Page 17 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes Management was once viewed primarily as a manufacturing function, service firms are now
recognizing its tremendous competitive potential. Instead of a focus on cost, the focus now
encompasses reliability as well as delivery times. Operations Management is now a major
contributor to the design and management of the supply chain needed to create, deliver, and
service the products sold.

Self Assessment

Fill in the blanks:

4. The ………………view perceives Operations Management as a system that is involved
with the manufacture and production of goods and services.
5. The ……………… view perceives Operations Management as a system designed to deliver
value.
6. Operations Management designs and manages the ……………… for manufacturing goods
and delivering services.

1.3 Operations Management Basics

The value driven approach focuses on the value provided to the customer. Customers are those
who purchase final goods and services. Those who ultimately use the products are called
consumers.
The consumer and the customer may not be the same person.

Example: It is known that wives generally buy their husband’s wardrobe. Here, the
consumer is the man while the customer is the woman.

Similarly, the recipients of goods and services from external suppliers are called
external customers, while the recipients of goods and services from internal suppliers are called
internal customers.

Example: In Escorts Ltd. the engine plant of the Tractor Division in ‘Plant I’ purchases
engine castings from Menon & Menon in Kohlapur, the engine plant is an external customer of
the casting company. In turn, the engine plant supplies the machined engine block to the Tractor
Assembly in ‘Plant III’. ‘Plant III’ is an internal customer to ‘Plant I’.

This distinction between consumers and customers (internal and external) is important for
operations managers. The concept of internal customer has profoundly changed Operations
Management thinking. It helps employees understand how they fit into the system and how
their work contributes to the final product, and it enables managers to view the organization as
a system. The needs of each group are quite different and lead to different operations capabilities
that must be met.

Example: A consumer product company like Hindustan Lever must pay attention to
consumers’ needs for product quality and performance, as well as to external customers’ (an
independent retail outlet like Morning Stores in Delhi) needs to supply the right products at the
right time.

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