The nature of operations
The transformation process
- Operations management turns inputs into outputs well.
- inputs (materials, labour, machines) → process (the work) → outputs (finished goods/services).
- Good operations add value — the output is worth more than the inputs.
Practice
Order the transformation process.
Operations turn inputs through a process into outputs, adding value.
Productivity and efficiency
$$\text{productivity} = \frac{\text{output}}{\text{input used}}$$
- Efficiency = making products with as little waste as possible.
- Higher productivity and efficiency lower the cost per unit.
Practice
Productivity is measured as:
Productivity = output ÷ input; higher productivity lowers the cost per unit.
Capital- vs labour-intensive
- capital-intensive — mostly machines (car factory): high set-up, low unit cost, good for large amounts.
- labour-intensive — mostly people (hair salon): flexible, personal, but quality can vary.
Practice
Match each operation to its type.
Capital-intensive relies on machines; labour-intensive relies on people.
You've got it
Key idea
- operations = inputs → process → outputs, adding value
- productivity = output ÷ input; efficiency = least waste → lower unit cost
- capital-intensive (machines) vs labour-intensive (people)