1. Updated By: Reham S. Al-Homayan Mar,2008 PROCESSES B200 SEMESTER 2 WEEK ONE

2. Updated By: Reham S. Al-Homayan Mar,2008 Themes of The Processes Module encourages thought about what organisations actually do and introduces the main activities that they undertake. introduces a series of processes, each requiring appropriate resources to produce the desired outputs. how all organisations aim to add value while minimising costs. examples of organisational activities in processing customers, materials and information.

3. Updated By: Reham S. Al-Homayan Mar,2008 The Processes Module Student Key Learning Outcomes recognise and describe the processes in the activities of an organisation recognise and describe the resources used in the activities of an organisation describe the behaviour of an organisation in terms of the processes and resources used in its activities. critically assess how useful it is to take a process perspective in understanding the behaviour of an organisation (more details in processes study guide p69)

4. Updated By: Reham S. Al-Homayan Mar,2008 Chapters we will cover in Processes Module: Week 1: Chapters 1 and 2 Week 2: Chapters 4 and 5 Week 3: Chapters 6 and 10 Week 4: Chapters 11 and 12 Week 5: Chapters 13 and 14 ALL OTHER PROCESSES CHAPTERS ARE OPTIONAL.

5. Updated By: Reham S. Al-Homayan Mar,2008 Organizations As Systems Chapter One

6. Updated By: Reham S. Al-Homayan Mar,2008 Definition & Characteristics In this section we introduce transformation model as a part of a broader framework of ideas about organizations, which derive from systems theory. In views any activity in an organization as a process in which inputs of resources are converted into outputs of goods and/or services for customers. A system is a collection of interrelated parts which form some whole (communication, …) Systems may be: –Closed: completely self supporting, do not interact with their environment –Open: Interact with their environment in obtaining inputs and discharging outputs (fig 1.1). Social systems such as organizations are open systems.

7. Updated By: Reham S. Al-Homayan Mar,2008 The three major characteristics of open systems are as follows : –They receive inputs or energy from their environment (input include people, material, finance, …) –They convert these inputs into outputs –They discharge their outputs into their environment (services, products,..) page 6 fig 1.2 Open Systems

8. Updated By: Reham S. Al-Homayan Mar,2008 Systems are divided into sub-systems. In organizations the sub-systems are the various departments, for example marketing, sales, HR, Production departments, ….. The boundaries between sub-systems are called interfaces Organization boundaries is not visible, boundaries of social system are based on relationship In any organization, some employees work consistently at the external boundary. These are the people who have to deal with the inputs and the outputs to the system, e.g those responsible for purchasing, sales, customer services, …Other employees work consistently on internal boundaries which responsible for provision of services to other in organization like personal officer, accountant, … Boundary management is of vital importance to the effectiveness of those in managerial position and supervisory rules While organizations are open social systems, taken as a whole, their sub- systems may be either open (Marketing and R&D) or closed (Production and accounting).

9. Updated By: Reham S. Al-Homayan Mar,2008 Katz and Kahn, American academics, identified the common characteristics of such open systems as follows: - Importation of energy and simulation like people and material - Throughput or conversion: the processing of material and organizing of work - Output :products and services - Cyclic Nature: The return from marketing the output enable further input to be made to complete the cycle of production - Negative entropy: i.e. firms building up reserves to use them in hard times (negative products) - Feedback: Negative feedback enables the system to correct deviations - Steady state: this refers to the balance to be maintained between inputs from the external environment and the outputs going back to it. - Differentiation: or unique, the tendency to greater specialization of functions and multiplicity of roles - Equifinality: Open systems do not have to achieve their goals in one particular way. Similar ends can be achieved by different paths and from a different starting points.

10. Updated By: Reham S. Al-Homayan Mar,2008 The feedback from output to input is to produce a closed loop system is basically a self-regulated system. Go to page 8 fig 1.3

11. Updated By: Reham S. Al-Homayan Mar,2008 The Tavistock Group They introduced the system of socio-technical and introduce several ideas related to open system and environment, and discussed the following: –Short-wall method: small and close teams doing autonomous (self directed) job –Long-wall method: a mass production system based on high degree of job specialization – big groups with their supervisors worked in a 3 shifts. –Composite long-wall system: meeting social needs and utilizing the benefits of a new technology (compined wall)

12. Updated By: Reham S. Al-Homayan Mar,2008 They described four types of environment: –Placid, randomized: this represents a relatively unchanging and homogeneous environment who is demands are randomly distributed. –Placid, clustered: relatively unchanging but its threats and rewards are clustered. For example, in a monopoly situation an organization’s failure or success depends on its continued hold over the market. –Disturbed, reactive: competition between organizations, and this may include hindering tactics. –Turbulent fields: dynamic and rapidly changing environment, in which organizations must adapt frequently in order to survive.

13. Updated By: Reham S. Al-Homayan Mar,2008 Katz and Kahn They identified 5 subsystems at work in an Organization: 1.Production or technical sub-system, concerned with the accomplishment of the basic tasks of the (production of goods, provision of services ). 2.Supportive sub-system, these are the system which completion the inputs and organize of the output of the production subsystem. They also maintain the relationship between the organization as a whole and the external environment. 3.Maintenance sub-system, these are concerned with the relative stability or future of the organization. They provide for the roles and rewards applicable to those who works in the organization. The three above systems serve the organization as it is. 4. Adaptive sub-system, this system concerned with what the organization might become. they deal with issues of change in the environment. e.g, in marketing and research and development, 5. Managerial Sub-system, controlling and coordinating the activities of the total system. Decision making and taking.

14. Updated By: Reham S. Al-Homayan Mar,2008 Activity In your group think of some examples of these sub-systems. Discuss these with your tutor.

15. Updated By: Reham S. Al-Homayan Mar,2008 Effective Operations Management Chapter 2

16. Updated By: Reham S. Al-Homayan Mar,2008 IKEA It has around 100 giant stores operating in over 15 countries world-wide it has managed to develop its own special way of selling furniture. The design and philosophy of its store operations go back to the original business which was started in southern Sweden by Kamprad in the 1950.

17. Updated By: Reham S. Al-Homayan Mar,2008 At that time Mr. Kamprad was successfully selling furniture, through a catalogue operation. In response to customer requests to be able to see some of his furniture, he built a showroom in Stockholm, not in the centre of the city where land was expensive, but on the cheaper outskirts of the town. Instead of moving the furniture from the warehouse to the showroom area, he asked customers to pick the furniture up themselves from the warehouse. This 'anti-service' approach to service, as it has been described, is the foundation of IKEA's stores today.

18. Updated By: Reham S. Al-Homayan Mar,2008 IKEA IKEA's furniture is 'value for money' with a wide range of choice. It is usually designed to be stored and sold as a 'flat pack' but is capable of easy assembly by the customer. The stores are all designed around the same self-service concept.

19. Updated By: Reham S. Al-Homayan Mar,2008 IKEA owes its success to the effectiveness of its operations management, who provide: 1-a smooth customer flow; 2-a clean, well-designed environment; 3-sufficient goods to satisfy demand; 4-sufficient staff to serve customers and stock the warehouse; 5-an appropriate quality of service; 6-a continuous stream of ideas to improve its, already impressive, operations performance.

20. Updated By: Reham S. Al-Homayan Mar,2008 Operations in the organization The operations function of the organization is the arrangement of resources which is devoted to the production of its goods and services. it is the central to the organization. Also, the organization have other functions and parts.

21. Updated By: Reham S. Al-Homayan Mar,2008 Here we divide the organization into three other major functions: the marketing function, the accounting and finance function and the product/service development function. And support functions, which supply and support the operations, function, including: The human resources function, the purchasing function and the engineering/technical function. Important: sometimes the function different from one organization to another and this is depend on the organization activities. Table 2.1 shows the activities of these functions for a sample of operations see page 16. and figure 2.1, page 17

22. Updated By: Reham S. Al-Homayan Mar,2008 Definitions The operations function of the organization is the arrangement of resources which is devoted to the production of its goods and services. Operations managers are the staff of the organization who have particular responsibility for managing some, or all, of the resources which comprise the operations function. Operations management is the term which is used for the activities, decisions and responsibilities of operations managers.

23. Updated By: Reham S. Al-Homayan Mar,2008 THE TRANSFORMATION PROCESS MODEL All operations produce goods or services or a mixture of the two, and they do this by a process of transformation. By transformation we mean that they use their resources to change the state or condition of something to produce outputs. Transformation model which is used to describe the nature of operations.

24. Updated By: Reham S. Al-Homayan Mar,2008 For example, hospitals have inputs of doctors, nurses and other medical staff, administrators, cleaning staff, beds, medical equipment, pharmaceuticals, blood, dressings, and so on. Their purpose is to transform sick patients into healthy patients. The outputs from the operation are treated patients, medical test results, medical research and 'best practice' medical procedures. Input Transformation Output Doctors, Nurses transform sick patients into treated patients healthy patients medical test result Medical staff, equipment medical research Cleaning staff (Facilities, material, staff) (Environment) (goods & services)

25. Updated By: Reham S. Al-Homayan Mar,2008 Inputs to the transformation process The inputs to an operation can be conveniently classified as either: 1-transformed resources – the resources that are treated, transformed or converted in some way; or 2-transforming resources – the resources that act upon the transformed resources.

26. Updated By: Reham S. Al-Homayan Mar,2008 Transformation Process The purposes of the transformation process in operation is closely connected with the nature of its transformed input resources. Transformed resources The transformed resources which operations take in are usually a mixture of:  materials; (to make the equipment it self)- operations which process materials could do so to transform their physical properties (shape), location, storing.  information; (fast, error free and efficient) for example storing information (library)  customers.( care maximize and cost minimize). For example bus station change their location or airline change their schedule.

27. Updated By: Reham S. Al-Homayan Mar,2008 Transforming resources There are two types which form the 'building blocks' of all operations:  facilities –the buildings, equipment, plant and process technology of the operation;  staff – those who operate, maintain, plan and manage the operation. Of course the exact nature of both facilities and the nature of staff will differ between operations. To a five-star hotel, its facilities consist mainly of buildings, furniture and fittings. The hotel will be ineffective with broken furniture. Level of skills different upon the company specialties…. Example?

28. Updated By: Reham S. Al-Homayan Mar,2008 output to the transformation process The output from the transformation process are goods and services which are generally seen as being different for several reasons: Tangibility: goods are usually tangible, for example can physically touch a newspaper. Services usually intangible, you can not touch consultancy services. Storability: goods can be stored, services not. Transportability: depend on services and goods. Simultaneity: concern with timings of their production. Goods are always produced prior to the customers receiving or even seeing, while the services as the same time you consumed the services. Customer contact: in goods operation low contact between customers and factory. while high contact between customer and services operation. Ex, bakery. Quality: customers do not see the production of goods, they will judge the quality of the operation which produced them on the evidence of the goods themselves. But in services, judge not only the outcomes of the services but also the aspect of the way in which it was produced. The output from most operation is a mixture of goods and services.

29. Updated By: Reham S. Al-Homayan Mar,2008 Activity Think of some facilities you would describe as housing a transformation process. Discuss in your group.

30. Updated By: Reham S. Al-Homayan Mar,2008 The process hierarchy The transformation process model can also be used within operations. For example television program and video production company, the input for production camera, staff, lighting, ….it transforms these into finished programmes and promotional videos, and there are smaller operations like marketing, finance,..

31. Updated By: Reham S. Al-Homayan Mar,2008 Internal customer-internal supplier relationships The terms internal customer and internal supplier can be used to describe micro operations which take outputs from, and give inputs to, any other micro operations. Any operations function is a network of micro operations which are engaged in transforming materials, information, or customers for each other. Fig 2.4 p 25

32. Updated By: Reham S. Al-Homayan Mar,2008 Thus we could model any operations function as a network of micro operations which are engaged in transforming materials, information, or customers (that is staff) for each other: each micro operation being at the same time both an internal supplier of goods and services and an internal customer for the other micro operation's goods and services.

33. Updated By: Reham S. Al-Homayan Mar,2008 There are difference between internal and external suppliers and customers. The differences provides us with a model to analyse the internal activities of an operation, if the macro operation is not working we have to go back to the problem with internal network customers or suppliers. Also, it is useful to treat the internal with same degree of care of the external one, the effectiveness of the whole operation will improve.

34. Updated By: Reham S. Al-Homayan Mar,2008 All parts of the organization are operations All functions can be viewed as operations themselves. It means that every manager in all parts of an organization is to some extent an operations manager. All managers need to organize their resources inputs effectively so as to produce goods and services. It also means that we must distinguish between two meanings of 'operations':

35. Updated By: Reham S. Al-Homayan Mar,2008 1-Operations as a function, meaning the part of the organization which produces the goods and services for the organization's external customers; 2-Operations as an activity, meaning any transformation of input resources in order to produce goods and services, for either internal or external customers.

36. Updated By: Reham S. Al-Homayan Mar,2008 Business processes Each micro operation will contribute some part to 'producing' several of the products and services with which the organization attempts to satisfy the needs of its customers. Breaking a whole operation down into its constituent micro operations helps to demonstrate that operations management applies to all parts of the organization and help to focus on improvement. These collections of contributions from each micro operation which fulfill customer needs are called business processes. Fig 2.5 p 27

37. Updated By: Reham S. Al-Homayan Mar,2008 Buffering the operation One way in which operations managers try to minimize 'environmental' disruption is by buffering or insulating the operations function from the external environment. It can be done in two ways: physical buffering – designing an inventory or stock of resources either at the input side of the transformation process, or at the output side; One way of protecting the transformation process of the operation against unpredicted fluctuations in the quality or nature of input resources is to build up a store of resources. Organizational buffering – allocating the responsibilities of the various functions in the organization so that the operations function is protected from the external environment by other functions. Stability is important because it allows the operation to organize itself for maximum efficiency. Organization buffering also allow other functions to specialized in their own particular tasks and leave the operation function to get on with the job of producing goods and services.

38. Updated By: Reham S. Al-Homayan Mar,2008 The disadvantages of buffering the operation A number of objections to buffering can be made: -The time lag of communicating between insulating function and the operations function makes change difficult. By the time, the insulating function has responded, operation has moved on to the next problem. -Operations never develops the understanding of the environment which would help it exploit new development -Operation never required to take responsibility for its actions. There is always another function to blame and unhelpful conflict may arise between functions. -Physical buffering often involves tolerating large stocks of input or output resources. these are both expensive and prevent the operation improving. -Physical buffering in customer-processing operations means making the customers wait for services which in turn could lead to customer dissatisfaction. From the above the operations need to develop the flexibility to respond and understand what is really happening with its customers and suppliers.

39. Updated By: Reham S. Al-Homayan Mar,2008 Activities Activities 1-8 from the Processes Study Guide.

40. Updated By: Reham S. Al-Homayan Mar,2008 Reading for Next Week Please read pages 5- 18 of the Processes Study Guide to refresh your study of Chapters 1 and 2. Please read chapters 4 and 5 (Chapter 3 is an optional reading) before the next tutorial.