Understanding Operations Management and Supply Chain Processes
Operations Management and the Supply Chain
Operations management involves managing the transformation process (production function) that converts inputs into outputs, typically goods and services. Meeting customer requirements and understanding the “voice of the customer” are crucial. Decision-making plays a vital role, leading to the division of operations into key decision areas: process, quality, capacity, and inventory.
Three Dimensions of Operations Management
Operations management can be understood through three main dimensions: decisions, functions, and processes.
Example Operations:
- Bank: Inputs include tellers, staff, and computer equipment. Outputs are financial services.
- Restaurant: Inputs include cooks, waiters, food, and facilities. Outputs are meals and entertainment.
- Manufacturing Plant: Inputs include equipment, facilities, labor, energy, and raw materials. Outputs are finished goods.
Supply Chain Transformation Processes
The supply chain involves a series of interconnected processes:
- Planning: Strategically operating an existing supply chain.
- Sourcing: Selecting suppliers to provide the necessary goods and services.
- Making: Producing the major product or providing the core service.
- Delivering: Choosing carriers to transport products to warehouses and customers.
- Returning: Managing the return of worn-out, defective, and excess products.
Goods vs. Services
Goods
Goods are tangible objects that are easily transferable, have physical dimensions, and often involve a monetary exchange. They typically do not require direct interaction with the customer during production.
- Tangible: Can be touched, seen, and felt.
- Transferable: Easily moved from one person to another.
- Physical Dimensions: Occupy space.
- Often Exchanged for Money: Typically purchased.
- No Customer Interaction During Production: Usually manufactured separately from the customer.
Services
Services are intangible commodities that involve interaction with the customer and are characterized by intangibility, perishability, inseparability, simultaneity, and variability.
- Intangible: Cannot be touched or seen.
- Perishable: Cannot be stored or inventoried.
- Inseparable: Production and consumption occur simultaneously.
- Simultaneous: Service is provided and consumed at the same time.
- Variable: Service delivery can differ based on the customer and provider.
Understanding Service Characteristics
Services, being intangible, cannot be physically experienced. They are perishable and often require ongoing payments for continued provision. The inseparability of services necessitates the presence of both the provider and the consumer. This simultaneity means the service is produced and consumed concurrently. Finally, the variability of services highlights their adaptability to individual customer needs.
Key Characteristics of Goods
Goods are tangible and often acquired through purchase or trade. They are typically produced in a standardized and repetitive manner. While some goods are perishable, many can be stored for extended periods.
Quiz
Supply chain management integrates suppliers, manufacturers, and customers. The process view considers a business as a system of interconnected processes. Contemporary operations themes emphasize meeting customer requirements. Best practices in operations are not universally applicable.