OPERATIONS MANAGEMENT

Chapter II

Industry

Industry refers to the production of an economic good (either material or a service) within an economy There are 4 key industrial economic sectors

Primary :- largely raw material extraction industries such as mining & farming Secondary :- it involves refining, construction & manufacturing Tertiary :- which deals with services (such as law & medicines) & distribution of manufactured goods Quaternary :- A relatively new type of knowledge industry focusing on technological research, design & development such as computer programming, biochemistry etc. A fifth quinary sector has been proposed encompassing non-profit activities.

Classification

Based on 1.. Raw material:- Agri based, marine based, mineral based 2.. Size:- it refers to amount of capital invested, number of people employed & the volume of production 3.. Ownership :- private, public & cooperative sector

Variety of business

Home business Real estate Small business Taxes Management E-business Sales employment

Scale of operations

Large scale Medium scale Small scale Micro scale

Economies of scale

The increase in efficiency of production as the number of goods being produced increase. Typically, a company that achieve economies of scale lower the average cost per unit through increased production, since fixed costs are shared over an increased number of goods External economy of scale- cost per unit depends on the size of industry, not the firm Internal economy of scale- cost per unit depends on the size of the individual firm

C h a ra cte ri cs o f sti G oods

Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction

Characteristics of Service
Intangible product Produced & consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge based Frequently dispersed

Goods Versus Services

Goods Services Reselling Can be resold unusual Can be Difficult to inventoried inventory Some aspects Quality of quality difficult to measurable measure Selling is distinct from Selling is part of production service

Goods Versus Services Continued

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

Goods Contain Services / Services Contain Goods

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

Service Productivity
Typically labor intensive Frequently individually processed Often an intellectual task performed by professionals Often difficult to mechanize Often difficult to evaluate for quality