• 1. What is your experience with operations? Provide details if you work or have worked in operations.
• 2. What did you find interesting about operations that you did not know prior to your readings and activities of Module 1?
• 3. How will the knowledge of operations help foster your career ambitions?

Module 1 content

Operations Management

Operations management is the set of activities that converts inputs into outputs to create value for customers. Apple converts electronic components into cell phones, iPods, and iPads. The Keg converts raw vegetables and meats into lunches and dinners. Civello Salons converts stylists' skills into new hair styles. In each of these activities, the conversion must provide satisfaction and value for customers for the organization to be successful.

Restaurant Meals:

The Importance of Studying Operations Management

Operations is one of the three major activities of any organization along with selling, marketing, and finance and administration. We study operations to know how people are organized to create a productive process. Production represents the part of our society that creates goods and services. We study operations to learn how to create better products and services to meet society's growing and changing needs. Understanding operations will provide a skill every organization needs. Even if a person is not directly working in operations, understanding how the organization converts inputs into outputs will make the person more productive in his or her position. Operations can require significant resources to function properly. We study operations so that resources can be used most efficiently and waste is minimized or eliminated.

Careers in Operations

Since operations is one of the three major activities of any organization knowing operations provides you with skills every organization needs. Any activity related to converting inputs to outputs is operations. Manufacturing positions, trades positions, quality control, shipping, receiving, supply chain, providing personal care services, and fundraising are jobs related to operations. There are many management operations positions as well such as plant manager, quality control manager, and right up to Vice President of Operations. A key executive of larger organizations is the COO or Chief Operating Officer. So you can see that studying operations provides you with a wide variety activities that you can perform and opportunities for growth to climb the corporate ladder.

Service Operations

There are many differences between services and products that makes service operations unique and hence requiring a unique set of skills.

• Service providers have high customer interaction. Therefore the person that has the skill to provide a service must also be able to interact well with the customer. A skilled service provider will leave a customer very satisfied so the customer will return for future services, tells others about the great service, and purchase more from the provider.
• Services are unique for each individual. Very few people have the exact same hair cut, for instance. A tax accountant's clients each have a unique set of circumstances that the accountant must work through to minimize the amount paid to Revenue Canada.
• Services are usually intangible. They cannot be touched like a product.
• Services can't be stored like a product. They are simultaneously produced and consumed. A masseuse can't store her massages and sell them over the counter to a client.

From 1970 to today, manufacturing of products had steadily declined and services has risen steeply as a percentage of GDP. Not surprisingly, employment in manufacturing continues to decrease while the job opportunities in services continue to rise, particularly in the industrialized nations of Canada, the United States, Germany, France, Italy, and Britain. The trend is forecasted to continue.

Goods and Services

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Trends in Operations Management

The globalization of trade and the rapid advancements in communication and connectivity has resulted in operations becoming a very dynamic environment. Companies must be constantly aware of their customers' needs and change as those needs change. Competition is stronger today forcing organization decision makers to constantly upgrade their production processes to deliver higher quality products at a better price. There are other trends developing in operations as follows:

• The buying public is more aware today of where, how, and by whom products are made. Some will not purchase from suppliers that use child labour or harm the environment in their production process. Operations are under scrutiny today like never before and the pressure is on to ensureethical and social responsibilitystandards are being maintained.
• Products and services are easily presentedgloballyvia the Internet. The speed of communication and delivery has enabled companies to grow geographically in very short periods of time.
• People expect instantaneous satisfaction. A ten second wait for a file to download into a computer is considered painfully slow today. As consumers want their needs satisfied immediately they want their changing needs satisfied immediately as well. Companies are now required torapidly develop new products and servicescontinuously and products become old and obsolete very quickly.
• Customers for once commodity items have unique requirements and expect to be able to order products with their specific needs met. Del Computers revolutionizedmass customizationenabling consumers to order their own unique system. More and more companies are required to do this for their customers.
• Quick response to changing customers needs means decisions have to be made much more quickly than in the past.Empowered employeesare given the authority to make their own decisions to solve problems and satisfy customers.
• Thesupply chainis becoming much more unified. The different companies that make up the supply chain see one another as partners in delivering products efficiently and effectively to the end consumer.
• Companies are holding less products to reduce costs of storage and risks of obsolescence.Just-in-time inventorysystems are being implemented where ever possible and the skills and systems to manage this are in greater demand.

Measuring Productivity

Recall that the study of operations is concerned with the conversion of inputs to outputs. Productivity increases when the rate of increase in outputs is greater than the rate of increase of inputs. For instance, a desk manufacturer may have a night shift of 10 workers producing 100 desks in their shift. The output per worker is 10 desks. Productivity can therefore be measured by the equation:

Productivity = Units Produced / Input Used

Units Produced = 100 desks and the Input Used is the labour of 10 workers.

Productivity increases when the output per worker exceeds 10 desks.

Suppose the owner of this company provides training for the workers to become more efficient and their output increase to 105 desks in their shift. Using the Productivity equation we get:

Productivity = 105 desks / 10 workers = 10.5 desks per worker

There is an increase of 0.5 desks per worker or a 5% increase in productivity.

The percentage increase in productivity is calculated by taking the difference between the new output per worker and the original output and dividing by the original output.

(10.5 - 10) / 10 = .05 = 5%

When one input resource is used, as labour is in this example, this is calledsingle-factor productivity.

The use of multiple inputs such as labour, materials, energy, and capital is calledmultifactor productivity.

For instance, suppose the owner of the desk company is able to calculate a dollar cost for each shift. Let's assume that worker is paid $15/hr for an 8 hour shift. After the shift the owner calculates a usage of $1500 in materials. The energy consumed equals $500. The capital required for the use of equipment is equivalent to $700. If 105 desks are produced the multifactor productivity can be calculated as follows:

Productivity = 105 desks / (10 workers x $120) + $1,500 + $500 + $700

Productivity = 105 / $3,900 = .0269 desks / $ 1

For every dollar of input, 0.0269 desks are produced

Example: Work through on your own and then check against the solutions.

Anthony runs a gift manufacturing company. Its paperweight line is manufactured by 4 employees making up the Paperweight Team. Together, they work 32 hours every shift. They average 1,500 finished paperweights per shift.