports field comes to your courtesy of the operations managers who organized its production. Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university -- all have been produced. That is what this book is concerned with -- the tasks, issues and decisions of those operations managers who have made the services and products on which we all depend. This is an introductory chapter, so we will examine what we mean by 'operations management', how operations processes can be found everywhere, how they are all similar yet different, and what it is that operations managers do. *[What is Operations Management?]* - - - - - - - *[Operations in the Organization]* The operations function is central to the organization because it produces the goods and services which are its reason for existing. It is, however, one of the **three core functions** of any organization. These are: - - - In addition, there are the **support functions** which enable the core functions to operate effectively. These include, for example: - - Figure 1.1 illustrates some of the relationships between operations and some other functions in terms of the flow of information between them. Although it is not comprehensive, it gives an idea of the nature of each relationship. However, note that the support functions have a different relationship with operations than operations has with the other core functions. Operations management's responsibility to support functions is primarily to make sure that they understand operations' needs and help them to satisfy these needs. The relationship with the other two core functions is more equal -- less of *'this is what we want'* and more *'this is what we can do currently -- how do we reconcile this with broader business needs?'* So, **operations management is relevant for all functions**, and all managers should have something to learn from the principles, concepts, approaches and techniques of operations management. It also means that we must distinguish between two meanings of 'operations': - - *[Importance of Operations Management]* Success in a hospitality service industry depends on the operations of its departments and its treatment of guests. Through planning, the hotel needs to select various achievable goals and the strategies for accomplishing the goals in order to identify potential opportunities and threats in a bid to facilitate productivity, decision-making, communication, motivation, and satisfaction of both guests and employees. The centrality of function of all industries, such as cruise, airline, travel, accommodation and restaurant, means that operations have a significant influence on cost and revenue as well as organizational structure. It uses the organization's resources to create outputs that fulfil defined market requirements. This is the fundamental activity of any type of enterprise. Operations management is increasingly important because today's business environment requires new thinking from operations managers. **Travel Industry** -- operations management helps in marshalling the attractions resources, notably the staff and physical equipment such as machinery to provide a satisfactory service for the customers and an acceptable rate of return on the use of these resources. The goal is the smooth and efficient operation of the site **Airline Industry** -- Operations management facilitates the execution of airline schedules, movement of passengers, baggage and cargo. It also involves passenger check-in, baggage check-in, connecting passengers/baggage processing, cargo and goods handling, catering service preparation, passenger boarding at the gates, passenger handling, cabin cleaning, crewing change, routine visual maintenance checks, and re-fueling.  **Accommodation Industry** -- Operations Management facilitates smooth and proper front desk service, housekeeping, maintenance, accounting, marketing and sales, and kitchen. **Cruise Industry** -- operations management deals with the effective and efficient management of accommodation on board, public areas, cabins, crew areas, deck areas, marketing, adherence to maritime legislations, cruise plans, personnel structures an contracts, customer service, food and drinks, facilities, and health and safety.  **Restaurant Industry** -- Operations management ensures safety of food, cleanliness, customer service, equipment, products, marketing and human resources. Whatever terminology is used there is a common theme and a common purpose to how we can visualize the operations activity in any type of organization: small or large, manufacturing or service, public or private, profit or not-for-profit. Operations management uses *resources* to *appropriately create outputs* that *fulfil defined market requirements.* *[The Activities of Operations Management]* Operations managers have some responsibility for all the activities in the organization which contribute to the effective production of products and services. And while the exact nature of the operations function's responsibilities will, to some extent, depend on the way the organization has chosen to define the boundaries of the function, there are some general classes of activities that apply to all types of operation. - - - - - - *[The Process Hierarchy]* A process is 'an arrangement of resources that produce some mixture of products and services. They are the 'building blocks' of all operations, and they form an 'internal network' within an operation. Within each of these processes is another network of individual units of resource such as individual people and individual items of process technology (machines, computers, storage facilities, etc.). Again, transformed resources flow between each unit of transforming resource. So any business, or operation, is made up of a network of processes and any process is made up of a network of resources. But also any business or operation can itself be viewed as part of a greater network of businesses or operations. It will have operations that supply it with the products and services it needs and unless it deals directly with the end-consumer, it will supply customers who themselves may go on to supply their own customers. Moreover, any operation could have several suppliers and several customers and may be in competition with other operations producing similar services to those it produces itself. This network of operations is called the **supply network**. In this way the input--transformation--output model can be used at a number of different 'levels of analysis'. Here we have used the idea to **analyze businesses at three levels**, the process, the operation and the supply network. But one could define many different 'levels of analysis', moving upwards from small to larger processes, right up to the huge supply network that describes a whole industry. This idea is called the **hierarchy of operations.** All operations are part of a larger supply network which, through the individual contributions of each operation, satisfies end-customer requirements. All operations are made up of processes that form a network of internal customer--supplier relationships within the operation. End-to-end business processes that satisfy customer needs often cut across functionally based processes. *[Characteristics of Operations Process]* Although all operations processes are similar in that they all transform inputs, they do differ in a number of ways, four of which, known as the four Vs, are particularly important: - - - - The Volume Dimension Let us take a familiar example. The epitome of high-volume hamburger production is McDonald's, which serves millions of burgers around the world every day. Volume has important implications for the way McDonald's operations are organized. The first thing you notice is the **repeatability** of the tasks people are doing and the **systematization** of the work where standard procedures are set down specifying how each part of the job should be carried out. Also, because tasks are systematized and repeated, it is worthwhile developing specialized fryers and ovens. All this gives *low unit costs*. Now consider a small local cafeteria serving a few 'short-order' dishes. The range of items on the menu may be similar to the larger operation, but the volume will be far lower, so the repetition will also be far lower and the number of staff will be lower (possibly only one person) and therefore individual staff are likely to perform a wider range of tasks. This may be more rewarding for the staff, but less open to systematization. Also it is less feasible to invest in specialized equipment. So the cost per burger served is likely to be higher (even if the price is comparable). The variety dimension A taxi company offers a high-variety service. It is prepared to pick you up from almost anywhere and drop you off almost anywhere. To offer this variety it must be relatively *flexible*. Drivers must have a good knowledge of the area, and communication between the base and the taxis must be effective. However, the cost per kilometre travelled will be higher for a taxi than for a less customized form of transport such as a bus service. Although both provide the same basic service (transportation), the taxi service has a high variety of routes and times to offer its customers, while the bus service has a few well-defined routes, with a set schedule. If all goes to schedule, little, if any, flexibility is required from the operation. All is **standardized** and regular, which results in relatively low costs compared with using a taxi for the same journey. The variation dimension Consider the demand pattern for a successful summer holiday resort hotel. Not surprisingly, more customers want to stay in summer vacation times than in the middle of winter. At the height of 'the season' the hotel could be full to its capacity. Off-season demand, however, could be a small fraction of its capacity. Such a marked variation in demand means that the operation must change its capacity in some way, for example, by hiring extra staff for the summer. The hotel must try to predict the likely level of demand. If it gets this wrong, it could result in too much or too little capacity. Also, recruitment costs, overtime costs and under-utilization of its rooms all have the effect of increasing the hotel's costs operation compared with a hotel of a similar standard with level demand. A hotel which has relatively level demand can plan its activities well in advance. Staff can be scheduled, food can be bought and rooms can be cleaned in a *routine* and *predictable* manner. This results in a high utilization of resources and unit costs which are likely to be lower than those in hotels with a highly variable demand pattern. The visibility dimension Visibility is a slightly more difficult dimension of operations to envisage. It refers to how much of the operation's activities its customers experience, or how much the operation is **exposed** to its customers. Generally, customer-processing operations are more exposed to their customers than material- or information-processing operations. But even customer processing operations have some choice as to how visible they wish their operations to be. For example, a retailer could operate as a high-visibility 'bricks and mortar', or a lower-visibility web-based operation. In the 'bricks and mortar', high-visibility operation, customers will directly experience most of its 'value-adding' activities. Customers will have a relatively *short waiting tolerance* and may walk out if not served in a reasonable time. Customers' perceptions, rather than objective criteria, will also be important. If they perceive that a member of the operation's staff is discourteous to them, they are likely to be dissatisfied (even if the staff member meant no discourtesy), so high-visibility operations require staff with good customer contact skills. Customers could also request goods which clearly would not be sold in such a shop, but because the customers are actually in the operation they can ask what they like! This is called **high received variety**. This makes it difficult for high-visibility operations to achieve high productivity of resources, so they tend to be relatively high-cost operations. *[The Input-Transformation-Output Process]* All operations produce products and services by changing *inputs* into *outputs* using an 'input-transformation-output' process. Figure 1.3 shows this general **transformation process model**. Put simply, operations are processes that take in a set of **input resources** which are used to transform something, or are transformed themselves, into **outputs of products and services**. And although all operations conform to this general input--transformation--output model, they differ in the nature of their specific inputs and outputs. All operations can be modelled as input--transformation--output processes. They all have inputs of transforming resources, which are usually divided into 'facilities' and 'staff', and transformed resources, which are some mixture of materials, information and customers. Few operations produce only products or only services. Most produce some mixture of tangible goods or products and less tangible services.  Inputs to the process One set of inputs to any operation's processes are **transformed resources**. These are the resources that are treated, transformed or converted in the process. They are usually a mixture of the following: **Materials** -- operations which process materials could do so to transform their *physical properties* (shape or composition, for example). Most manufacturing operations are like this. Other operations process materials to change their *location* (parcel delivery companies, for example). Some, like retail operations, do so to change the *possession* of the materials. Finally, some operations *store* materials, such as in warehouses. **Information** -- operations which process information could do so to transform their *informational properties* (that is the purpose or form of the information); accountants do this. Some change the *possession* of the information, for example market research companies sell information. Some *store* the information, for example archives and libraries. Finally, some operations, such as telecommunication companies, change the *location* of the information. **Customers** -- operations which process customers might change their *physical properties* in a similar way to materials processors: for example, hairdressers or cosmetic surgeons. Some *store* (or more politely *accommodate*) customers: hotels, for example. Airlines, mass rapid transport systems and bus companies transform the *location* of their customers, while hospitals transform their *physiological state.* Some are concerned with transforming their *psychological state*, for example most entertainment services such as music, theatre, television, radio and theme parks. Outputs from the process Although products and services are different, the distinction can be subtle. Perhaps the most obvious difference is in their respective **tangibility**. Products are usually tangible. You can physically touch a television set or a newspaper. Services are usually intangible. You cannot touch consultancy advice or a haircut (although you can often see or feel the results of these services). Also, services may have a shorter stored life. Products can usually be stored, at least for a time. The life of a service is often much shorter. For example, the service of 'accommodation in a hotel room for tonight' will perish if it is not sold before tonight --accommodation in the same room tomorrow is a different services. **CHAPTER POST TEST** Direction: Write TRUE if the statement is correct and FALSE if incorrect. T\_\_\_\_\_\_\_\_1. Operations Management is the activity of managing the resources which produce and deliver products and services to meet the needs of the organization's customers T\_\_\_\_\_\_\_\_2. The Operations Manager is the person responsible of managing the operations of an organization F\_\_\_\_\_\_\_\_3. Organization staff has the sole responsibility for all activities in the organization which contribute to the effective production of products and services F\_\_\_\_\_\_\_\_4. Not all operations are part of a larger supply network T\_\_\_\_\_\_\_\_5. A process is 'an arrangement of resources that produce some mixture of products and services **CHAPTER ACTIVITY** Case Study: BIRMINGHAM INTERNATIONAL AIRPORT Read the case study and answer the questions that follows. Write a short report following the case study format. in the space of just 30 minutes every weekday, around 5.00 in the evening, around 20 flights arrive at and depart from the Eurohub Terminal. At the same time, aircraft are arriving and leaving the Main Terminal next to the Eurohub. Across the runway and acres of tarmac, at the site of the original airport, the overnight freight operation is just beginning to wake up with the arrival of staff and the preparations for the first aircraft from Europe or the United States. Some of the 7000 staff from the 150 organisations based at Birmingham International Airport (BIA) see to the needs of their customers. The baggage handling operation is sorting, checking and dispatching bags to the many departing aircraft. The ground crews are loading and unloading aircraft, putting meals on board, filling the fuel tanks and cleaning the aircraft during their brief spell at the airbridge. The airlines' ticketing staff are dealing with lines of passengers, each of whom may have a different final destination. The information desk is fully staffed, dealing with the many queries, such as people wanting to know if their plane is on time, the location of a bank or hotel, or trying to work out how to get by road or rail to their final destination. Passengers flow through the lounges, passport control and security checks, and use toilets, duty free shops and restaurants, all of which have to be kept clean and stocked for their convenience. All of these activities, and more, are coordinated by BIA's Operations Director, Richard Heard. Richard explains his role: 'Out of all the people that work at the airport, BIA employs about 700 and I oversee about 600 of them. These operations people are basically concerned with the day-to-day running of the airport and the short and medium-term operational planning. This includes a whole raft of things on the airfield and in and around the terminals. The airfield side of things essentially involves maintaining the runways, agreeing slot allocations with the airlines, developing and implementing safety management systems and keeping the fire crew fully trained, for example. This is a heavily regulated area, so we work very closely with the Civil Aviation Authority. The other side of the operation is about managing the terminal buildings and other facilities. This is almost like running a shopping center with its focus on customer service but with special security arrangements. Airport security is a key task which we run in-house, employing about 300 people. I also have a facilities management team and an engineering services team that look after the maintenance of the whole site. 'In terms of long-term design and development, we set up teams to oversee the planning of new building projects, such as new catering outlets, car parks and people mover systems. This plan uses the forecasts of passenger numbers and guides our decisions about what to build and when, and how to pay for it. We have been growing at a rate of about 10 per cent a year over the last 10 years. In 2000 the airport handled 7.6 million passengers and our growth is set to continue, with an anticipated 10 million passengers expected to travel through Birmingham by 2005. This plan involves serious money; we are talking about a capital plan of about £50 million a year over the next 15 years. This is all very much driven by operational needs. Managing and developing the airport's operations are huge challenges. 'One of the major tasks for operations is not just to provide the infrastructure for all the other organizations on site -- such as airlines, handling agents, retailers, cargo handlers -- but also to provide the leadership and coordination for them. There are also groups off site, such as community groups, which we liaise with as we work to monitor and improve the environment. My personal job is about coordination and setting the safety and customer service standards for everyone to adhere to. 'All of us from the different organizations try to work together as a team and there is a great community spirit here that has built up over the years. Everyone wants their own bit to work well and the whole thing to work well together. We all have a great understanding of everyone's problems and there is an excellent spirit of cooperation. 'The real secret of managing operations, if you are ever going to sleep at night, is to make sure you have really good processes and procedures in place. We can't have people making it up on the spot. Everything has to be thought through and tried and tested. We spend a great deal of time reviewing and developing processes. We have to have procedures for fires, evacuations, bomb threats, ill passengers and even deaths in the terminal. Unfortunately, we do have medical emergencies, not surprising since we have about 30 000 people passing through the airport every day in the summer. 'Another key task is operational planning. We do this on an annual basis. Operational planning is about making the operation as efficient as possible by working out how we can best allocate our infrastructure to the airlines. For example, we need to decide who is going to get the airbridges, who is going to get certain stands, who is going to have their passengers bused to the terminal at peak times, and so on. However, you must remember that the operational plans are just that, plans, and as ever, things go wrong -- schedules fall apart because of plane delays or mechanical problems, for example. So we also have terminal duty managers whose job it is to sort out the day-to-day operational problems. Our team of terminal managers covers the airport 24 hours a day, every day of the week, with one senior manager overseeing each shift. 'Many of the things that happen are recurring problems, such as delays or diversions, and you know you will end up with a lot of passengers waiting around a lot longer than they want to. The job of the duty manager is to coordinate all our efforts, ensuring that the catering people know what's happening and making sure our information services people know so they can tell the passengers, for example. The terminal managers need to keep their ears and eyes open. Passengers may report that they have seen someone acting suspiciously and the managers need to know what to do. When passengers get off the plane and their bags are not there, although it's the responsibility of the airlines or their handling agents, our people may have to pick up the pieces. When people try taking prohibited items through security, such as a family heirloom with a large curved blade, we have to explain patiently to them that they have to leave it with us. 'The terminal managers also have to deal with major incidents -- things like bomb threats or, like last year, when the Spanish coach drivers went on strike leaving many passengers stranded at the airport. The job of the terminal manager is to sort it all out and make sure everyone knows what is happening. It involves a great deal of common sense but it is not easy. If you have to do an evacuation, for example, everyone will be at different stages in the passenger processing and security clearance procedures, so when the incident is over, we have to try to put them all back where they came from without mixing them up or they all have to start the process again! 'We have the equivalent of the terminal duty managers looking after the airfield side: operations duty managers. Their job is about dealing with the day-to-day problems, such as changing stand allocations when delays occur or arranging snow clearance if we have a sudden fall. Again plans are in place and everything has to be thought through. We also have weekly communication meetings when we get the operations and duty managers to work with the operational planning department. 'Our mission is to be the best regional airport in Europe. To do this we need continually to try to improve everything we do. It sounds simple but it is not easy. For example, we have almost no capacity at the peak times, that is between 7.00 a.m. and 8.00 a.m. and between 5.00 p.m. and 6.00 p.m. when we are busy with short-haul European traffic, so we are trying to encourage other airlines to fill in the off-peak times. This is ideal for long-haul operators and we now have flights to South East Asia and America, and just last year we added an Emirates flight to Dubai. This allows us to use the middle of the day when we have runway and terminal capacity and it suits everybody as we can all make better use of our facilities. 'Running an airport is a fascinating and exciting challenge. No two days are the same. We know that we can make a real difference to our customers, both passengers and airlines, by what we do. We also make a major contribution to the impact on the local economy by encouraging inward investment and exports. As an operations manager, my job is to make it all happen. It's a fantastic opportunity and it really does make a difference -- its great!' **Case Study Questions** **Case Study Format:** - - - - - - - **Important Instruction** The activity should be submitted on September 18, 2020. Please send it to [[jmtayag210326\@gmail.com]](mailto:[email protected]). There will be additional five points for timely submission of the activity. 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