REVIEWER MIDTERM EXAM

• Operations Management


  • Operations Management is considered the central core of all business functions
  • It is a business function responsible for planning, organizing, directing, and controlling resources to produce goods and services
  • It involves managing human resources and nonhuman resources such as raw materials, equipment, technology, and information
  • Role: to transform company's inputs into the outputs
  • Strategic management of processes that transform inputs into goods and services, adding value for customers
  • Encompasses planning, organizing, directing, and controlling resources to efficiently produce desired outputs
• Transformation Processes and Categories


  • Transformation Process involves activities converting inputs into outputs, categorized as changes in physical characteristics, location, ownership, storage, accommodation, and purpose
  • Four main transformation categories are manufacture, service, supply, and transport
• Importance of Operations Management for Business Students

  • Operations is a major department crucial for creating and delivering goods or services
  • Understanding operations is fundamental for all business functions as it influences efficiency, effectiveness, and customer satisfaction
• Three Phases of Operations Management History

  • Craft Manufacturing: Skilled craftspeople produce goods with low volume and high variety
  • Mass Production (19th Century): High-volume production with low variety, standardized parts, and assembly lines
  • Modern Period: Shift from mass production to approaches like flexible specialization, lean production, mass customization, and agile manufacturing
• Producing Goods vs. Performing Services

  • Goods Production: Tangible products, lower customer contact, less labor content, lower input variability, straightforward quality and productivity measurement, inventory storage
  • Service Performance: Intangible services
• Producing Goods vs. Performing Services
• Goods Production


  • Tangible products, lower customer contact, less labor content, lower input variability, straightforward quality and productivity measurement, inventory storage
• Service Performance

  • Intangible services, higher customer contact, more labor-intensive, higher input variability, complex quality measurement, challenging productivity measurement, no inventory storage
• OM decisions

  1. Effectiveness refers to making the right actions and plans to improve the business and add value for the customer

  2. Efficiency means doing things well at the lowest cost possible by reducing unnecessary activities

  3. Operations management is concerned with the design, management, and improvement of systems that create the organization's goods or services
• Operations management: '“Operations management is the administration of business practices to create the highest level of efficiency possible within an organization”'
• Operations management is concerned with converting materials and labor into goods and services as efficiently as possible
• Corporate operations management professionals balance costs with revenue to maximize net operating profit
• Operations management oversees product development and delivery, inventory and supply chain management, operations staffing and job design, and production
• Calculating Productivity
• Product Yield
• Quality Productivity Ratio
• Quality Management


  A product/service is of good quality if it meets the needs & expectations of the customer. Quality includes the whole customer experience
• Customer needs & expectations

  • Performance (fit for purpose)
  • Appearance
  • Availability & delivery
  • Reliability/durability
  • Price/Value for money
• Customers define quality
• Measures of Quality

  • Tangible & Intangible
• Customers are more knowledgeable & demanding, prepared to complain about poor quality, and able to share information about poor quality online
• If a business develops a reputation for high quality, it may create an advantage over its competitors
• If a business can develop a reputation for high quality, then it may be able to create an advantage over its competitors
• Business Benefits of Greater Quality

  • Lower Marketing Costs = no need to spend too much on promotion/marketing the G/S
• Dimensions of Quality

  • Quality of Design
  • Quality of Conformance
  • Quality of Performance
• Quality Design


  • The intentions of designers to include/exclude features in a G/S i.e. the degree to which the quality characteristics are embedded in to the G/S
• Quality Design in manufacturing sector


  • Ford vs. BMW cars: Fit for use but designed for a different set of customers
• Quality Design in service sector

  • Economy vs. 5 Star Hotel
• Quality of Conformance


  • How well the G/S meets the specifications determined by designers
• Quality of Conformance in manufacturing sector

  • The product should have the size of 2 inches
• Quality of Conformance in service sector


  • Hotel industry - promised service time within 15-20mins only
• Quality of Performance


  • Associated with the reliability of the G/S, performing its intended function under a prescribed set of conditions
• Quality of Performance in manufacturing sector

  • Voltage stabilizer - designed to work over a voltage range. If it doesn’t perform satisfyingly, performance is poor. If it does, then performance is good
• Quality of Performance in service sector


  • IT industry - antivirus program
• Dimensions of Quality for Manufacturing


  • Performance
  • Features
  • Reliability
  • Conformance
  • Durability
  • Serviceability
  • Aesthetics
• Dimensions of Quality for Manufacturing


  • Safety
  • Perceptions
• Dimensions of Quality: Services


  • Time and timeliness
  • Completeness
  • Courtesy
  • Consistency
  • Accessibility and convenience
  • Accuracy
  • Responsiveness
• Cost of quality helps determine the need for Six Sigma or quality improvement projects
• Graphical representation, Pareto diagram, includes: Cost of repairs, rejects, reworks, remakes, Appraisal cost for inspection, Prevention cost for ensuring right first time
• Indicates whether processes need improvement