Business Operation Management Textbook Pdf


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Operation Management Textbook Pdf

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This book is about operations management. The subject matter is presents an introduction and overview of operations management. Among the issues it. We were motivated to write this book to help students understand operations .. Many of the decisions made by operations managers are dependent on. Seventh Edition Operations Management Nigel Slack Alistair Brandon-Jones A student access code card may have been included with this textbook at a.

Not long ago, most of a product's added value came from the production processes that transformed raw materials into products. Now there is added value from technological improvements, intellectual property, product image and name brands, aesthetic design and styling that only services can create. However, in order to more critically appraise the servitization concept it will be necessary to further investigate the emerging key components of the process.

1. Introduction

In particular, it is important to distinguish the reality of implementing servitization strategies from the more rhetorical pronouncements starting to become evident, both in the popular management press and amongst the consultancy community. Although small, the literature in the servitization area is growing. However, much of the academic literature is naive in its understanding of organizational complexity and limited in its perspective often confined to single dyadic relationship.

Early studies on industrial service providers concentrated largely on spare parts manufacture and simple maintenance provision Wise and Baumgartner, Later work increasingly concentrated on the integration of products and service as the context in which industrial service providers could be developed, particularly in terms of how product manufacturers seek either to grow or protect their profitability by enhancing the service element of their customer offerings. This is why most literature assumes that, product manufacturers increasingly are seeking, either to grow, or protect their profitability by enhancing the service elements of their customer offerings Matthyssens and Vandenbempt, ; Wise and Baumgarter, Thus the emergence of a wide variety of strategies based on "blend[s] of services with products, and vice-versa, [that are] increasingly common" White et al.

Servitization is clearly more than a management fad. It is an important indicator of the way in which many industries are likely to develop. It is a movement along the trajectory of economic development that could enable the bulk of value capture to remain in developed economies, even when manufacturing itself moves to less developed economies.

However, what seems to be clear, even at this stage, is that servitization is not without its challenges. These include coping with the differences between 'efficiency' and 'value-creating' drivers, recognizing the difficulty of reconciling 'purchaser' and 'provider' requirements, adapting technology development trajectories to changed risk characteristics, and above all, updating the mindset of the firm to make the most of a service dominated environment.

One recent investigation Slack, into the patterns of servitization presents the results from a study that investigated some of the emerging conceptual and practical opportunities as well as the threats that are associated with the servitization challenge in companies featuring servitization a variety of sectors. It reached the following conclusions.

The main motivation behind the strategy of moving towards servitization is largely based on revenue generation. This is especially true for organizations with a large installed base of products, but applies more broadly, particularly because services are regarded as having higher margins than products. In addition, services are regarded as providing a more stable source of revenue, less prone to less economic cycles, as well as having the ability to grow even in mature markets.

Customer motivation is primarily based on cost and to a lesser extent quality. By far the most important drivers for customer companies to outsourcing their services is to focus on their core business and reduce their overall cost base.

There will be a limit as to how far suppliers of service can improve profitability, while customers simultaneously save costs. Although most companies surveyed saw these two seemingly opposing factors being reconciled through the development of higher value services.

Stretch means the extent to which a company moves down the supply chain.

Width means the number of service components offered to customers at each stage of the supply chain. It is likely that different patterns of servitization along these two dimensions will have implications for the nature of their implementation. The concept of 'strategic fit' is a useful perspective in understanding the progress towards increasingly sophisticated integrated service packages.

It also emphasizes some of the risks inherent in misaligned market requirements and service capabilities. Servitization involves new and ill-understood risks. These include, the risks inherent in diverting financial resources away from other activities, the larger than expect cost of establishing service networks, and for some companies the cost of investing in market positioning.

Servitization involves significant cultural issues.

In particular there is some doubt that, notwithstanding explicit policies to embrace servitization, some companies still think of themselves primarily as manufacturers with 'add on' services, rather than service companies whose offerings include manufactured products. Servitization involves designing services, a task that is significantly different to designing products. Services, by their nature, are fuzzy and difficult to define.

This has several implications particularly in the way services are perceived by customers, how service quality is defined, and how service innovation is managed. Servitization involves significant organizational structuring choices.

Most organizations have evolved using an organizational structure that separates out service from manufacturing divisions. But this structure may become increasingly inappropriate as the extent of servitization increases.

Servitization exposes costing deficiencies. In particular life cycle costing was seen as a very approximate activity that would have to be improved significantly if servitization was to avoid unacceptable risks.

Servitization may be limited by the extent of strategic span in the supply chain. Moving down the supply to provide service will inevitably increase strategic span unless some upstream activities are abandoned. The dilemma is for companies that derive competitive advantage through the embedded knowledge of their upstream activities.

Servitization emphasizes new relationship skills in the supply chain. Managing the supply chain where intangible services rather than physical products are traded requires a new set of supply chain relationship skills. Servitization redefines risk management. There was significant anxiety regarding the unquantified but probably significant increase in risk in taking over activities previously performed by customers. It may be that at some point the marginal extra risk incurred will outweigh the marginal benefits of increased profit potential.

Servitization impacts technology strategy. The value of new but less reliable technologies is likely to decrease when servitization involves taking on more explicit risk. Servitization involves integrating service processes.

It is generally recognized that the integration of service processes posed different challenges to those involved in the integration of physical process. Servitization poses new opportunities for knowledge transfer mechanisms. Generating knowledge is a key task, especially for front line staff, yet most companies were dissatisfied with their ability to feed back this knowledge, especially into product design activities.

While some of these emergent points are treated within the broad business strategy area, not all of them receive sufficient attention from a purely operations strategy perspective.

So, there may be a case for arguing that not only is academic operations strategy failing to reflect the dominance of service activity in most economies, even when it treats manufacturing, it is ignoring the influence of service concepts within its traditional sector.

Moving operations towards being 'strategic' It is not difficult to justify the importance of the strategic perspective of 'operations' on the business as a whole. No other functional strategy has such a direct impact on both revenue and cost. The popularization of ideas such as TQM and lean production established in both practitioner and research arenas the idea that operations practice must pursue the twin objectives even if to different extents of improving aspects of service such as quality, variety, responsiveness etc.

Given the business maxim that "profit is a very small number made up of the difference between two very big numbers", any subject that claims to increase revenue and reduce costs must demand the attention of companies that can appreciate its potentially disproportionate effect on profitability. It is not surprising then that the cumulative contribution of operations strategy's conceptual development has been significant, especially since the inclusion of resource based theory RBT into some parts of its research stream.

In fact, interest in operations strategy has paralleled the growth of interest in resource-based Wernerfelt, ; Barney, ; Mahoney and Pandian, or capability-based Teece and Pisano, ; Teece et al. The overlaps between operations strategy and resource-based driven views of general strategy are often explicit.

Prahalad and Hamel , for example, defined their 'core competencies' as "collective learning especially how to co-ordinate diverse production skills and integrate multiple streams of technologies". If operations are to play a serious role in helping the firm to stay 'ahead of the game' Wheelwright and Bowen, it is vital that operations strategy concepts explore the utility of frameworks, like the RBT, that are increasingly central to mainstream strategic management.

However, given that a great deal of operations strategy thought remains functionally defined and subject to within field fragmentation Skinner a; b there has also to be further reflection on the comparative insights generated by extant constructs.

There has perhaps been insufficient reflection on the underlying conceptualizations and motivations of important models like the order-winning, qualifying model, especially when pragmatic operations strategy frameworks seeks to use them. It is perhaps because of the tension between operations management's unavoidable responsibilities for day-to-day activities and their strategic role that there appears to be some confusion regarding the nature of strategy in an operations context.

Unlike some management functions, operations management and strategy tasks are principally defined by pragmatism and immediacy. Operations must be able to cope with the day-to-day production of goods or delivery of services.

This requires practitioners to continually make decisions and implement changes. Similarly, academic operations management and strategy also claims to focus on 'real' managerial preoccupations Wilson, and regularly rededicates itself to the needs of practitioners e. Hayes, Also, the theoretical underpinnings of the operations management and strategy field are somewhat different from other academic management subjects like strategy, marketing or finance.

Whereas these fields of study are more-or-less directly connected to base theoretical disciplines such as economics, sociology, psychology and mathematics, OM's underpinnings are more fragmented. Indeed it could be argued that the specific genealogy of 'modern' OM is a mixture of very different academic inputs for example, systems theory and practical fields of application for example, production engineering.

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Yet despite the apparently overwhelming practical focus of academic operations management and strategy, it also appears to have a history that demonstrates anxiety about how 'helpful' to operations practice it is really being Buffa, ; Voss, The question therefore is whether this pragmatic and practitioner influenced subject can raise itself to the level of abstraction required of any area of study if it is to be truly strategic.

But to accept this is to accept that abstraction and aggregation, both of which characterize strategic thinking, is necessarily in conflict with the practical constraints of dynamic and uncertain business life. In fact a stronger argument is that, in dealing with the practicalities of creating services and product, operations strategy of all functions is best placed to reconcile strategic and operational perspectives.

Following Mintzberg's concepts of emergent strategy for example, see Mintzberg, , the operation function should be ideally placed to exploit the day-to-day operational experience that can be the origin of emergent strategies. The implication of this is not that operations, because of its operational role, is unsuited to strategy thought, but rather that it is well positioned to reconcile 'top-down' and 'bottom-up' perspectives on strategy. It also means that the conceptual 'gap' between operations strategy and operations management may be smaller than in other functional areas.

Related, but separate, from the 'top-down' or 'bottom-up' debate is the 'internal orientation' or 'external orientation' debate. Put simply, this is essentially a conflict between operations strategy as a functional strategy, and operations strategy as a driver of the business.

The increasingly common shorthand for these two perspectives is the 'outside in' as opposed to the 'inside-out' role of operations strategy. The first perspective is perhaps best characterized by the well-known work of Terry Hill, while the second perspective is encapsulated in the more resource-based view of Hayes, Wheelwright and Pisano.

The 'external orientation' of operations strategy starts by identifying existing market requirements and then align operational resources with them Adam and Swamidass, ; Anderson et al. This 'outside-in' approach has a number of practical advantages, not least of which is the sheer availability of tools and techniques for classifying and identifying market requirements.

Hill's methodology, for instance, clarifies market order-winners and qualifiers before moving on to discussion of operational processes and infrastructure. These models also fall neatly into a 'traditional' hierarchy of strategies i. However, such 'reactive' operations strategy models have much less explanatory power when discussing long-run competitive advantage based upon pro-active operational excellence Ferdows and DeMeyer, Alternatively therefore, operations strategy can begin with the strengths and weaknesses of the operational resources and only then seek market opportunities that fit well with them Hayes, ; Cleveland et al.

Whilst this 'internal' or 'inside-out' model has obvious appeal to operations strategy practitioners and academics, terminological confusion, conceptual ambiguity and a predominantly theoretical orientation have limited its impact on practice Porter, ; Scarborough, ; Lewis and Gregory, Today this 'internal' paradigm, arguing that firm-specific factors are as important Rumelt, as industry market factors in determining advantage over time, occupies a central part of the competitive strategy landscape Foss and Knudsen, The overlaps between the fields are often explicit, with 'core competencies' defined as "collective learning especially how to co-ordinate diverse production skills and integrate multiple streams of technologies" Prahalad and Hamel, , and various operational 'behaviours' Barney and Zajac, Although exploitation of strategic resources makes theoretical sense in defining a sustainable competitive advantage, these disparate conceptual elements are still characterized by conceptual and terminological ambiguity.

Consider for instance, the notion of a set of unique or scarce or imperfectly mobile, substitutionable etc. This might appear, at a suitable level of abstraction, to define a very specific set of operational resources, yet there are degrees of scarcity.

Equally, such a categorization is prone to market variability: some resources are scarce in a new market without well-defined routes to value creation, whereas established margins enable rivals to justify expenditures that can rapidly eliminate scarcity.

The whole issue of the different dynamics associated with each conceptual category in the RBT, a factor that will be crucial in any practical prescription, remains underdeveloped.

Operations Management For Dummies

By definition, even the most explicitly 'outside-in' operations strategy frameworks do not simply analyse the external environment; they also offer a discussion of how this analysis should influence the operations resource base. The Hill methodology for instance follows its order-winning, qualifying analysis with a discussion of stage 4 the correct model of manufacture for specific products e.

It is perhaps unfair to characterize any author's work as belonging to either the outside-in or the inside-out perspectives exclusively. Most authors do, to some extent, recognize both perspectives even if their work tends to be based in one or the other usually the outside-in perspective.

Indeed, many authors attempt to reconcile both perspectives. Slack and Lewis go as far as to define operations strategy as the reconciliation between market requirements outside-in and operations resource capabilities inside-out. However, even they make the point that, whereas all businesses have some kind of market to service and therefore must include an outside-in analysis, not all businesses have operations capabilities worth exploiting in a market the outside-in perspective.

The way forward? Although the above discussion presents a number of challenges to the way operations strategy is being researched and practiced, it is possibly one of the most exciting areas of research in business management at the moment.

The dynamics of markets and technologies place continual demands on operations strategies. Furthermore, well-known and often cited examples such as Dell, IKEA, South West Airlines, Amazon, and so on, all provide evidence that fresh, new, and sometimes radically different operations strategy models can have a huge impact, not only on individual businesses but on whole industries also. Yet, if operations strategy is to continue to provide the intellectual context for the development of such practical models, it must address some of the challenges posed here.

It must stop being an alternative term for manufacturing strategy. Unless academic operations strategy starts to reflect the balance of economic activity, it will become a manufacturing ghetto, increasingly irrelevant as new industries such as telecommunications start to dominate even developing economies.

It must prove relevant to all parts of the business, not just the operations function. This may sound like a paradox, but, if a large part of a firm's resources are engaged in 'non-operations' processes, their contribution must be placed in a strategic context. Even manufacturing organizations must reconceptualize their view of manufacturing strategy to see it as providing a broad service to its customers who may or may not include a manufactured physical product.

It must engage more intimately with some of the development not only in the general strategy area but other areas of management literature. While resource-based theory is clearly of central importance to operations strategy, it has not been fully integrated into operations strategy as yet.

Furthermore, there are other areas for example, real options theory within financial strategy that have considerable potential for exploitation in the operations strategy area. It must not conflate the 'top-down or bottom-up' debate with the 'inside-out or outside-in' debate.

Many authors assume that top-down is equivalent to outside-in. It is not. The dominant paradigm of market requirements dictating the nature of operations resources can work both at a strategic and operational level. Day-to-day contact with customers is, in practice, a major influence in shaping how businesses articulate their more strategic 'market requirements'. There are many more perspectives on operations strategy than have been covered here.

There are also more debates within the subject over which perspectives and models provide most utility for the development of the subject and its use in practice. So, the issues covered in this paper must be taken very much as a personal view over how the subject needs to change. And, while maintaining that the subject could be made significantly more relevant, it is also important to finish on a more positive note. Operations strategy as a body of knowledge has moved a long way since Skinner's first call for more recognition to be given to the operations or manufacturing function.

It now represents both an intellectually exciting and practically useful body of knowledge. More significantly, it clearly holds the potential to contribute far more to both theory and practice.

Assessing operations management from a strategic perspective. Journal of Management, v. Operations Strategy: A Literature Review. Journal of Operations Management, v. Competitive Organizational Behavior: Toward an organizationally-based theory of competitive advantage. Strategic Management Journal, v. Research in Operations Management. A theory of production competence. Decision Sciences, v. Worlds Apart? Scandinavian Journal of Management, v.

Lasting Improvements in Manufacturing Performance. Towards a Competence Theory of the Firm. London: Routledge, Profit Pools: a fresh look at strategy. Advertisement Hide. Front Matter Pages i-xxi. Basics of Supply Chain and Operations Management.

Pages Examples from Different Industries, Services and Continents. Processes, Systems, and Models. Operations and Supply Chain Strategy. Sourcing Strategy. Production Strategy. Facility Location Planning and Network Design. Distribution and Transportation Network Design. Factory Planning and Process Design. Layout Planning. Demand Forecasting.

Production and Material Requirements Planning. Inventory Management.They told us what elements of supply chain security they believe will be most critical in the future. It involves a multitude of different factors including transportation management, freight and inventory management, materials handling, and order fulfillment. Generating knowledge is a key task, especially for front line staff, yet most companies were dissatisfied with their ability to feed back this knowledge, especially into product design activities.

The Hill methodology for instance follows its order-winning, qualifying analysis with a discussion of stage 4 the correct model of manufacture for specific products e. Journal of Operations Management, v. Although originally developed independently, engine management systems, navigation systems, landing systems, instrumentation systems, and so on, are increasingly integrated within the aircraft platform to provide higher degrees of product sophistication.

Starting in the s and s the term operations management became more common. Even in developing economies, manufacturing does not represent the majority of economic activity. November Whether it is tangible or intangible production items the "Operations Management" book will guide you through concepts such as Supply Chain Management to LEAN, and much more.