MANAGING PRODUCTS AND SERVICES OPERATIONS

Operation

Operation refers to “any process that accepts inputs and uses resources to change those inputs in
useful ways.” The inputs include, land, labor, capital and entrepreneurship. The transformation
process converts inputs into final goods or services.

Operation Management

Operations management is often defined as “the process of planning organizing and controlling
operations to reach objectives efficiently and effectively.”

Operation Manager

An operation manager is a senior role which involves overseeing the production of goods and/or
provision of services.

It is an operations manager’s job to make sure an organization is running as well as it possible

can, with a smooth efficient service that meets the expectations and needs of customers and
clients.

Operations and the Manager

The manager is expected to produce some output at whatever management level he is, if he is
assigned as the manufacturing manager/supervisor, his function is “to determine and define the
equipment tools, processes required to convert the design of the desire product into reality in an
effective manner.

The engineer in-charge of operations in a construction firm is responsible for the actual
construction of whatever bridge or road his company has agreed to put up. He is required to do it
using the least-expensive and the easiest methods. The engineer, as operations manager is one
with several years of experience in the operations of division and possesses an academic
background in engineering.

Transformation Processes

A transformation process is any activity or group of activities that takes one or more inputs,
transforms and adds value to them, and provides outputs for customers or clients.
Types of Transformation Processes

Manufacturing Processes Service Processes

Manufacturing Processes

Manufacturing Processes are those that refer to the making of products by hand or with
machinery.

1. Job Shop
 Production is based on sales and orders for a variety of small items
 It is associated with high quality goods, customized orders and unique items

Examples:
• A satellite used for scientific discovery has a unique design that is only produced
once.
• A high quality tailored suit is produced by hand from customer requirements and
measurements.

2. Batch Flow

Batch production is the method used to produce or process any product in groups or
batches where the products in the batch go through the whole production process
together.

Example: A bakery produces each different type of bread separately and each product (in
this case, bread) is not produced continuously.

3. Worker-Paced Line Flow

An assembly line refers to a production layout arranged in a sequence to accommodate

processing of large volumes of standardized products or services.

Example: An example of worker paced line flow would be working in fast food chains.
4. Machine-Paced Line Flow

This type of production process produces mostly standard products in which parts are
added as the semi-finished assembly that moves from workstation to workstation with
machines playing a significant role.

Ex: Automobile Plant

5. Continuous Flow

This process is characterized by the rapid rate at which items move through the system,
undergoing chemical reactions or subject to mechanical or heat treatment.

Ex: Petroleum Refinery

 6. Batch-Continuous Flow Hybrid

The batch/continuous flow hybrid is a combination of the batch and continuous flow.

Ex: Breweries

Service Processes

A service is an activity or benefit that one party can offer to another that essentially
intangible and does not result is the ownership of anything.

The service process refers to how a service is provided or delivered to a customer.

Processes involve the procedures, tasks, schedules, mechanisms and routines by which a service
is delivered to the customer activities and routines by which a service is delivered to the
customer.

Factors in Designing Service Process

Designing a service process is creative process. It begins with a service concept and
strategy to provide a service to differentiate it from its competition.

• Service itself

• Customer participation

• Degree of customer contact

• Location of service delivery

• Complexity of service
Service Process Matrix

Service process matrix is a classification matrix of service industry firm based on the
characteristic of the individual firm’s service processes. The matrix was derived by Roger
Schmenner and first appeared in 1986.

Types of Service Processes

1. Service Factory

A service factory offers a limited mix of services which result to some economies of
scale in operation. Service factory also uses a rigid pattern of line flow processing.

Example: Fast food chains

2. Service Shop

A service factory is usually a capital intensive and customized services which provides a
diverse mix of services.

Example: Hospitals and repair shops

3. Mass Service

A mass service is a type of service which provides services to a large number of people
simultaneously.

Example: Retailing and wholesaling

 4. Professional Service

Professional services provide specialized services to other firm or individual. This offers
a diverse mix of services.

Example: Physician, lawyers and accountants

Important Parts of Productive Systems

Productive systems consist of six important activities as follows:

1. Product design
 The process of creating a set of products specification appropriate to the demands of
the situation
 Products design team is composed of: Engineers, manufacturing and marketing
specialist

Objectives of Product Design

 To achieve the desired quality of the product
 To reduce the cost of the product
 To ensure the availability of the product according to the needs of customer
 To generate profit in the long run
 To implement the idea of a new product

Steps for Product Design

 Defining the product vision
 Product research
 User analysis
 Design
 Testing and validation
 Post-launch activities

2. Production planning and scheduling

 Production planning, or production scheduling, is a term that covers all aspects of
operations, from workforce activities to product delivery.
 Production planning is almost exclusively seen in manufacturing environments;
however, many of the techniques employed in production planning can be and are
used by many service-oriented businesses.
  Production planning is primarily concerned with the efficient use of resources.
While it is sometimes referred to as operations planning, and it employs many of
the same techniques, the primary distinguishing characteristic is that production
planning is focused on the actual production, whereas operations planning looks
at the operation as a whole.

2 types of Production Planning

a. Static - Static planning carries an assumption that all steps in a process can be
defined and will not change
b. Dynamic - dynamic planning assumes that steps in the process will change, so
nothing is planned until the demand is received

Types of Dynamic Planning

 Forward Incremental Planning
o Forward incremental planning, or FIP, is a dynamic planning method. FIP
is implemented from the initial receipt of an order. The actions required to
fulfill that order are prioritized. The essential goal of FIP is to reduce lag
time. While it can be quite effective, its primary limitation is that it
assumes no other action is in progress -- as in, no machines are tied up and
the workforce was essentially idle until the order was received. This may
be a huge limitation for some industries, but for companies that produce
products with high levels of customization, FIP is a powerful tool.
 Backward Incremental Planning
o Backward incremental planning, or BIP, is the other side of the FIP coin.
BIP looks at the requirements from the due date backward and organizes
the process accordingly. A good example of this is a bakery. The cake
must be fresh for its pickup date, so the baker would look at the steps
required to produce the cake and the estimated time required to bake and
decorate it. BIP works well in cases where a deadline is more of a
requested completion date and completing the order sooner produces no
benefit.
 Capacity Planning
o Capacity planning is focused on maximizing the capacity of a company in
a way that allows it to be more efficient and, thus, more profitable. Basic
capacity planning attempts to match the volume the company is able to
produce to the demand in order to avoid downtime by preventing
bottlenecks.
 Aggregate Planning
o Aggregate planning, also called aggregate scheduling, is an approach to
operations management focused on satisfying demand. This may be in
relation to production, the workforce itself or inventory management.
 Aggregate planning ties facility planning in with scheduling decisions and
does so in a way that is quantitative, meaning it produces numbers to back
up an operations plan. Aggregate plans help match supply and demand
while minimizing costs by applying upper-level forecasts to lower-level,
production floor scheduling. Plans generally either chase demand,
adjusting the workforce accordingly, or are level plans, meaning that labor
is relatively constant with fluctuations in demand being met by inventories
and back orders.

3. Purchasing and materials management

 Purchasing and Materials management is responsible for controlling the cost of
goods ordered and controlling inventory levels.
 Is one of the most crucial area of the organization as it manage the overflow of
materials, from initial purchase to destination

Activities involved in Purchasing and materials management

 Materials requirement planning
• Encompasses the identifying, quantifying and scheduling the acquisition
of materials and equipment
 Purchasing
• Holds the responsibility of procuring goods for the project in alignment
with the specifications, standardization and in compliance with the project
schedule and budget

Function

• Select proper supplier for the materials requisitioned before placing an

order
• Negotiate about the price of the materials from the supplier
• Assure quality of materials and should not be compromised with the cost
• Materials should be purchased in right quantity and quality at proper time
and at cheapest cost as possible
• Set proper purchased policy and procedures
 Inventory Control
• Methods where all stocks of goods are properly and promptly issued,
accorded and preserved in the best interest of the firm.
• Monitor the stock of goods used for production, distribution and captive
(self) consumption
 Expedition
• Continuous monitoring as well as ascertaining and maintaining the flow
and supply of materials to prevent stock outs and stoppage of production
 Factors affecting expediting

• Insufficient or zero inventories

• Failure of materials handling devices
• Uncertainty in demand and production quantity
 Transportation
• Involves using of the safest and most economical means to transport the
materials to the sire where they are needed

Modes of transportation

• Aviation
• Land transport
• Ship transport
• pipeline
•
 Materials handling
• The movement of materials at the lowest possible cost through the use of
proper method and equipment
• Applies the movement of raw materials, parts in process, finished goods,
packing materials and disposal of scraps

Materials handling equipment

• Industrial trucks
• Automated guided vehicle
• Conveyors
• Cranes and hoist

4. Inventory control
 The process of establishing and maintaining appropriate levels of reserve stocks of
goods.
 Inventory control systems help you track inventory and provide you with the data you
need to control and manage it.
 Inventories can contain information about raw materials, components, work-in-
process (WIP), finished good, distribution inventory, and maintenance repairs &
operating supplies (MRO).

Types of Inventory Control System

a. Perpetual Inventory System
It continually updates inventory records and accounts for additions and
subtractions when inventory items are received, sold from stock, moved from one
 location to another, picked from inventory, and scrapped. These type monitoring
usually do not need physical inventory counts and typically use specialized
equipments and software that results to higher costs.
b. Periodic Inventory System
Do not track inventory on a daily basis; rather, they allow organizations to know
the beginning and ending inventory levels during a certain period. These types of
inventory control systems track inventory using physical inventory counts.

5. Work flow layout

 The process of determining the physical arrangement of the production system.
 Workflow may be considered a view or representation of real work. The flow being
described may refer to a document, service, or product that is being transferred from
one-step to another.

Components of Work Flow System

Each workflow component or step may be described by three parameters: input,

transformation, and output.

a. Input. State the materials and resources or machines that are required to complete a
step.
b. Transformation. A specific set of rules that dictate how the input is received and what
is done to it or algorithms which may be carried out by people or machines, or both.
c. Output. The information, material, and energy produced by the step and provided as
input to downstream steps.

6. Quality control
 A process through which a business seeks to ensure that product quality is maintained
or improved and manufacturing errors are reduced or eliminated.
 ISO 9000 defines quality control as "A part of quality management focused on
fulfilling quality requirements".

Types of Quality Control

a. Internal Quality Control

When a company institutes protocol to check their system, this is called internal
quality control. This can range from routine checking of equipment, having a co-
worker go over another employee's data analysis, or running standards and controls
on a regular basis.
 b. External Quality Control
The process when products or data is sent to an outside business not affiliated
with the company. One example is in food production. To verify results in their food
items, FDA would do another testing of it on an outside laboratory.
c. Proficiency Testing Quality Control
A special type of quality control often done on a volunteer basis or to gain
accreditation. In this type of quality control, the company is sent a series of tests to
perform. The results are sent back and the company receives a grade on its
proficiency.

References

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