transformation process

Topics: Output, Input, Input/output Pages: 8 (1095 words) Published: February 20, 2014
WHAT IS OPERATIONS MANAGEMENT?

Production: The creation of goods and services

Operations Management: The set of activities that creates value in the form of goods and services by transforming inputs into outputs.

Operations management is one of three main business functions involved in the creation of goods and services (i.e., Operations Function, Marketing Function, Finance/Accounting Function). These functions all interact and share information with one another, as the diagram on the following page indicates. ROLES AND NTERACTIONS OF THE MAIN BUSINESS FUNCTIONS

SIMPLIFIED VIEW OF THE CREATION OF A GOOD OR SERVICE

What is not apparent in this simple diagram is the wide diversity of inputs, transformation process, and outputs, as indicated on the following page.

TYPES OF INPUTS, TRANSFORMATIONS, AND OUTPUTS

INPUTS
TRANSFORMATIONS
OUTPUTS
Materials
Raw Materials
Purchased Parts
Supplies
Energy
People
Workers
Technicians
Supervisors
Managers
Maintenance
Custodial
Equipment
Land
Buildings
Machines
Tools
Office Equipment
Computers
Physical
Locational
Storage
Exchange
Informational
Educational
Attitudinal
Physiological
Products
Services

TRANSFORMATION EXAMPLES:
Physical or Chemical – Manufacturing, chemical processing, oil refining, etc.
Locational – Airline companies, trucking companies, package delivery services.
Storage – Warehousing operations, banks.
Exchange – Wholesale and retail operations.
Informational – T.V. news departments, newspapers, computer information services
Educational – Schools, colleges, universities.
Attitudinal – Entertainment industry, movie companies, theme parks.
Physiological – Hospitals and healthcare institutions.
BASIC PRODUCTIVITY EQUATION

A fundamental principle of the transformation process is that value should be added during the transformation process. In that way the value of the output will exceed the value of the input, and the firm will be profitable. If the value of the output is less than the value of the input, one will not be in business very long. This ratio of output to input is called productivity and it provides a yardstick to determine how effective an organization is at transforming inputs to outputs.

Productivity
=
Value of Output

Value of Input

While the above fundamental equation measures the ratio of dollars to dollars, this is not the only productivity equation in use. Any parameter that is a measure of output could appear in the numerator, and any parameter that is a measure of input could appear in the numerator. For example:

Single-Factor Productivity

Productivity = Units Produced/Labor Hours Used

Productivity = Units Produced/Raw Material Dollar Used

Multifactor Productivity

Productivity = Units Produced/(Labor $ + Material $ + Energy $)

STRATEGIC VS. TACTICAL DECISIONS IN OPERATIONS

Operations management is responsible for orchestrating all the activities needed to produce the final output (i.e., transform the inputs to outputs). These activities present themselves as a wide array of decisions that must be made. These decisions are often categorized as follows:

MANUFACTURING AND SERVICE DISTINCTIONS

Nature of output
Customer contact
Storability of output
Transportability of output
Number of outlets
Location of outlets
Size of outlets
Response time
Use of capital and labor
Measurement of quality
Measurement of productivity
CHARACTERISTICS OF MANUFACTURING AND SERVICE ENTITIES

Characteristic
Manufacturing Organization
Service Organization
Nature of Output
Physical, durable product
Intangible, perishable service
Customer Contact
Low customer contact
High customer contact
Storability
Output can be...
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