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Operations: Creating Goods & Services
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MGTA02 – Chapter 6
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Today’s Agenda
1. Operations – Defined & Explained
2. Managing Services vs. Goods
3. What operations managers do
World’s Worst Coffee Shop
A true story….
What’s The Point of the Story?
A business can’t make sales, unless It has planned and organised:
What to make…
How much to make…
When to make it…
How to make it…
Who is to make it… etc.
“Operations” Defined
Managing the creation
of goods and services,
using the factors of production
Why “Operations” is Important
A business must
provide what it
claims to offer
A “Coffee Shop”
must have coffee
Or else – they will never come back!
A Car Should Have Brakes
Discussion Question
What is the impact of falling share prices on financial state of a corporation?
Immediately??
In the long-run??
An ATM Should Have Cash
Discussion Question
Why would a bank refuse to pay cash to its customers?
Do you know what a “bank-run” is?
Operations…
Help bring cash to our business (inflow)
Ensure healthy supplier relationships (outflow)
Contribute to financial well-being of an organisation..no products..no sales (net cashflow)
Chickens: An operations’ story
Domestication…around 700BC
Poultry revolution ..1950s
Industrialization…1970s
Commercialization…1990s/2000s
Responding to Demand…
Process improvement??
Operations Management: Defined
Planning, organising,
leading, & controlling
the creation of the
goods & services
that businesses’
customers demand
Why Its Called “Operations”
“Production” implies Canadian businesses
“produce” goods
rather than
“provide” services
80% of Canadians work in “services”
Goods Vs. Services
Remember (from MGTA01):
Goods: Products you can see and touch
Services: Products that are intangible
Products you “experience”
Goods vs Services – world
Canadian GDP by Sector – 2012
Agriculture 1.7%
Source: CIA World factbook
https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html
Manufacturing 28.5%
Services 69.8%
Examples of Services
finance: loans, deposits, investments
consulting: marketing, ideas, design
legal advice: leases, wills, contracts
Service Operations
Provision of services needs to be planned, organized, controlled
In some ways:
services more difficult to provide than goods
Services: More Difficult?
In some ways: Services more difficult
to provide than goods
Because of:
Customer involvement
Customization
Service Operations: Issues
Immediacy: Services can’t be stored Goods: (a book)
can be stored
Services: (a meal)
Service Operations: Issues
Customer involvement
Goods (a pen)
can be made
without customer
Services(a bus trip)
High & Low (Human) Contact Services
Service Operations: Issues
Services are customized
Goods (jeans)
should be identical
(Mass production)
(hair cuts)
should not
Service Operations: Example
Banks need to plan:
Conveniently located branches
Open at convenient hours
Enough teller positions open
Tellers have people skills
Enough operators at call centre
Cash machines that work
Service to the Customer
Apple: A Success Story
Why Operations Management
General Managers are often too busy to pay attention to details
A lot of projects facing Cost; Time; Quality Constraints
What Operations Managers Do (1)
Demand planning:
Forecast how much you need to make
Bad Example:
Coffee Shop that runs out of coffee
What Operations Managers Do (2)
Capacity planning: Ensure enough space, and workers to meet demand
Bad example: ‘s at UTSC
What Operations Managers Do (3)
Location planning: Find best location for
getting raw materials, good employees, and close to customers
Good Example: Auto
making in Ontario
Bad example: Rex’s Den?
What Operations Managers Do (4)
Layout planning:
Arrange store/factory for smooth flow of materials
example: in UTSC student centre
What Operations Managers Do (5)
Schedule: To finish on time: Start on time!
1976 Olympic Stadium – finished 1981
Midterm Test: Schedule
LEC01: Monday Feb 28th
10:15 am to 11:30 am
LEC02: Tuesday Mar 1st
2:15 pm to 3:30 pm
Chapters 1 – 6
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