Operations and Service Management
Operations and Service Management
Operations management is the design, operation, and improvement of the systems that create and deliver products and services. Key concepts include the 4Vs (volume, variety, variation, visibility), process design (job, batch, line, continuous), capacity management, inventory management (EOQ model, JIT), quality management (TQM, Six Sigma, ISO 9000), and lean principles (eliminate waste). Service management differs from manufacturing due to intangibility, inseparability, variability, and perishability (the IHIP characteristics).
Candidates must understand the trade-offs: high variety often means higher cost and lower volume; high volume allows standardisation and lower unit costs. The line of fit in operations strategy aligns operations resources with market requirements.
Traps include confusing quality assurance (process-based) with quality control (inspection-based), and assuming JIT is always beneficial (it requires reliable suppliers and can increase vulnerability to disruptions). Another trap is overlooking the role of customers in service operations (they are part of the process).
Worked example / rule of thumb: To calculate Economic Order Quantity (EOQ), use the formula: EOQ = sqrt((2DS)/H), where D = annual demand, S = ordering cost per order, H = holding cost per unit per year. For example, if D=1000, S=£20, H=£4, then EOQ = sqrt((2100020)/4) = sqrt(10000) = 100 units. This minimises total inventory costs. In exams, if asked to improve operations, consider the 4Vs and lean principles: reduce waste (overproduction, waiting, transport, overprocessing, inventory, motion, defects).
Remember that operations strategy must support business strategy; it is not just about efficiency.