Principles of Business Operations

Topic 1:
Introduction to Business Operations © NCC Education Limited
 Title of Topic Topic 1 - 1.2

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
 Title of Topic Topic 1 - 1.3

Introduction

Various definitions exist for Operations Management,

all with a common theme:
• “The science and art of ensuring that goods and
services are created and delivered successfully to
customers”
• “The management of processes that convert inputs
(such as materials, labour and energy) into outputs
(in the form of goods and services)”
 Title of Topic Topic 1 - 1.4

Nature of Operations Management

There are four basic principles required for operations

management:
• Planning
• Organising
• Directing
• Controlling
 Title of Topic Topic 1 - 1.5

Planning

• Basis for future activities

• Includes strategies for action
• Goals and objectives
• Guidelines
• Schedules for meeting
objectives
 Title of Topic Topic 1 - 1.6

Organising

• Process of bringing together:

– Resources
– People
– Technologies
– etc.
– ……in order to perform planned activities
• Includes design of processes and systems to
create goods and services for customers
 Title of Topic Topic 1 - 1.7

Directing

• Turning plans into action and realities

• Assigning specific tasks to employees

• Coordinating employees efforts

 Title of Topic Topic 1 - 1.8

Controlling
• Measuring performance against plans

• Applying corrective measures where necessary

to ensure plans are achieved
 Title of Topic Topic 1 - 1.9

Key Operations Management Activities

1

• Understanding the needs of customers

• Using information about customers to make better
decisions
• Exploiting technology to improve productivity
• Building quality into goods, services and processes
to improve business performance
 Title of Topic Topic 1 - 1.10

Key Operations Management Activities

2

• Ensuring material flows are coordinated from

supplier to customer
• Creating a high-performance workplace through
developing and motivating staff
• Continually learning from co-workers, competitors,
customers, etc.
 Title of Topic Topic 1 - 1.11

Class Activity

• Work in groups of about 5

• What are the main planning, organising, directing

and controlling activities required for making your
favourite beverage? Make a list for each.
• 10 minutes

• Feedback to the class

• 5 minutes
 Title of Topic Topic 1 - 1.12

Impact on Other Business Functions

Operations management impacts upon various other

business functions:
•Engineering – operational analysis can make
processes more efficient and reduce costs
•Finance – budgetary control, evaluating planned
investments
•IT – involved in automating operations
•Marketing – identifying new market opportunities or
promoting existing products and services
 Title of Topic Topic 1 - 1.13

Understanding Goods and Services 1

• A “Good” is a physical product that you can see,

touch and sometimes consume, e.g. a television
• Goods can be durable, e.g. last at least 3 years, or
non-durable (perishable) generally lasting for less
than 3 years, e.g. toothpaste
• A “Service” is an activity that does not directly
produce a physical product, e.g. a haircut
 Title of Topic Topic 1 - 1.14

Understanding Goods and Services 2

• Goods are “tangible” whereas services are

“intangible”

• Goods are “consumed” whereas services are

“experienced”

• Customers participate in many processes, activities

and transactions, e.g. a restaurant meal
 Title of Topic Topic 1 - 1.15

Understanding Goods and Services 3

• A “service encounter” is the interaction between the

customer and the service provider

• The demand for services is more difficult to predict

than the demand for goods
 Title of Topic Topic 1 - 1.16

Understanding Goods and Services 4

• Services cannot be stored as physical inventory –

you can store a can of paint for sale tomorrow, but
a barber’s chair that is empty is losing money today
• Service facilities usually need to be close to the
customer
• Patents do not protect services
 Title of Topic Topic 1 - 1.17

Customer Benefit Packages

• All operations contain goods and services – a

“music concert” is primarily a service – but includes
a ticket … a bicycle is primarily a good, but
includes safety/service instructions, etc.
• A customer benefit package is a clearly defined set
of tangible (goods) and intangible (services) that a
customer recognises, pays for, uses or
experiences – meeting both primary and peripheral
customer wants and needs
 Title of Topic Topic 1 - 1.18

Example of Customer Benefits Package for

Fast Food Restaurant

Free Toys Playgrounds

Food Service

Birthday Games and

Parties Prizes
 Title of Topic Topic 1 - 1.19

Class Activity

• Work in groups of about 5

• Why do you think predicting the demand for

services is more difficult than predicting the
demand for goods and what are the implications of
this when planning staffing levels?
• 10 minutes
• Feedback to the class
• 5 minutes
 Title of Topic Topic 1 - 1.20

Processes and Value Chains 1

• Processes are the building blocks for the creation

of goods and services
• A “process” is a sequence of activities to create a
result – goods, services or information
• Processes typically have 3 components –
inventory, materials and resources
• A “transformation” is to create an output for a
customer or market segment
 Title of Topic Topic 1 - 1.21

Processes and Value Chains 2

• A value chain is a network of processes that create

value for a customer
• A “cradle to grave” operation:
– Suppliers provide inputs (physical goods, people,
information)
– Inputs transformed into value-added goods or services
– Outputs are delivered to customers or target market
segments
 Title of Topic Topic 1 - 1.22

Input-Transformation-Output
Transformed
Resources:
MATERIALS,
INFORMATION
& CUSTOMERS

TRANSFORMATION Output Products &

Input Resources Services
PROCESS

Transforming
Resources:
FACILITIES &
Based On: Slack, Chambers & Johnson (2007)
STAFF
Operations Management, 5th Edition, p. 9
 Title of Topic Topic 1 - 1.23

Eras of Operations Management 1

• 1960s – Focus on cost and efficiency

• 1970s – Focus on quality
• 1980s – Focus on customisation and design
• 1990s – Focus on time
• 21st century – Focus on service and value
 Title of Topic Topic 1 - 1.24

Eras of Operations Management 2

• Today Operations management focuses on:

– Value maximisation
– Mass customisation
– Information-based technologies
– Service
– Global markets
 Title of Topic Topic 1 - 1.25

Conclusions

• Everyone is involved in Operations Management –

not just Operations Managers!
• All operations contain both goods and services –
but the degree of each can vary enormously, e.g.
cinema visit versus grocery shopping
• Value chains create transformations
• Operations management foci have changed
enormously over the last 50 years from minimising
cost issues to maximising service and value
 Title of Topic Topic 1 - 1.26

References

• Evans & Collier (2007) “Operations Management:

An Integrated Goods & Services Approach”,
Thomson.
• Slack, Chambers & Johnston (2007) “Operations
Management”, 5th Edition, FT Prentice Hall.
• Jones and Robinson (2012) “Operations
Management”, Oxford University Press
Topic 1 – Introduction to Business
Operations

Any Questions?