Operations and supply management is a crucial aspect of organizational performance. This paper highlights the different characteristics of goods and services and how they affect production and operations management. Furthermore, the distinction between production and capacity has been described. Finally there is a reflection on the relevance of inventory management in both the goods and services firms.
Operations and supply management
Goods and services are produced by organizations with the consumers in mind. Consumers have expectations with regard to goods and services that are available in the market. In the course of addressing consumer expectations, firms have to make their operations and supply chains effective. This is achieved through the use of different strategies that aim at satisfying the needs of consumers.
Goods and services have differing characteristics that are significant in understanding operation management. Goods are tangible such that they can be seen physically by the consumers. For instance consumers are able to see mobile phones or cakes as goods in the market. On the other hand, services are intangible in the sense that they cannot be seen by the consumers. For instance customers cannot feel or touch courier services provided by some organizations. They are only supposed to trust the providers based on their understanding. An inventory of goods can easily be kept because of their physical characteristics. It is very difficult to make an inventory of services produced by an organization(Jacobs 2010, p.22).
Services are usually unique and they can be used to identify a particular firm or agency. Water and Electricity companies are unique with the intangible products they produce to meet the expectation of consumers in the market.
For instance customer may require support services when they are supplied with internet services. This might become necessary especially when technical problems occur in the course of using the services provided.
Goods are made with the intention of reducing human customer interaction in the course of their utilization. For instance most producers provide instructions on goods concerning their use by the consumers. Goods such as electronics and automobiles are distributed with reduced customer interaction because the consumers can freely manipulate them in the course of their use (Jacobs 2010, p.22).
Buying a loaf of bread is different from buying a car based on the requirements needed by the consumers. Buying a loaf of bread is a simple process compared to buying a car. A loaf of bread is known by all consumers and can be returned to the seller if a defect is found. For instance, if a consumer cuts the loaf and finds some foreign materials, he can return to the supplier for a refund or exchange with a good loaf. Buying a car on the other hand is not simple based on the number of processes the buyer has to go through before deciding to become the owner of the car. For example the owner has to ensure that the car is in good condition and the documents are valid. It is only after verification of documents that a decision to buy it is initiated by the seller.
Production is different from capacity in a number of ways. Production refers to the process through which goods and services are created in an organization. Before goods or services are created, a number of things happen and they all aim at producing the goods or services.
Operations management ensures that activities are directed towards creation of goods and services. Activities in operations management work to create value which later comes out as goods and services. In a manufacturing scenario, operations management ensures that the raw materials are delivered in time and are acted upon so as to come up with goods that can satisfy the expectations of consumers. Operation management therefore makes sure that inputs are transformed into outputs hence becoming valuables in the market (Jacobs 2010, p.43).
Capacity on the other hand is different from production in the sense that it is concerned with the ability to hold, store or handle goods and services. This ability is determined by the resources available in an organization. Some organization may have larger capacities in handling goods and services while others have a small capacity. Capacity can be used as a measure of the effectiveness of operations management. With well managed operations in goods and services, there is always preparedness in handling of goods and services. A hospital that has efficient operations management can handle emergency situations because of a good capacity that is facilitated by the available resources. (Jacobs 2010, p.45).
Economies of scale in inventories are relevant in the case of a steel manufacturing plant. Steel manufacturing requires bulk and homogenous production. This can be well achieved though making good use of the inventories. In terms of efficiency, economies of scale are relevant to the steel manufacturing companies. This is in light of the fact that when firms expand, their efficiency to utilize the available resources is enhanced. When resources are being well utilized, more desirable results are realized. With economies of scale, the cost of transport of raw materials to and from the steel manufacturing plant tends to influence the size of the firm. When the costs are low, firms may expand and serve the customers to their satisfaction. However when the costs of transport are high in the same firm, it becomes difficult to reach out to many customers. Economies of scale, in the inventories, helps steel manufacturing plants to reduce the costs that can be associated with the transport of raw materials to the plant, and distribution of the finished products to the customers. The economies of scale are therefore crucial in production planning of a steel manufacturing plant. Good production planning would therefore aim at reducing the costs of processes such as transport (Jacobs 2010, p.76).
In the case of a hospital, dependability of inventories is relevant. This is in light of the fact that hospital falls under the service sector. The clients in this case have higher expectations that should be met by the supply chain. Inventories have to be dependable to prevent failure which can have a huge impact on the organization especially when the needs of clients are not addressed or there are delays in the delivery of services. A good inventory guarantees efficient services to the patients in a hospital. In the production planning strategy of a hospital the inventories are selected based on their capacity to provide the most efficient services
In conclusion, operations management is essential for organizations both in the goods and service sectors. Consumers of goods and services can only be satisfied if the operations management is effective. The goods and service firms show differences in their structure and inventories but they are all focused on the needs of the customers. Inventories play a very significant role in the production planning and management of steel manufacturing firms and hospitals. Their ability to satisfy the needs of consumers is based on how efficient their inventories have been organized.
Jacobs R(2010) Operations and supply management. New York: McGraw-Hill Companies