BS-OM Session 1c

Business Services Operations Management
Session 1 Introduction & Overview
Business Services
Operations Management
Session 1 Introduction &
Overview
Facilitator:
Dr. Jonathan Farrell
This Evenings Program
Introductions
Unit outline
Lecture - Introduction to Operations Management
Case Studies Concept Design Services, Central Evaluation Unit class discussion
Little
Littles Law

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Introductions
(1 minute maximum)
Name
Organisation
Position
Type of operation
Why are you here?

Course Objectives
Gain an appreciation of technologies available, and how they

are applied to operations.
Develop an ability to integrate these technologies with

corporate and operations strategies.
Recognis
Recognise how successful operations
operations management can lead to
sustainable competitive advantage.
dvantage.
Understand the dynamics of change management and the

effects of changes on organisation culture.
The operations function is fashionable!

The consultancy services market
% of world revenues of 40 largest firms
Financial
6
Marketing/sales
2
Organizational design
11
Operations and process
management
31
Benefits/Actuarial
16
IT strategy
17
Corporate strategy
17

Kitchen unit
manufacturing
operation
Back office
operation in a
bank
They are all

operations
Retail
operation
Take-out /
restaurant
operation
7
A general model of operations management

ENVIRONMENT
Operations
strategic objectives
Operations
strategy
The operations
competitive role
and position
Input
transformed
resources
Materials
Information
Customers
Facilities
Staff
Input
transforming
resources
Design
Improvement
Output products
and services
Input resources
Customers
Planning and
control
ENVIRONMENT
8

Where does the business get

its competitive advantage?
The technological
technological
specification of its
product/service?
Product/
Service
Technology
The way it
produces its
goods and
Operations services?
Marketing
The way it
positions itself
in its market?
The three functions working together ....

eg. Swatch
Further
innovations
Innovative
plastic design
with few parts
which
gives
allows
Mass fashion
orientation
Extended
range
which funds
Product/
service
design
Marketing
Operations
but
also
which
funds etc.
Standardise,
easy to make
product at high
volume so low
cost
Increased variety
does not increase
costs
but because volume

is high
10

Core and support functions

Core functions
Engineering/
technical
function
Accounting
and finance
function
Support functions
Product/services
development function
Others
Operations
function
Human
resources
function
Marketing
function
Information/
technical (IT)
function
A broad definition of
operations
management
11
The position of the operations function
Marketing
Accounting
and finance
Product
development
Operations
Church
Call on
newcomers
Manage
appeals
Retranslate
scriptures
Conduct
weddings
Fast food
chain
Advertise on
television
Pay
suppliers
Design
hamburgers
Make
hamburgers
Furniture
manufacturer
Sell to
stores
Pay staff
D esign new
furniture
Assemble
furniture
Process
perspective
Identify
needs
Raise
capital
D evelop
product
Make and
distribute
12

The best way to start understanding the nature of

Operations is to look around you
Everything you can see around you (except the flesh and
blood) has been processed by an operation
Every service you consumed today (radio station, bus
service, lecture, etc.) has also been produced by an
operation
Operations Managers create everything you buy, sit on,
wear, eat, throw at people, and throw away
We will start by examining a high street operation
13
Some operations management activities

at IKEA
Design elegant products
which can be flat-packed
efficiently
Site stores of an
appropriate size in
the most effective
locations
Design a store layout

which gives smooth and
effective flow
IKEA STORE
Maintain cleanliness
and safety of storage
area
Arrange for fast
replenishment of
products
Ensure that the jobs of all

staff encourage their
contribution to business
success
Continually examine
and improve operations
practice
Monitor and enhance

quality of service to
customers
14

Pret a Manger
High-end sandwich and
snack retailer
Use only wholesome ingredients
All shops have own kitchens which make fresh
sandwiches every day
Fresh ingredients delivered early every morning
Same staff who serve you at lunch made the sandwiches
that morning
We dont work nights, we wear jeans, we party
15
The three basic functions at

Pret a Manger
Nutritional mechanical and aesthetic
design of the sandwiches and snacks
Product/
Service Technology
Marketing
Promotional activities,
market research, etc.
Operations
Design, location and

management of stores and
in-store processes and the
network that supplies them
16

All operations are transformation

processes
TRANSFORMED
RESOURCES
ENVIRONMENT
MATERIALS
INFORMATION
CUSTOMERS
INPUT
TRANSFORMATION
PROCESS
OUTPUT
GOODS
AND
SERVICES
FACILITIES STAFF
TRANSFORMING
RESOURCES
ENVIRONMENT
17
At Pret a Manger
TRANSFORMED
RESOURCES
ENVIRONMENT
Food ingredients
Packaging
Customers
INPUT
TRANSFORMATION
PROCESS
OUTPUT
CUSTOMERS
ASSEMBLED
TO SNACKS
Kitchen equipment
Shop fittings, Staff
TRANSFORMING
RESOURCES
ENVIRONMENT
18

Operations Management Basic

Principles
Operations
management is
concerned with
producing and
delivering products
and services
Materials
Information
Customers
Products and
services
All types of enterprise have an operations function, even if it

isnt called operations.
Most operations produce both products and services.
19
Television programme and video

production company
Wood, steel
plastic etc.
Carpenters
Machines
Set and props

manufacture
Scenery
and props
Information
from customers
Marketing and
sales
Computer
systems
Surveys and
analysis staff
Broadcasting and
programme making
equipment
Test and repair
equipment
Engineering
Market
forecasts,
sales
proposals
and plans
Adapted,
maintained
and repaired
equipment
Staff
20
10

The two main processes at a

Pret a Manger store
INPUT
Bread, mayo,
fillings, packing,
etc.
Sandwich
production
TRANSFORMATION
PROCESS
OUTPUT
Packed, fresh
sandwiches
Staff
Packed, fresh
sandwiches
Staff
Sandwich
production
Satisfied
customers
assembled to
sandwiches
Customers
21
The three core functions as transformation

process operations
operations
Designers
Design
software
Producing
effective new
products and
services
Appropriate
designs as
promised and
to budget
Product/
services
development
function
Operations
function
Transformed/
transforming
resources
Producing
service value for
customers
Marketing
function
Products
and services
Sales people
Marketeers
Market
information
Producing
sales and
market plans
Orders
Marketing plans
as promised
and to budget
22
11

Intangible
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
Psychotherapy clinic
Computer systems
services
Management
consultancy
Tangible
Can be stored
Production precedes
consumption
Low customer contact
Can be transported
Quality is evident
Restaurant
Specialist machine tool

manufacturer
Pure goods
Aluminium smelting
Crude oil production
The output from most types of operation is a

mixture of goods and services
Pure services
23
The output from most operations is a

mixture of goods and services
Tangible
Production precedes
consumption
Low customer contact
Can be transported
PSYCHOTHERAPY CLINIC
Quality is evident
MANAGEMENT
CONSULTANCY
COMPUTER SYSTEMS
SERVICES
RESTAURANT
Pret a Manger
SPECIALIST MACHINE TOOL

MANUFACTURER
Can be stored
ALUMINIUM SMELTING
CRUDE OIL PRODUCTION
PURE GOODS
Intangible
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
PURE SERVICES
24
12

A Typology of Operations
IMPLICATIONS
IMPLICATIONS
Low repetition
Each staff member performs
more of job
Less systemisation
High unit costs
Flexible
Complex
Match customer needs
High unit cost
Changing capacity
Anticipation
Flexibility
In touch with demand
High unit cost
Short waiting tolerance
Satisfaction governed by
customer perception
Customer contact skills
needed
Received variety is high
High unit cost
High repeatability
Specialisation
Systemisation
Capital intensive
Low unit cost
Low
Volume
High
High
Variety
Low
Well defined
Routine
Standardised
Regular
Low unit costs
Low
Stable
Routine
Predictable
High utilisation
Low unit costs
High
High
Variation in demand
Visibility
Low
Time lag between production

and consumption
Standardised
Low contact skills
High staff utilisation
Centralization
Low unit costs
25
Some configurations of Formule 1

prepre-manufactured room units
26
13

Profile of two operations
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
Island Resort
Formule 1
27
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Low
Visibility
Island
Resort
Hotel
Formule
1 type
Hotel
Important to understand how different operations are positioned

on the 4 Vs.
Is their position where they want to be?
Do they understand the strategic implications?
28
14

Pret a Manger and IKEA

4 Vs analysis
Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
Pret a
Manger
IKEA
29
The activities of operations management

OPERATIONS
STRATEGIC
OBJECTIVES
ENVIRONMENT
INPUT
TRANSFORMED
RESOURCES
MATERIALS
INFORMATION
CUSTOMERS
INPUT
FACILITIES STAFF
INPUT
TRANSFORMING
RESOURCES
Operations
strategy
OPERATIONS
STRATEGY
Operations
management
THE
OPERATIONS
COMPETITIVE
ROLE AND
POSITION
IMPROVEMENT
DESIGN
OUTPUT
PLANNING AND
CONTROL
GOODS
AND
SERVICES
ENVIRONMENT
30
15

Operations Activities as Feedback Loops

Design activities set the basic configuration
Planning & control activities guide short/medium term changes
Improvement activities guide longer term changes
Design
Planning & Control
Improvement
31
Case Study Central Design Services
What are the inputs, transformation processes and

outputs?
Why is operations management important to CDS?
Draw the four Vs for CDS
CDSs products & services.
What would you recommend to CDS if you were asked
to advise on improving its operations?
32
16

Process Design
Processes that Design
Products
and Services
Processes that
Produce Products
and Services
Supply Network Design
Concept Generation
Screening
Layout
and Flow
Preliminary Design
Evaluation and
Improvement
Process
Technology
Job
Design
Prototyping and final design
33
Nature and purpose of the design activity
Products, services and the processes which

produce them all have to be designed
Decisions taken during the design of a product or
service will have an impact on the decisions taken
during the design of the process which produces
those products or services and vice versa.
34
17

The purpose of design is to satisfy

customers
Product designers will seek to create things that:
- are aesthetically pleasing;
- satisfy needs;
- meet expectations;
- perform well;
- are reliable;
- are easy to manufacture and deliver.
Operations managers tend to focus on the design of the

transformation process
35
Design of the
Product
Design of the
Process
In manufacturing operations
overlapping the activities of
product and process design is
beneficial
Design of the
Service
Design of the
Process
In most service operations the

overlap between service and
process design is implicit in the
nature of service
36
18

Designing the
Product or Service
Products and services

should be designed in
such a way that they can
be created effectively
Designing the
Processes that
Produce the Product or
Service
Processes should be
designed so they can
create all products and
services which the
operation is likely to
introduce
Decisions taken during the design of the product or service will have an
impact on the process that produces them and vice versa
37
TRANSFORMED
RESOURCES
Technical information
Market information
Time information
INPUTS
THE DESIGN
ACTIVITY
Test and design

equipment
Design and technical
staff
Finished designs which are:

High quality
Speedily produced
OUTPUT
Dependably delivered
Produced flexibly
Low cost
TRANSFORMING
RESOURCES
38
19

Relatively early in the design activity the

decisions taken will commit the operation
to costs which will be incurred later
100%
Percentage of final
product cost
committed by the
design
Percentage of
design costs
incurred
0%
Finish of the
design activity
Start of the
design activity
39
Broad categories of evaluation criteria for assessing

design options
THE CRITERIA FOR ASSESSING
PROPOSED DESIGN OPTIONS
FEASIBILITY
ACCEPTABILITY
VULNERABILITY
How difficult is
it?
How worthwhile is
it?
What could go
wrong?
What RETURN
in terms of financial and
performance improvement
will it give?
What RISKS
do we run if things
go wrong?
What INVESTMENT both

managerial and financial
will be needed?
40
20

Process Mapping Symbols

Operation (an activity that
directly adds value)
Beginning or end of process
Inspection (a check of
some sort)
Activity
Transport (a movement of
some thing)
Input or Output from the process
Delay (a wait, e.g. for materials)
Direction of flow
Storage (deliberate storage, as

opposed to a delay)
Decision (exercising discretion)
Process mapping symbols derived from

Systems Analysis
Process mapping symbols derived

from Scientific Management
41
Process Mapping An Example

Raw
Materials
Assembly
Stored
Sandwiches
Move to
Outlets
Stored
Sandwiches
Sell
Take Payment
Standard sandwich process

Customer Request
Raw
Materials
Assembly
Take Payment
Customer Request
Customised sandwich - old process
42
21

The operation of making and

selling customised sandwiches
Prepare
Sandwich materials
and customers
Assemble as
required
Bread and
Base filling
Take
payment
Customers
assembled to
sandwiches
The outline process of making and

selling customised sandwiches
Assemble whole
sandwich
Use standard
base?
No
Yes
Fillings
The detailed process of

assembling customised
sandwiches
Customer Request
Assemble from
standard base
Stored
Bases
43
Customised sandwich new

process
Assemble whole
sandwich
Assembly of
sandwich
bases
Use standard
base?
Take
Payment
No
Fillings
Yes
Bread and Base

filling
Customer Request
Stored Bases
Assemble from
standard base
44
22

Two handed process chart

Right hand
Left hand
Wait
Pick up base plate

Insert into fixture
Hold base plate
Pick up two supports

Locate back plate
Pick up screws
Locate screws
Pick up air driver
Fasten screws
Wait
Replace air driver

Pick up centre assembly
Inspect centre assembly
Hold centre assembly
Locate and fix

Switch on timer
Wait to end test
Inspect
Inspect
Transfer grasp
Transfer grasp
Wait
Put aside
45
Service process
types
High
High
Manufacturing
process types
Project
Professional
service
Service shop
Variety
Variety
Jobbing
Batch
Mass
Low
Volume
High
Mass service
Low
Low
Contin-uous
Low
Volume
High
46
23

Project Processes
OneOne-off, complex,
omplex, large scale, high work content products
products
Specially made, every one customis
customised
Defined start and finish: time,
ime, quality and cost objectives
Many different skills have to be coordinated
Fixed position layout, resources brought to product
47
Jobbing Processes
Very small quantities: one-offs, or only a few required
Specially made. High variety, low repetition. Strangers
Skill requirements are usually very broad
Skilled jobber, or team of jobbers complete whole product
Fixed position or process layout (routing decided by jobbers)
48
24

Batch Processes
Higher volumes and lower variety than for jobbing

Standard products, repeating demand. But can make specials
Specialized, narrower skills
Set-ups (changeovers) at each stage of production
Process or cellular layout, predetermined planned routing
49
Mass (Line) Processes
Higher volumes than Batch

Standard, repeat products (runners)
Low and/or narrow skills
No set-ups, or almost instantaneous ones
Cell or product layout: a fixed sequence of operations
50
25

Continuous Process
Extremely high volumes and low variety: often single product

Standard, repeat products (runners)
Highly captial-intensive and automated
Few changeovers required
Difficult and expensive to start and stop the process
Product layout: usually flow along conveyors or pipes
51
The Product/Process Matrix

INCREASING VARIETY
INCREASING VOLUME
PRODUCT CHARACTERISTICS
PROCESS CHARACTERISTICS
Low volume
Low
standardisation
Low volume
Multiple products
Higher volume
Few major
products
High volume
High
standardisation
Random
flow
(project)
Jumbled
flow
(jobbing)
Disconnected
line flow
(batch)
Connected
line flow
(mass)
Smooth flow
(Continuous)
52
26


INCREASING VARIETY
INCREASING VOLUME
Low volume
Low
standardisation
Low volume
Multiple products
Random
flow
(project)
Higher volume
Few major
products
High volume
High
standardisation
Too much
flexibility so high
costs
Jumbled
flow
(jobbing)
Disconnected
line flow
(batch)
Connected
line flow
(mass)
Smooth flow
(Continuous)
Too little
flexibility so high
costs
53

INCREASING VARIETY
INCREASING VOLUME
Low volume
Low
standardisation
Random
flow
(project)
Jumbled
flow
(jobbing)
Disconnected
line flow
(batch)
Connected
line flow
(mass)
Smooth flow
(Continuous)
Custom
furniture
maker
Low volume
Multiple products
Higher volume
Few major
products
High volume
High
standardisation
Machine
tool maker
Automobile
factory
Petrochemical
refinery
54
27


INCREASING VARIETY
INCREASING VOLUME
Low volume
Low
standardization
Random
flow
(project)
Jumbled
flow
(jobbing)
Low volume
Multiple products
Higher volume
Few major
products
High volume
High
standardization
Investment
banking
Customer
service
branch
Disconnected
line flow
(batch)
Bank call
centre
Connected
line flow
(mass)
Credit card
processing
Smooth flow
(Continuous)
55
Deviating from the natural

natural diagonal on the
productproduct-process matrix has consequences for
cost and flexibility
Manufacturing
operations process
types
Service operations
process types
Volume
Variety
Project
None
Jobbing
More process
flexibility
than is
needed so
high cost
Batch
Mass
Continuous
Less process
flexibility
than is
needed so
high cost
None
Professional
service
Service
Shop
Mass
service
The natural line of fit of process
to volume/variety characteristics
56
28

Case Study Central Evaluation Centre

Processing Unit
Construct a Process Map for the new applications

Calculate the cycle time for the process
Calculate the number of people involved in the
processing of an application
Why is it difficult to locate an individual file?
What are the problems?
What suggestions would you make to Veronique to
improve her process?
57
CECPU Process Map
58
29

Process Cycle Time

The total work in progress (applications in the in-trays) = 600 + (4 130) + 220
= 1340 applications
Average throughput time = 36 working days
Therefore, from Littles Law: Throughput time = cycle time work in progress (and working in
hours)
36 7 = cycle time 1340
Therefore, cycle time = (36 7)/1340 = 0.188 hours
In other words, a fully processed application form is emerging from the process every 0.188
hours.
That is, in a 35 hour week, the Centre will process 35/0.188 = 186.17 applications per week
This is an important finding because 200 applications per week are entering the process, but
only 186.17 applications per week are emerging from the process. In other words, inventory
must be building up within the process.
59
Littles Law
Throughput (TH) = Work in process (WIP) Cycle time (CT)
Cycle time =
2 minutes
WIP = 10
Throughput time = ?
Throughput time = 10 2 minutes
= 20 minutes
Also stated as:
The average number of customers in a stable
system (over some time interval) is equal to their average
arrival rate, multiplied by their average time in the system.
60
30

Littles Law
Throughput (TH) = Work in process (WIP) Cycle time (CT)
500 exam scripts need to be marked in 5 days (working 7 hours a day).
It takes 1 hour to mark a script. How many markers are needed?
Throughput time = 5 days 7 hours = 35 hours
35 hours = 500 scripts Cycle time
Cycle time =
35 hours
500 scripts
= 0.07 hours
Number of markers = Work content = 1 hour = 14.29

Cycle time
0.07
61
Littles Law An Example

Think of a tank of water with a constant inflow and a constant,
identical outflow.
In this analogy, the input tap represents orders coming to the
factory. The outlet tap represents finished product. Water in the
tank represents WIP inventory. Average throughput or dwell time
in the tank is 100 minutes.
(If we set the level to 100 gallons and maintain the same flow,
throughput time is only 10 minutes).
62
31

Throughput efficiency
Throughput efficiency is the work content of whatever is being

processed as a percentage of its throughput time
Throughput efficiency =
Work content
Throughput time
100
63
Littles Law More Examples

At the supermarket a checkout operator has on average 4
customers and customers arrive every 2 minutes. Therefore
customers on average will be in line for 8 minutes.
A restaurant holds about 60 people, and the average person
will be in there about 2 hours, so they're entering at the rate of
about 30 people an hour. The queue for the restaurant has 30
people in it, so that means I'll wait about an hour for a table.
A financial services organisation receives on average 160
enquiries per day about its products and services. If it takes
around 30 minutes to process each enquiry and management
want to ensure each enquiry is responded to on the same day
its received, how many people are needed to process the
enquiries?
64
32

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Business Services Operations Management

Session 1 Introduction & Overview

This Evenings Program

Business Services Operations Management

Plagiarism: using the work of another person and presenting it as your

Business Services Operations Management

Gain an appreciation of technologies available, and how they

Develop an ability to integrate these technologies with

Understand the dynamics of change management and the

The operations function is fashionable!

Business Services Operations Management

They are all

A general model of operations management

Business Services Operations Management

Where does the business get

The three functions working together ....

but because volume

Business Services Operations Management

Core and support functions

The position of the operations function

Business Services Operations Management

The best way to start understanding the nature of

Some operations management activities

Design a store layout

Ensure that the jobs of all

Monitor and enhance

Business Services Operations Management

The three basic functions at

Design, location and

Business Services Operations Management

All operations are transformation

Business Services Operations Management

Operations Management Basic

All types of enterprise have an operations function, even if it

Television programme and video

Set and props

Business Services Operations Management

The two main processes at a

The three core functions as transformation

Business Services Operations Management

Specialist machine tool

Crude oil production

The output from most types of operation is a

The output from most operations is a

SPECIALIST MACHINE TOOL

CRUDE OIL PRODUCTION

Business Services Operations Management

Time lag between production

Some configurations of Formule 1

Business Services Operations Management

Profile of two operations

Important to understand how different operations are positioned

Business Services Operations Management

Pret a Manger and IKEA

The activities of operations management

Business Services Operations Management

Operations Activities as Feedback Loops

Planning & Control

Case Study Central Design Services

What are the inputs, transformation processes and

Business Services Operations Management

Prototyping and final design

Nature and purpose of the design activity