H1.3 Operations Process

The output of the process is a tangible good (finished or intermediate).

Located close to suppliers or raw materials / inputs.

Zoning and size of operations determines the location.

High capital costs; capital-intensive. Requires a lot of initial finance to establish.

Can produce customised output, but large manufacturers must standardise.

Uses skilled and unskilled labour for various roles; the more automated the technology, the lower order skill sets required by human labour force.

Uses substantial manufacturing technology (depending upon cost and availability).

Inventory management: raw materials and other inputs can stocked at front-end and completed goods can be stocked at back-end of the process (consider costs and risks and impacts on working capital and liquidity).

Quality management: systems need to be in place to ensure the durability, dependability and use of tangible item is as advertised.

Customer service is critical, but less face-to-face interaction. 

The output of the process is an intangible service where customers (usually) enter into the operations process (physical or digital) and are part of the transformation process.

Services provided in real-time and are produced and consumed simultaneously.

Located close to markets and customer (convenience)

High labour costs; labour-intensive. This means that ongoing costs of running the firm can be high, but entry levels are lower.

Use of highly skilled / specialised labour (higher pay) and also some semi-skilled roles.

Must be flexible and responsive to individual customer needs (providing variety of options, or high level of customisation). Standardised services can be automated (ATM—cash withdrawal)

Use of technology; flexible, office technology / software, systems

Inventory management: Firm cannot stockpile services; no preproduction and mass-redistribution. Customer required as an input to be served in real-time. If no customers, inputs of highly paid staff still must be paid by firm.

Quality management: measurement of customer satisfaction; customer service is key; the human interactions in the process are of vital importance to ensure repeat sales.