ROSEBANK COLLEGE

INDEPENDENT INSTITUTE OF EDUCATION

(IIE)
BUSINESS MANAGEMENT (BUSM5112E)
LECTURE TUTORIAL SLIDES FOR CHAPTER
1
LEARNING UNIT 1: OPERATIONS
MANAGEMENT

Mr Tyson Thamsanqa Sibanda

Double Tee Holdings (Pty) Ltd
 Objectives of Learning Unit 1
Theme 1: The Importance of Operations
Theme 2: System Processes and Operational
Management
Design
 Explain in your own words the importance of
 Explain the system of classifying process types
operations management for a business.
according to manufacturing and services and
 Identify the components of an operations how this may assist operations managers.
management model and explain what each
 Discuss the aspects involved in operations
entails.
design and how it needs to be managed to
 Distinguish between the six general develop effective design for:
operations management performance  Products and services;
objectives.
 Operations processes
1.1 The Importance of Operations Management

 The basic objective of business is to develop, produce and supply products and services to
the society within which it operates.
 This has to be done in such a way as to allow businesses to make a profit, which can be
used to obtain and pay for additional resources to continually develop, produce and supply
products and services and to make a living.
 In the process of meeting the needs of society, business organisations transform inputs
from the environment (resources) into outputs to the environment (products and services).
 1.1 The Importance of Operations
Management (Cont)
 The operations function is directly responsible for this transformation process and thus
creating products and providing services that will meet the needs of society and making a
profit
 The management of the operations function is referred to as operations management.
 The importance of operations management is reflected in both the advantages that it holds
for a business as well as reasons why it is considered important to a business.
 1.1 The Importance of Operations
Management
 Erasmus et al. (2019, p.311) indicate that an effective and efficient operation holds four advantages to
a business, namely:
 It can reduce costs if producing products or offering services;
 It can increase revenue of the business
 It can reduce the amount of investment needed to manufacture the required type and quantity of
products and services;
 It can provide the impetus for new innovationThe reasons that operations management is considered
important are the following:
 It can improve productivity
 It can help a business to satisfy the needs of customers/ clients more effectively;
 It can be decisive for the general reputation of the business.
 1.2 An Operations Management Model

 As indicated earlier, business organisations transform inputs from

the environment (resources) into outputs back into the environment
(products and services), and that the operations function is
responsible for this transformation process. This is the basis of the
operations management model reflected in Figure 11.1 on p.316 of
your textbook.
1.3 Operations Management Strategies and
Performance Objectives
The operations management functions should develop strategies and objectives to
ensure that all the needs of customers/ clients are met and that the business
organisation will retain and even expand its competitive position and customer/ client
base.
1.3 Operations Management Strategies and
Performance Objectives(Cont)
 The needs of clients can be categorised in the following elements:
 Higher quality
 Lower costs
 Shorter lead time
 Greater flexibility/ adaptability
 Higher reliability (lower variability regarding specifications)
 Higher level of service
 1.4 The Transformation Model
 The transformation process converts inputs into outputs.
 Inputs are divided into resources that will be transformed, (material, customers/ clients and information)
and the resources required to make the transformation possible (human resources, equipment and
facilities, and technology).
 The type of input (resources) that is processed determines the nature of the transformation process.
 The transformation process for material is usually geared towards changing the physical appearance or
characteristics while the primary input is being processed when information is transformed.
 Transformation of clients/ customers may occur in a variety of ways:
 Changing physical appearance or characteristics,
 Changing physiological or emotional condition
 Changing their location or
 Storing the customer, as in a hotel.
 1.4 The Transformation Model (Cont)
 Outputs on the other hand, are the products and/ or services that a business organisation renders to its clients/
customers.
 Products and services are different from each other and are usually measured against the following
characteristics:
 Perishability – unused products can usually be stored for future use, while unused capacity or service cannot
be stored for future use
 Tangibility – products can be touched or viewed and are thus tangible, while services cannot be touched or
viewed and are thus intangible.
 Variability (or heterogeneity) – products can be mass produced and little to no variance exists between
different times of production. Services depend on people and their differences, which imply a high level of
variety. This could be minimised by means of training.
 Inseparably of production and consumption – products can be manufactured before use while the provision/
production and consumption of services are usually simultaneous.
 Ownership – ownership of products are transferred during the sales process but service cannot be separated
from the service provider.
1.4 (Outputs Cont)

 Quality measurement – the measurement of adherence to quality standards for products are
possible and easy while the measurement of adherence to quality standards set for services
are difficult.
 Response time – the response time for products are long as the time between production
and manufacturing may be long while the response time for services are short due to the
fact that manufacturing and consumption are simultaneous.
1.5 Classification of Process Types of
Manufacturers and Service Providers
 1.5.1 Manufacturers
 In manufacturing, the most common classification system classifies different operations
processes according to the volume of output (scope) and the variety of products. Five main
categories of classification are identified:
 Project processes
 Jobbing processes
 Batch processes
 Mass processes
 Continuous processes
1.5.2 Service Providers

A similar classification system can also be used for service providers based on output volume
and variety, resulting in three main categories:
 Professional services
 Service shops
 Mass services
 1.6 Operations Design

1.6.1 The Nature of Operations Design

 Customer/ client needs are at the centre of operations design as the primary aim of operations design is to
develop and produce products and/ or services that satisfy these needs. Operations design entails two
interdependent aspects:
 The design of products and services (also referred to as product design).
 The design of operations products or service processes to manufacture or provide these products or services
(also referred to as process design).
 1.6.2 Design of Products and Services

 COMPETITIVE ADVANTAGE:
STAGES IN DESIGN:
 Design begins and ends with customer.
 Concept generation.
 Satisfaction in best possible way.
 Screening process.
 Expectations realised/ exceeded.
 Preliminary design.
 Evaluation and improvement.
 COMPONENTS OF PRODUCT/ SERVICES:
 Prototype and final design.
 Concept/ idea.
 Package – remember: Services cannot be inventoried.
 Services involve direct interaction with client.
 Process
1.6.3 Design of Operations Processes

 The provision of products and services that will meet the needs of customers does not only
rely on the design of products or services, but also on the design of the operations
processes to manufacture these products and/ or services.

 THE DESIGN OF SUPPLY NETWORKS:

 Suppliers of materials or services.
 Intermediaries.
 Final customers.
 Consider entire supply network.
 1.6.3 Design of Operations Processes(Cont)

JOB DESIGN AND WORK ORGANISATION:

 LAYOUT AND FLOW OF FACILITIES:

 Job design.
Fixed position layout.
 Process layout (flexible-flow layout).
 Work study.
 Product layout (line-flow layout).  Method study.
 Cellular layout (hybrid layout).  Work measurement

 APPLICATION OF PROCESS TECHNOLOGY:

 Machines, equipment and apparatus used.
 Simple or automated systems.
 Involvement of operations manager.
1.7 Operations Planning and Control

 1.7.1 The Nature of Operations Planning and Control

 Operations planning and control focuses on the activities to put the operations process into
action so that products can be manufactured or services developed in order to meet the
needs of customers.
 1.7.2 Capacity Planning and Control and
Inventory Supply-Chain Planning and Control
 Capacity can be described as “...the maximum level of value added activity over a period of time that the
process can achieve under normal operation circumstances” (Erasmus et al, 2019, p.341).
 Notice how this definition includes a time dimension. The aim of capacity planning and control is to obtain a
suitable balance between the available manufacturing or service capacity of a particular operations process and
the expected demand for products or services.
 In order to do this, operations managers need to:
 firstly establish the total demand (which can be obtained from the marketing function) and required capacity
needed to meet the demand (which depends on the nature of the product).
 Secondly operations managers need to identify alternative capacity plans in order to deal with possible changes
in demand which could be either a level-capacity plan, chase demand plan or demand-management plan.
 Thirdly operations managers must choose the most suitable approach to capacity planning and control
1.7.2 Capacity Planning and Control and
Inventory Supply-Chain Planning and
Control(Cont)

 Various techniques and methods could be used in capacity planning and control of which
two techniques are discussed:
 Moving-average demand-forecasting technique
 Cumulative representations of demand and capacity.
1.7.3 Quality Planning and Control

 Quality is important to most business organisations and the responsibility for it does not
only reside within the ambit of the operations function only. The concept of total quality
management (TQM) implies that the manufacturing of quality products and services can
only be achieved if the entire business organisation contributes to achieving a quality
objective. Quality adds value to products and services and thus contributes towards
profitability by means of saving on costs and increasing income.
1.7.3 Quality Planning and Control (Cont)

 Quality planning and control can be divided into six steps:

 Defining quality characteristics of products and services;
 Measuring quality characteristics of products and services;
 Setting standards for each quality characteristic;
 Controlling quality against the set standards;
 Identifying and correcting causes of poor quality;
 Continuously improving quality.
1.8 Operations Improvement

Design and the planning and control of operational processes are important aspects in ensuring
the delivery of quality products and services to customers and clients. However, the function
of the operations manager does not stop here as “...the continuous improvement of operational
processes of a business is seen as a further activity of the operations manager” (Erasmus et al,
2019, p.344).
1.8.1 Nature of Operations Improvement

 Performance standards are necessary in order determine the performance of current

operations.
 There are four types of standards which operations can be compared against. Once the
performance of the present processes is known, priorities for improvement can be set.
These should focus on the needs of customers. There are two approaches to improvement
which can be followed. These are the dramatic breakthrough approach or the incremental
approach of continuous improvement.
1.8.2 Failure Prevention and Recovery

 There are five types of failures:

 Design failures
 Facility failures
 Staff failures
 Supplier failures
 Customer/ client failures.
1.8.3 Total Quality Management

 Total quality management can be described as “a management philosophy that primarily

aims to satisfy the needs and expectations of customers/ clients by means of high-quality
products or services, and endeavours to shift the responsibility for quality from the
operations management to the entire business” (Erasmus et al, 2019, p.348)
1.8.3 Total Quality Management (Cont)

 Total quality management (TQM) is primarily aimed at:

 Meeting the needs and expectations of customers/ clients
 Covering all parts of the business regardless of how small/ insignificant they seem
 Making each and every employee in the business quality conscious and responsible to
achieve it
 Identifying and accounting for all costs of quality
 Doing things right for the first time
 Developing and implementing systems and procedures for quality and the improvement
thereof
 Establishing a continuous process of improvement.
1.8.3 Total Quality Management(Cont)

 The ISO standards are used as standards for quality management all over the world. ISO
9000 standards for quality systems include guidelines for:
 Documentation requirements
 Management responsibility
 Resource management
 Product realisation
 Analyses and improvement.
Thank you!