operations

1. COMPETING
WITH
OPERATIONS

2. LECTURE OUTLINE
 What is Operations Management
 Corporate & Operations
strategies
 Evolution of OM
 Differences between Services
and Goods
 Current Issues in Operations
Management
 Learning Objectives for This
Course
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3. WHAT OPERATIONS AND SUPPLY
CHAIN MANAGERS DO
• What is Operations
 a function or system that transforms
inputs into desired outputs
• What is a Transformation Process
 a series of activities along a value chain
extending from supplier to customer
• What is Operations Management
 systematic design, running &
improvement of systems that transform
inputs into services and products and
deliver them to customers
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4. ACROSS THE ORGANIZATION
Material &
Service
Inputs
Sales
Revenue
Product &
Service
Outputs
Finance
Acquires financial
resources and
capital for inputs
Marketing
Generates
sales of outputs
Operations
Translates
materials
and service
into
outputs
Support Functions
• Accounting
• Information Systems
• Human Resources
• Engineering
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5. A PROCESS VIEW
External environment
Information
on
performance
Customers
Processes
and
operations
1
2
3
4
5
Inputs
• Workers
• Managers
• Equipment
• Facilities
• Materials
• Land
• Energy
Outputs
• Goods
• Services
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6. TRANSFORMATION PROCESSES
• Physical: as in manufacturing operations
• Locational: as in transportation
• Spatial: as in warehouse operations
• Exchange: as in retail operations
• Physiological: as in health care
• Psychological: as in entertainment
• Informational: as in communication
• Academicals: imparting knowledge/skills
• Agricultural: growing crops
• Federal: government actions – licensing
Question: What is honeybee cultivation
What is poultry farming
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7. EVOLUTION OF OPERATIONS
MANAGEMENT
 Craft production
 process of handcrafting products or
services for individual customers
 Division of labor
 dividing a job into a series of small tasks
each performed by a different worker
 Interchangeable parts
 standardization of parts initially as
replacement parts; enabled mass
production
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8. EVOLUTION OF OPERATIONS
MANAGEMENT
 Scientific management
 systematic analysis of work methods
 Mass production
 high-volume production of a standardized
product for a mass market
 Lean production
 adaptation of mass production that prizes
quality and flexibility
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9. HISTORICAL EVENTS IN
OPERATIONS MANAGEMENT
Era Events/Concepts Dates Originator
Industrial
Revolution
Steam engine 1769 James Watt
Division of labor 1776 Adam Smith
Interchangeable parts 1790 Eli Whitney
Scientific
Management
Principles of scientific
management
1911
Frederick W.
Taylor
Time and motion
studies
1911
Frank and
Lillian Gilbreth
Activity scheduling
chart
1912 Henry Gantt
Moving assembly line 1908 Walter
Flanders
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10. HISTORICAL EVENTS IN
OPERATIONS MANAGEMENT
Era Events/Concepts Dates Originator
Human
Relations
Hawthorne studies 1930 Elton Mayo
Motivation theories
1940s Abraham Maslow
1950s Frederick Herzberg
1960s Douglas McGregor
Operations
Research
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
line theory, decision
theory, PERT/CPM
1950s
Operations
Research groups
MRP, EDI, EFT, CIM
1960s,
1970s
Joseph Orlicky,
IBM
and others
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11. HISTORICAL EVENTS IN
OPERATIONS MANAGEMENT
Era Events/Concepts Dates Originator
Quality
Revolution
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality
management)
1980s
W. Edwards Deming,
Joseph Juran
Strategy and
operations
1980s
Wickham Skinner,
Robert Hayes
Reengineering 1990s
Michael Hammer,
James Champy
Six Sigma 1990s GE, Motorola
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12. HISTORICAL EVENTS IN
OPERATIONS MANAGEMENT
Era Events/Concepts Dates Originator
Internet
Revolution
Internet, WWW, ERP,
supply chain
management
1990s ARPANET, Tim
Berners-Lee SAP,
i2 Technologies,
ORACLE, Dell
E-commerce 2000s Amazon, Yahoo,
eBay, Google, and
others
Globalization WTO, European Union,
Global supply chains,
Outsourcing, Service
Science
1990s
2000s
China, India,
emerging
economies
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13. HISTORICAL EVENTS IN
OPERATIONS MANAGEMENT
Era Events/Concepts Dates Originator
Green
Revolution
Global warming, An
Inconvenient Truth,
Kyoto
Today Numerous
scientists,
statesmen and
governments
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14. Copyright 2011 John Wiley & Sons, Inc.Copyright 2011 John Wiley & Sons, Inc.
STRATEGIC PLANNING
Mission
and Vision
Corporate
Strategy
Operations
Strategy
Marketing
Strategy
Financial
Strategy
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15. OPERATIONS STRATEGY
Corporate Strategy
• Environmental scanning
• Core competencies
• Core processes
• Global strategies
Market Analysis
• Market segmentation
• Needs assessment
Competitive
Priorities
• Cost
• Quality
• Time
• Flexibility
New Service/
Product Development
• Design
• Analysis
• Development
• Full launchOperations Strategy
Decisions
• Managing processes
• Managing supply chains
Competitive Capabilities
• Current
• Needed
• Planned
Performanc
e Gap?
No
Yes
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16. POSITIONING THE FIRM
 Cost
 Speed
 Quality
 Flexibility
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17. COMPETITIVE PRIORITIES
DEFINITIONS, PROCESS CONSIDERATIONS & EXAMPLES OF COMPETITIVE
PRIORITIES
COST Definition Process Considerations Example
Low-cost
operations
Delivering a service
or a product at
lowest possible cost
Processes must be
designed and operated to
make them efficient
Costco,
WalMart
QUALITY
Top quality Delivering an
outstanding service
or product
Requires superior product
features. May require a high
level of customer contact
Ferrari
Consistent
quality
Producing services
or products that
meet design
specifications on a
consistent basis
Processes designed and
monitored to reduce errors
and prevent defects
McDonald’s
TIME
Delivery
speed
Quickly filling a
customer’s order
Design processes to reduce
lead time
Dell
On-time
delivery
Meeting delivery-
time promises
Planning processes to
continuously increase
percent of on-time delivery
United Parcel
Service (UPS)
Development
speed
Quickly introducing
a new science or a
product
Cross-functional integration
and involvement of critical
external suppliers
Li & Fung
Zara
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18. COMPETITIVE PRIORITIES
DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE
PRIORITIES
FLEXIBILITY Definition Process Considerations Example
Customization Satisfying unique
needs of each
customer by
changing service or
products designs
Low volume, close customer
contact, and easily
reconfigured
product/service offerings
Ritz Carlton
Variety Handling a wide
assortment of
services or products
efficiently
Capable of larger volumes
than processes supporting
customization
Amazon.com
National
Bicycle
Volume
flexibility
Accelerating or
decelerating the rate
of production quickly
to handle large
fluctuations in
demand
Processes must be
designed for excess
capacity
The United
States Postal
Service (USPS)
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19. POSITIONING THE FIRM: COST
 Waste elimination
 relentlessly pursuing the removal of all
waste
 Examination of cost structure
 looking at the entire cost structure for
reduction potential
 Lean production
 providing low costs through disciplined
operations
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20. POSITIONING THE FIRM: SPEED
 Fast moves, Fast adaptations, Tight linkages
 Internet
 Customers expect immediate responses
 Service organizations
 always competed on speed (McDonald’s,
LensCrafters, and Federal Express)
 Manufacturers
 time-based competition: build-to-order
production and efficient supply chains
Example
 two-week design-to-rack lead time of Spanish
retailer, Zara
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21. POSITIONING THE FIRM: QUALITY
 Minimizing defect rates or conforming to
design specifications
 Ritz-Carlton - one customer at a time
 Service system designed to “move heaven and
earth” to satisfy customer
 Employees empowered to satisfy a guest’s wish
 Teams set objectives and devise quality action
plans
 Each hotel has a quality leader
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22. POSITIONING THE FIRM: FLEXIBILITY
 Ability to adjust to changes in product
mix, production volume or design
 Mass customization: the mass
production of customized parts
 National Bicycle Industrial Company
 supplies customised bicycle mass produced
 offers 11,231,862 variations
 delivers within two weeks at costs only 10%
above standard models
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23. WHAT IS A SERVICE
WHAT IS A GOODS
 “If you drop it on your foot, it
won’t hurt you” (Goods or
service)
 “Services never include goods
and goods never include
services” (True or false)
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24. A PROCESS VIEW OF
GOODS/SERVICE
• Physical, durable output
• Output can be inventoried
• Low customer contact
• Long response time
• Capital intensive
• Quality easily measured
• Intangible, perishable output
• Output cannot be inventoried
• High customer contact
• Short response time
• Labor intensive
• Quality not easily measured
More like a
manufacturing
process
More like a
service
process
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25. THE GOODS-SERVICE CONTINUUM
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26. ORDER QUALIFIERS & WINNERS
Order qualifiers are basic
criteria that permit a firm’s
products/services to be
considered as candidates by
customers
Order winners are the criteria
that differentiate the products
and services of one firm from
another (USPs)
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27. CURRENT ISSUES IN OM
 Coordinate relationships between
mutually supportive but separate
organizations
 Optimizing global supplier, production,
and distribution networks
 Increased co-production of goods and
services
 Global Competition
 Quality, Customer Service, and Cost
Challenges
 Social-Responsibility Issues
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28. QUESTION BOWL
In the Input-Transformation-Output
relationship, a typical “input” for a
department store is which of the following
a. Displays
b. Stocks of goods
c. Sales clerks
d. All of the above
e. None of the above
 Answer: e. None of the above (The above are
considered “Resources” of a department
store. The correct answer is “Shoppers”)
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29. LEARNING OBJECTIVES OF
THIS COURSE
 Gain an appreciation of strategic
importance of operations and supply chain
management in a global business
environment
 Understand how operations relates to
other business functions
 Develop a working knowledge of concepts
and methods related to designing and
managing operations and supply chains
 Develop a skill set for continuous
improvement
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