1-1
Operations Strategy

Equations Have Changed
The New One..
PROFIT = PRICE - COST
The Old One..
PRICE = COST + PROFIT

Sectors in Economy
3

Evolution of an Economy
Extractive
Goods Producing
Trade & Commerce
Domestic Services
Refining & extending Human Capacities
Health
Education
Research
Arts
Transportation
Retailing
Finance &
Insurance
Real Estate
Government
Hospitality
Beauty Treatment
Laundry
Repair & Maintenance
Child – Day Care
Manufacturing
Processing
Agriculture
Mining
Fishing
Forestry

Significance & Role of Sectors in Nations Economy

Significance & Role of Sectors in Nations Economy
52
30
18

Products vs Services
1-7

8
What is a Product?
 A Product is anything that can be offered to a market for
attention, acquisition, use, or consumption and that might
satisfy a want or need.
 Includes:
 Physical Objects
 Services
 Events
 Persons
 Places
 Organizations
 Ideas
 Combinations of the above

Classification of Products
• Consumer Durables
 Electronics
 IT products
 Automotive
• Consumer Consumables (FMCG)
 Beauty Aids
 Toiletries
 Medicines
 Foods & Beverages
 Fertilisers
• Industrial (B2B)
 Cement
 Ship Building
• Military
 Vehicles
 Weapons & Arms
 Ammunition
 Clothing

10
Unsought Products
 New innovations
 Products consumers don’t
want to think about these products
 Require much advertising &
personal selling
i.e Life insurance, blood donation
Product Classifications
Consumer Products
Specialty Products
 Special purchase efforts
 High price
 Unique characteristics
 Brand identification
 Few purchase locations
i.e Lamborghini, Rolex
Shopping Products
 Buy less frequently
 Higher price
 Fewer purchase locations
 Comparison shop
i.e Clothing, cars, appliances
Convenience Products
 Buy frequently & immediately
 Low priced
 Mass advertising
 Many purchase locations
i.e Candy, newspapers

11
Supplies
and
Services
Materials
and
Parts
Capital
Items
Product Classifications
Industrial Products

13
What is a Service?
 A Service is a form of product that consist of activities,
benefits, or satisfactions offered for sale that are
essentially intangible and do not result in the ownership
of anything.
 Examples include:
 Banking
 Hotels
 Tax Preparation
 Home Repair Services

Classification of Services
• Business Services
 Consulting
 Finance
 Banking (Personal / B2B)
 Insurance
• Trade Services
 Retailing
 Maintenance
 Repairs
• Infrastructure Services
 Communication
 Transportation
 Rail/Road Network
 Airline Services
• Social / Personal
 Restaurants
 Hotels
 Service Apartments
 Day care for children
 Hospitals, clinics
• Public Administration
 Education
 Government
– Water
– Electricity

1-16
Products vs Services
Can be resold
Can be inventoried
Some aspects of
quality measurable
Selling is distinct
from production
Reselling unusual
Difficult to
inventory
Quality difficult to
measure
Selling is part of
service
Goods Service

1-17
Products vs Services
Product is
transportable
Site of facility
important for cost
Often easy to
automate
Revenue generated
primarily from
tangible product
Provider, not product
is transportable
Site of facility
important for
customer contact
Often difficult to
automate
Revenue generated
primarily from
intangible service.
Goods Service

Manufacturing vs Service
Characteristic Manufacturing Service
Output
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct
Tangible
Low
High
Low
High
Easy
High
Intangible
High
Low
High
Low
Difficult
Low
quality problems
High

Quiz: Product vs Service Operations
Element Product Service
Output Tangible Intangible
Demand Per
Product
Uniform Variable
Ownership Possible Not Possible
Customer
Involvement
No or Low High

Parameter Service Goods
Customer Participation in production process Yes No
Simaltaneous production & Consumption Yes No
Can be stocked (Inventoried) No Yes
Full Impact of Demand Transferred to System Yes No
Selection of Location dectated by Customers Yes No
Economies of Scale Difficult Possible
Standardisation Difficult Possible
Performed in Controlled Environment ? Yes
Control on Decentralised Facilities ? Yes
Employee Attitude & Performance Important ?
See , Touch, Feel , Test Possible Yes No
What is the Product? Process Goods
Can the Output be Measured Easily? ? Yes
"In Service Business,you cannot make happy guests with unhappy employees."J.Willard Marriott.
Quiz: Product vs Service Operations

21
Products-Service Continuum
Pure Tangible
Good
Pure
Service
Soap
Tangible Good
With
Accompanying
Services
Auto With
Accompanying
Repair Services
Hybrid Offer
Restaurant
Service With
Accompanying
Minor Goods
Airline Trip
With
Accompanying
Snacks
Doctor’s Exam

Products-Service Continuum
22

1-23
Products-Service Continuum
0 25 50 75 100
25
50
75
100
Automobile
Computer
Installed Carpeting
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Counseling
Percent of Product that is a Good Percent of Product that is a Service

Operations Framework
1-24

1-25
Production Process
Manufacturing
Processing
Conversion
Land
Manpower
Material
Machine
Money
MIS
Motivation
Goods
Comparison
Actual v/s Planned
Inputs Conversion Process Outputs
Monitor
Output
Adjustments
Needed

Example - Food Processor
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
vegetables
Metal Sheets Making cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment

Manufacturing Operations - Classification
 Capital Intensive versus Labour Intensive
Manufacturing
Capital Intensive Labor Intensive
Monitored by
Unskilled
Operators
Automatic Operated by
Skilled
Operators
Unskilled
Labor
Skilled
Labor
Professionals
Chemicals
, paper
production
Food
production,
saw mill
Autos,
power
plants
Toys,
leather
goods
Tailored
clothes,
eyeglasse
s
Sculptors
, artists

Service Process
28
(Men, Machine, Material)

Example - Hospital Process
Inputs Processing Outputs
Doctors, nurses Examination Healthy
patients
Hospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

Value-Added
The difference between the cost of inputs
and the price of outputs.
Inputs
Land
Labor
Capital
Transformation/
Conversion
process
Outputs
Goods
Services
Control
Feedback
Feedback
Feedback
Value added

1-31
Operations Strategy
Operations function is the set of activities
that creates goods and services by
transforming inputs into outputs
Production is the creation of goods and
services
Operations Management is the management
of systems or processes that create goods
and/or provide services

Operations Strategy
 Operations Strategy is the design; operation; improvement
of system that create & deliver the firm’s primary products
& services
Transformation
(Conversion)
Process
Energy
Materials
Labor
Capital
Information
Goods or
Services
Feedback information for control
of process inputs & process
technology
Operations as
a System

1-33
Functions - Manufacturer
Operations Finance/
Accounting
Marketing
Production
Control
Manufacturing Quality
Control
Purchasing
Manufacturing

1-34
Functions - Bank
Operations Finance/
Accounting
Marketing
Check
Clearing
Teller
Scheduling
Transactions
Processing
Security
Commercial Bank
© 1984-1994
T/Maker Co.

1-35
Functions - Airline
Operations Finance/
Accounting
Marketing
Ground
Support
Flight
Operations
Facility
Maintenance
Catering
Airline
© 1984-1994 T/Maker Co.