Business & Finance Productions and Operations Assignment

OperationsManagementandValueChainsPart1GoodsandServices.pdf

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Operations Management and Value Chains

Part One Prof. Fiyinfoluwa Abioye

Bowie State University

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Content

• Importance and Scope of Operations Management

• Understanding Goods and Services

• The Concept of Value

• Customer Benefit Packages

Importance and Scope of Operations Management

Why is Operations Management Important?

“The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn a profit, in which you will share.”

- William Cooper Procter, 1887

Issues at the Core of Operations Management

• Efficiency: A measure of how well resources are used in creating outputs.

• Cost: Expenses incurred in the completion of one or more business operations.

• Quality: The degree to which offered goods and services satisfy customer needs

What do Operations Managers do? • Forecasting

• Supply Chain Management

• Facility Layout and Design

• Technology Selection

• Quality Management

• Purchasing

• Resource and Capacity Management

• Process Design

• Job Design

• Service Encounter Design

• Scheduling

• Sustainability

Understanding Goods and Services

Goods

A good is a physical product that you can see, touch, or possibly consume.

A durable good is one that does not quickly wear out and typically lasts about three years. Examples are vehicles, dishwashers, and furniture.

A nondurable good is one that is no longer useful once it is used, or one that lasts for less than three years. Examples are toothpaste, software, clothing and shoes, and food.

Services

A service is any primary or complementary activity that does not directly produce a physical product. Services represent the non-goods part of a transaction between a buyer and a seller. Service providing firms are founds in industries such as banking, lodging, education, healthcare, and government.

Differentiating Services from Goods

• Goods are tangible, whereas services are intangible

• Customer involvement is required for service to be provided

• Demand for service is more difficult to predict than the demand for goods

• Services cannot be stored as physical inventory

• Service management skills are required to provide satisfactory service

• Service facilities often need to be close in proximity to the customer.

• Patents do not protect services

Goods and Service Content

The truth is that today, most examples of “goods” and “services” are a mixture of both goods and service content.

The Concept of Value

Value is the perception of the benefits associated with a good, service, or bundle of goods and services in relation to what buyers are willing to pay for them.

𝑉𝑎𝑙𝑢𝑒 = 𝑝𝑒𝑟𝑐𝑒𝑖𝑣𝑒𝑑 𝑏𝑒𝑛𝑒𝑓𝑖𝑡𝑠

𝑝𝑟𝑖𝑐𝑒 𝑐𝑜𝑠𝑡 𝑡𝑜 𝑡ℎ𝑒 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟

How to Increase Value

To increase value, an organization must:

• Increase perceived benefits while holding price or cost constant

• Increase perceived benefits while reducing price or cost

• Decrease price or cost while holding perceived benefits constant

The focus on value has forced many traditional goods-producing companies to add services, and, increasingly, digital content to complement their physical goods.

Customer Benefit Packages

A customer benenefit package (CBP) is a clearly defined set of tangible (goods) and intangible (services) features that the customer recognizes, pays for, uses, or experiences.

A CBP consists of a primary good or service coupled with peripheral goods and/or services, and sometimes variants.

Primary goods/services are the core attractions, while the peripheral goods/services are nonessential features that serve to enhance the primary good/service.

Variants are features that depart from a company’s/business’s standard CBP and is normally location or firm specific.

When defining CBPs, make sure you don’t confuse features determined by management with customer wants and needs.

Customer - “I need to make sure my property is well secured while I lodge in this hotel.”

Management – “We provide a room safe for you to store your valuables”

x Property Security Room Safe

Slide 1: Operations Management and Value Chains Part One
Slide 2: Content
Slide 3: Importance and Scope of Operations Management
Slide 4: Why is Operations Management Important?
Slide 5: Issues at the Core of Operations Management
Slide 6: What do Operations Managers do?
Slide 7: Understanding Goods and Services
Slide 8: Goods
Slide 9: Services
Slide 10: Differentiating Services from Goods
Slide 11: Goods and Service Content
Slide 12: The Concept of Value
Slide 13
Slide 14: How to Increase Value
Slide 15
Slide 16: Customer Benefit Packages
Slide 17
Slide 18
Slide 19
Slide 20