© Cambridge University Press 2012 CHAPTER ONE ROLE OF OPERATIONS MANAGEMENT Topic 1 Operations

© Cambridge University Press 2012 The creation of goods and the provision of services by businesses. The transformation of inputs into outputs or products to be sold. This involves: planning activities purchasing inputs managing inventory selecting and implementing manufacturing processes developing strategies to gain a sustainable competitive advantage. Role of operations management

© Cambridge University Press 2012 Involves gaining a long-term competitive advantage over its competitors, both local and overseas. May also use either a cost leadership of product differentiation strategy. Strategic role of operations

© Cambridge University Press 2012 Strategic operations decisions focus on: products to be created how to produce products capacity or size of operations organisation of inputs and equipment in operations location of operations employees used in operations quality. Strategic role of operations (cont.)

© Cambridge University Press 2012 A strategy where a business aims to obtain an advantage over its competitors by being the lowest cost manufacturer within its industry. Cost leadership operations strategy

© Cambridge University Press 2012 Low cost through operations may be achieved by: using less expensive inputs maximising efficiency by minimising waste and save time maximising productivity producing more outputs from less inputs using technology producing faster having lower quality outputs increasing size of operations to reduce the average cost of making each item. Cost leadership operations strategy (cont.)

© Cambridge University Press 2012 Aims to obtain an advantage over its competitors by having outputs that are different to its competitors, unique or leading edge technology. This is achieved through having: better quality outputs quicker supply of outputs custom designed outputs and/or more varieties to suit different needs more features, applications and versatility new technology incorporated. Good/service differentiation operations strategy

© Cambridge University Press 2012 Goods outputs: physical, tangible can be reused more capital intensive (machinery) can be stored hard to modify once manufactured. Goods and services in different industries

© Cambridge University Press 2012 Services: intangible can only be used by one customer once more labour intensive more interaction with customers easier to change and customise. Goods and services in different industries (cont.)

© Cambridge University Press 2012 Mining industry Retailing Education Banking and finance Construction Tourism Goods and services in different industries (cont.)

© Cambridge University Press 2012 Specialisation – where the business is separated into different functions, each of which is highly skilled at its specific task or role. Interdependence – where the different parts of a business must rely on each other to perform their task or role. Interdependence of operations with the other key business functions

© Cambridge University Press 2012 As a result of specialisation, there will be interdependence between the key business functions and a constant flow of information between operations, marketing, finance and human resources. Interdependence of operations with the other key business functions (cont.)