Lecture 1 – Introduction to Business Operations Principles of Business Operations

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Learning Objectives for this Unit

On completion of this unit, students will be able to:

• Understand the core principles of Operations

Management
• Understand goods and services
• Understand processes and value chains

Principles of Business Operations

Topic 1:
Introduction to Business Operations © NCC Education Limited

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Introduction Nature of Operations Management

Various definitions exist for Operations There are four basic principles required for operations
Management, all with a common theme: management:
• “The science and art of ensuring that goods and • Planning
services are created and delivered successfully to • Organising
customers” • Directing
• “The management of processes that convert inputs • Controlling
(such as materials, labour and energy) into outputs
(in the form of goods and services)”

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Planning Organising

• Process of bringing together:

• Basis for future activities
– Resources
• Includes strategies for action – People
• Goals and objectives – Technologies
• Guidelines – etc.
• Schedules for meeting – ……in order to perform planned activities
objectives • Includes design of processes and systems to
create goods and services for customers

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Lecture 1 – Introduction to Business Operations Principles of Business Operations

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Directing Controlling
• Measuring performance against plans

• Turning plans into action and realities

• Applying corrective measures where necessary
to ensure plans are achieved
• Assigning specific tasks to employees

• Coordinating employees efforts

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Key Operations Management Activities Key Operations Management Activities

1 2

• Understanding the needs of customers • Ensuring material flows are coordinated from
• Using information about customers to make better supplier to customer
decisions • Creating a high-performance workplace through
• Exploiting technology to improve productivity developing and motivating staff
• Building quality into goods, services and processes • Continually learning from co-workers, competitors,
to improve business performance customers, etc.

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Class Activity Impact on Other Business Functions

• Work in groups of about 5 Operations management impacts upon various other

business functions:
• What are the main planning, organising, directing • Engineering – operational analysis can make
and controlling activities required for making your processes more efficient and reduce costs
favourite beverage? Make a list for each. • Finance – budgetary control, evaluating planned
• 10 minutes investments
• IT – involved in automating operations
• Feedback to the class • Marketing – identifying new market opportunities or
• 5 minutes promoting existing products and services

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Lecture 1 – Introduction to Business Operations Principles of Business Operations

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Understanding Goods and Services 1 Understanding Goods and Services 2

• A “Good” is a physical product that you can see, • Goods are “tangible” whereas services are
touch and sometimes consume, e.g. a television “intangible”
• Goods can be durable, e.g. last at least 3 years, or
non-durable (perishable) generally lasting for less • Goods are “consumed” whereas services are
than 3 years, e.g. toothpaste “experienced”
• A “Service” is an activity that does not directly
produce a physical product, e.g. a haircut • Customers participate in many processes, activities
and transactions, e.g. a restaurant meal

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Understanding Goods and Services 3 Understanding Goods and Services 4

• A “service encounter” is the interaction between the • Services cannot be stored as physical inventory –
customer and the service provider you can store a can of paint for sale tomorrow, but
a barber’s chair that is empty is losing money today
• The demand for services is more difficult to predict • Service facilities usually need to be close to the
than the demand for goods customer
• Patents do not protect services

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Example of Customer Benefits Package for

Customer Benefit Packages
Fast Food Restaurant

• All operations contain goods and services – a

“music concert” is primarily a service – but includes Free Toys Playgrounds

a ticket … a bicycle is primarily a good, but

includes safety/service instructions, etc.
Food Service
• A customer benefit package is a clearly defined set
of tangible (goods) and intangible (services) that a
customer recognises, pays for, uses or experiences Games and
Birthday
– meeting both primary and peripheral customer Parties Prizes

wants and needs

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Lecture 1 – Introduction to Business Operations Principles of Business Operations

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Class Activity Processes and Value Chains 1

• Work in groups of about 5 • Processes are the building blocks for the creation
of goods and services
• Why do you think predicting the demand for
• A “process” is a sequence of activities to create a
services is more difficult than predicting the
demand for goods and what are the implications of result – goods, services or information
this when planning staffing levels? • Processes typically have 3 components –
• 10 minutes inventory, materials and resources
• Feedback to the class • A “transformation” is to create an output for a
• 5 minutes customer or market segment

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Processes and Value Chains 2 Input-Transformation-Output

Transformed
• A value chain is a network of processes that create Resources:

value for a customer MATERIALS,

INFORMATION
• A “cradle to grave” operation: & CUSTOMERS

– Suppliers provide inputs (physical goods, people,

TRANSFORMATION Output Products &
information) Input Resources
PROCESS Services

– Inputs transformed into value-added goods or services

– Outputs are delivered to customers or target market Transforming
Resources:
segments
FACILITIES &
Based On: Slack, Chambers & Johnson (2007)
STAFF
Operations Management, 5th Edition, p. 9

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Eras of Operations Management 1 Eras of Operations Management 2

• 1960s – Focus on cost and efficiency • Today Operations management focuses on:
• 1970s – Focus on quality – Value maximisation
• 1980s – Focus on customisation and design – Mass customisation
– Information-based technologies
• 1990s – Focus on time
– Service
• 21st century – Focus on service and value
– Global markets

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Conclusions References

• Everyone is involved in Operations Management – • Evans & Collier (2007) “Operations Management:
not just Operations Managers! An Integrated Goods & Services Approach”,
• All operations contain both goods and services – Thomson.
but the degree of each can vary enormously, e.g. • Slack, Chambers & Johnston (2007) “Operations
cinema visit versus grocery shopping Management”, 5th Edition, FT Prentice Hall.
• Value chains create transformations • Jones and Robinson (2012) “Operations
• Operations management foci have changed Management”, Oxford University Press
enormously over the last 50 years from minimising
cost issues to maximising service and value

Topic 1 – Introduction to Business

Operations

Any Questions?

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