Operations Management
1.7 Defining Operations
Operations are purposeful actions (or activities) methodically done as part of a plan of work by a process that is designed to achieve practical ends and concrete objectives. This definition is applicable to both manufacturing and services orga- nizations. This interpretation further justifies the use of the term operations for manufacturing. An operations manager is responsible for planning, organizing, coordinating, and controlling organizational resources to produce desired goods and services, which is the subject matter of this textbook.
1.7.1 Manufacturing Operations
Manufacturing operations transform materials into desired goods and products.
Operations can be described using different verbs and object phrases such as pressing
and turning metal (on a lathe), cutting paper, sewing clothes, sawing and drilling wood, sandblasting glass, forming plastics, shaping clay, heat-treating materials, soldering contacts, weaving fabric, blending fuels, filling cans, and extruding wires. Similarly, there are a variety of assembly phrases, such as snapping together parts, gluing sheets, fitting components, joining pieces together, preparing (assembling) a burger. Products such as automobiles, airplanes, televisions, furniture suites, computers, refrigerators, and light bulbs are made in factories. On the other hand, fast-food chains such as McDonald’s and Burger King view the assembly of sandwiches from meat, buns, and condiments as a manufacturing application. Goods also include processed items such as paint, milk, cheese, chemicals, etc. While there is a notable distinction between fresh foods and factory foods, much of agriculture is a production process.
1.7.2 Service Operations
Service operations in the office environment are quite familiar, that is, filing docu- ments, typing input for the word processor, and answering the phone. There are simi- lar lists of verbs and objects that apply to jobs done in banks, hospitals, and schools:
granting loans, taking X-rays, and teaching classes are a few examples. Movies are one of the biggest export products of the United States. Operations management applies directly to entertainment, film-making, and sports. Administration of the law is a major service industry that requires operations management. Law firms are well aware of the importance of productivity management, information systems, and quality improvement. Jobs available for operations managers of law firms are one indication of the extent to which OM savvy lawyers are highly valued.
Those who have worked for UPS, Federal Express, or the post office are able to list the various service operations related to delivering mail and packages. Those who have worked for the IRS will have another set of job descriptions to define specific operations that characterize tax collection activities of the federal government. Also, if one has worked for The Gap, Banana Republic, Eddie Bauer, The Limited, Wal-Mart, The Sharper Image, Kmart, Sears, or other retail operators, he or she will be able to define processes that are pertinent to merchandise selection and pricing, outsourcing, distribution logistics, display, and store retailing. The experience will have similarities and differences with supermarkets that must also cope with dated products such as milk and greens that speak for themselves (besides being labeled) regarding freshness.
Successful mail-order (and Internet) companies like Lands’ End, Amazon, L.L.Bean, Victoria’s Secret, Norm Thompson, and Barnes & Noble are good exam- ples of entrepreneurial firms that have struggled to master changes in technologies to gain the operational advantages of smart logistics. Distribution, in retail, mail order, and Internet B2C (business-to-consumer web customers), is a production process that lends itself to all of the benefits that excellent information systems and new technology can bestow.
The credit card business is another splendid example of a situation that com- bines many aspects of service functions. MasterCard, VISA, and American Express
are totally dependent on smart operations management to provide profit margin excellence. The IT component of the credit card business model is almost trans- parent, but it is still very difficult to do well with consistent performance. These production processes are good examples of information systems operating under high-volume flow shop conditions.
Disaster (crisis) management, another service area, is an emerging field within the realm of P/OM. A disaster can be man-made through error and/or terror; or nature-driven such as flooding, fires, earthquakes, hurricanes, and volcanic erup- tions. With an increase in the frequency of disasters—both natural and man- made—the importance of crisis management has increased. First responders to crises must cope with needs of people buried, injured, starving, thirsty, and requir- ing shelter. They need supplies and equipment. In this instance, crisis management anticipates needs before they arise based on understanding the type of disaster that is predicted. Dealing with the aftermaths of tragedies requires a priori analysis of supply chains to deliver healthcare and subsistence. This point of view is under- standable since alleviating human suffering deserves top priority.
From a systems perspective, the anticipation of catastrophes can sometimes result in mitigation of damage. Under some circumstances, it can even prevent the catastrophe from occurring. P/OM concepts can be used during various phases of catastrophic events. Various phases include anticipating and stopping catastrophes, mitigating catastrophes, and preparing for catastrophes.
P/OM procedures can stop catastrophes. There is no record of how many disas- ters did not occur because good operational procedures detected problems and cor- rected them before calamities resulted. There are, however, numerous instances of where official reports confirmed that correctable conditions were detected but the corrections were not made in time and disaster resulted.
As is later discussed in Chapter 11 (where sustainability is the P/OM topic under consideration), operational procedures did not require a delay in the Challenger space shot (STS-51-L) on January 28, 1986. Postponement should have been required because O-ring conditions had not been tested nor certified in very low temperatures which prevailed on that day.
Many other examples can be cited including Space Shuttle Columbia (STS-107) which experienced vehicle disintegration on February 1, 2003. Learning from this event, design changes were instituted which would prevent similar tragedies from occurring in future space launchings. The list of preventable accidents is extremely large and further examples will be presented in Chapter 11 and other suitable parts of this textbook.
P/OM can control impact severity. Bringing to bear mobile firefighters and equipment of sufficient capacity to manage forest wildfires has helped reduce the size of the burning areas. Similarly, taking steps to build up walls of sandbags has helped limit damage in many flood areas. P/OM is well known for bringing ade- quate supplies to staging areas before catastrophic events occur. Thus, Home Depot had repair supplies on the move from dozens of states in the USA before hurricane
Katrina struck New Orleans in August of 2005. Supermarket Publix moved food and water to selected storage sites before hurricane Andrew decimated parts of South Florida in August of 1992.
How much time is needed after a prediction of a stage 4 hurricane to strengthen levees and dikes? There was more than enough time for the Army Corp of Engineers to reinforce the levees around New Orleans. It was not done because the people in control were politicians, not managers. Preparation for events that are highly likely to occur can be short term (for necessities such as food and drugs) and also long term for engineering construction projects.
P/OM dreams up various process crisis scenarios (like Toyota Production System—TPS) and inculcates “best practice” response drills. P/OM knows how to monitor the system’s dashboard which shows the degree to which various strategies would have succeeded in saving the Titanic. Toyota designed the Andon (a signal board or dashboard that flashes lights) to indicate root causes of problems. This helps trace problems to their origins.
The methodology of P/OM was first developed by and for manufacturing, but it has now been extended to services with great success. Service industries involve an increasing percent of the workforce. Thus, more attention needs to be directed toward achieving coherent and efficient operations for services. The service industries include: hospitals, banks, restaurants, airlines, hotels, tourism, cruises, educational institutions, departmental stores, government agencies, knowledge management, and so on.
In the current era, the distinction between managing goods and service organi- zations is diminishing, and there is a common body of knowledge that can be used to manage both types of organizations effectively and efficiently.
1.7.3 Similarities and Differences between Services and Manufacturing
There is less difference than similarity between P/OM in manufacturing and service organizations. Manufacturing is the fabrication and assembly of goods, whereas services generate revenues either independent of goods or to help the user of those goods. Banking, transportation, healthcare, and entertainment are all services.
They change the customer’s location, financial condition, and sense of well-being.
Increasingly, manufacturers recognize the importance of servicing customers, and service systems recognize the value of using manufacturing capabilities.
Similarities between services and manufacturing can be noted when service operations are based on repetitive steps in information processing. Almost identical methods apply with respect to production scheduling, job design and design of the workplace, process configurations, and quality achievement. High-volume repetitive operations on physical items (i.e., for fast foods or blood testing) constitute produc- tion irrespective of whether they are categorized as manufacturing or services. Similar analogies can be made for lower volumes of production and services delivered.
The similarities stop and significant differences occur when the operations involve contact between people. Person-to-person activities that require transfer of information and/or treatments offered by one to another are difficult to sched- ule; activity times vary more than with machines. Human-to-human interactions involve many more intangibles than interactions between people and machines.
The contact aspect of services requires different methods for analysis and synthesis than are needed for manufacturing systems.
At the same time, care should be taken to avoid stereotyping services as being all too human and, therefore, difficult to control for quality and productivity. It does a disservice to services to consider them quixotic or flawed by humanism, while manufacturing is admired for its elegant, efficient technological component.
A most respected thinker, Levitt (1972) has written, “Until we think of service in more positive and encompassing terms, until it is enthusiastically viewed as manufacturing in the field, receptive to the same kind of technological approaches that are used in the factory, the results are likely to be … costly and idiosyncratic.”
The point to make is that services that are currently rendered in an inherently inefficient way often can be transformed into rational repeatable activities that emulate the best of manufacturing environments. However, often is not always.
Some services are not amenable to the concept of manufacturing in the field. One might be fearful if the services rendered by a doctor were based on a repetitive manufacturing model. At the same time, many aspects of open-heart surgery are the better for such systematization. The same can be said for blood testing, taking X-rays, and other repetitious aspects of the healthcare business. Juxtaposed to this, some products, such as artwork, are epitomized by being custom-made. They lose most of their value if they are manufactured.
Another significant difference between the provision of services and manufac- turing occurs because of inventory. It is not considered possible, usually, to stock services. For example, when the machine-repairing person is idle, there is no way to build up an inventory of repair hours that can be used when two machines go down at the same time. In most service businesses, supply being greater than demand is one of the great waste factors.
On the other hand, many companies use automated systems to provide cus- tom-tailored information such as stock, bond, and mutual fund quotes for anyone knowing the symbols. Phone-call requests for product information are answered by a digitized voice that instructs the caller to use a Touch-Tone phone to input the product of interest and his or her fax number. The appropriate fax is automatically transmitted within a minute. This entire service transaction, without human inter- vention, is becoming increasingly common and epitomizes automated manufactur- ing and/or service processes. In this case, the supply of service hours is limited only by the technology and there is no cost for supply waiting for demand.
Voice recognition technology is getting so good that a new era is about to occur that will likely revolutionize the service function. Contacts by computer have become kindly and comfortable to customers. Machine’s ability to understand
customers’ responses has also altered the contact relationship. Logical reasoning by computers for service requests is likely to be far better than what can be supplied by outsourced, call-center employees whose native language and cultural milieu are different from the caller’s. This voice recognition advantage of computers using the Internet will alter outsourcing of call-center functions for banks, e-stores, etc.
Voice-directed picking technology (as well as goods receiving, put-away, replenish- ment, and dispatch) is finding its way in streamlining warehousing operations;
source: http://www.manufacturingdigital.com/technology/talking-sense-voice- recognition-technology. SIRI, the voice of iPhone’s activated personal assistant, is a noteworthy example of mobile voice interface.