1.Intro, Operations Strategy, Competitiveness

8/3/2019 1.Intro, Operations Strategy, Competitiveness

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Chapter 1

Introduction to the Field



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Operations Management

Why Study Operations Management?

Transformation Processes Defined

Operations as a Service

The Importance of OperationsManagement

Historical Development of OM Current Issues in OM

OBJECTIVES



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An Overview Meaning of production.

Meaning of operations.

Nature of Production/Operations.As a system.

As an Organizational function.

As a conversion/transformation process.As a means of creating utility.



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What is Operations Management?

Defined

Operations management (OM) is defined asthe design, operation, and improvement of

the systems that create and deliver thefirm’s primary products and services



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What is a Transformation Process?

Defined

A transformation process is defined as auser of resources to transform inputs intosome desired outputs



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Transformations

OM as a Transformational process.

Steel plant.

Restaurant.

Automobile plant. Oil refinery.

Supermarket.

College.

Airline.



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OM as an Organizational function

Operations

Plant

Manager

Operations

Manager

Director

Manufacturing, Production control,

Quality assurance, Engineering,

Purchasing, Maintenance, etc

Finance Marketing



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Difference between Products andservices.

Services are1. Intangible.

2. Produced and consumed simultaneously.

3. Unique.

4. High customer interaction.5. Knowledge based.

6. Dispersed.

7. Can’t be inventoried.

8. Not measureable.

9. Can’t be transported.

10. Can’t be easily automated.



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Core services are basic things

that customers want fromproducts they purchase

Core ServicesDefined



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Core Services Performance Objectives

OperationsManagemen

t

Flexibility

Quality

Speed

Price (or costReduction)

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Value-added services

differentiate the organizationfrom competitors and buildrelationships that bind

customers to the firm in apositive way

Value-Added Services

Defined

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Value-Added Service Categories

Operations Management

Information

Problem Solving

Sales Support

Field Support

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Production function.

Responsibilities of production/operations Managers. The five Ps – Product, Plant, Processes, programs,

People.

Planning, organizing, staffing, directing, controlling

the functions in the production process. Q = f (a, b, c, d)

Productivity = output / input.

Managing a production/operating system.

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Historical Development of OM JIT and TQC

Manufacturing Strategy Paradigm

Service Quality and Productivity

Total Quality Management and QualityCertification

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Historical Development of OM

(cont’d) Business Process Reengineering

Supply Chain Management

Electronic Commerce

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Current Issues in OM

Coordinate the relationships betweenmutually supportive but separateorganizations.

Optimizing global supplier, production,and distribution networks.

Increased co-production of goods andservices

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Current Issues in OM (cont’d)

Managing the customers experience duringthe service encounter

Raising the awareness of operations as asignificant competitive weapon

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Operations Strategy and

Competitiveness

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Operations Strategy

Competitive Dimensions

Order Qualifiers and Winners

Strategy Design Process

A Framework for Manufacturing Strategy

Service Strategy Capacity Capabilities

Productivity Measures

OBJECTIVES

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Operations strategy Operations strategy is concerned with setting

broad policies and plans for using the resourcesof a firm to best support its long term competitivestrategy. Its comprehensive through its integration

with the corporate strategy. It includes decisions to be taken on two major

areas

Design of the process – technology, sizing,

inventory, location of the process.

Infrastructure design – planning and controlsystems, quality assurance, control approaches,work payment structures, organization of operation

functions.

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Strategy Strategy should describe how a firm intends to

create and sustain value for its shareholders. Astrategy typically breaks down into 3 majorcomponents.

Operations effectiveness. Quality initiatives, process redesign, technology

investments.

Customer management.

Segmentation. Product innovation.

New product development.

Needs of customer are ever changing, hence a

continuous change in the strategy is required.

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Cost or Price - Make the Product or Deliver the ServiceCheap

Commodities is an ExampleSegmentation is very large, all companies are

attracted to high profit due to large unitvolumes.

Quality - Make a Great Product or Deliver a GreatService Design quality – set of features.

Process quality – relates to the reliability of the product/service. Delivery Speed - Make the Product or Deliver the

Service Quickly Onsite repair service within 1 or 2 hrs.

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Competitive Dimensions Delivery Reliability - Deliver It When Promised

Important for both customers and OEMs.

Coping with Changes in Demand - Change ItsVolume When demands are strong and increasing, cost are

continuously reduced due to economies of scale,and investment in new technologies can be justified.

Decrease in demand may cause reduction inassets.

Companies can compete with a great ability to deal

with dynamic market demand.

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Competitive Dimensions Flexibility and New Product Introduction

Speed - Change It. Offering a wide variety of product is another

competitive advantage. It requires the ability to manage the time required

for product development and process re-engineering.

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Other Product-Specific Criteria - Support It Technical assistance and support. (for product

development during early stages) Meeting a launch date – when manufacturing and

development goes on simultaneously. In such cases

coordinating between different firms effectively canserve a competitive advantage. Supplier after sales support – includes availability of

replacement parts, modification of existing productsto new performance levels, and speed of response

to after sales service.

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Other dimensions – Colors Size Weight Location of the fabrication site. Customization. Product mix options.

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Dealing with Trade-offs

Cost

Quality

DeliveryFlexibility

For example, if we

improve customerservice problem solvingby cross-trainingpersonnel to deal with awider-range of

problems, they maybecome less efficient atdealing with commonlyoccurring problems.

For example, if we reduce costs by reducing productquality inspections, we might reduce product quality.

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Order Qualifiers and Winners

Defined Order qualifiers are the basic criteria thatpermit the firms products to be considered ascandidates for purchase by customers.

Order winners are the criteria that differentiatesthe products and services of one firm fromanother. It can be the product cost, quality, orreliability according to the situation.

order winnig and qualifying qualities changeover-time, and companies need to keep a watchto succed in the competitive environment.

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Frame work for operations strategy inManufacturing

operations strategy is linked vertically to thecustomer and horizontally to the other parts of theenterprise.

Main overlying attribute is senior management’s

strategic vision, which identifies the following. Target market.

Firm’s product line

Core operational and enterprise capabilities.

Companies need a whole new product realizationsystem differently and better than any competitor.

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Customer Needs

New product : Old product

Competitive

dimensions & requirements

Quality, Dependability, Speed, Flexibility, and Price

Support Platforms

Financial management Human resource management Information management

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Manufacturing Strategy

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Manufacturing Strategy

Objectives:- To translate required competitive dimensions

(typically obtained from the marketing department)into specific performance requirements for

operations. To make plans necessary to ensure that the

Operations/Enterprise capabilities are sufficient toaccomplish them.

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H t i iti th



How to prioritize these

dimensions.

1. Segment the market according to the product group2. Identify product requirements, demand patterns, and

profit margins of each group

3. Determine order qualifiers and winners for each

group4. Convert order winners into specific performance

requirements

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Operations strategy in services.

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Service Strategy Capacity Capabilities Process-based

Capacities that transforms material or information andprovide advantages on dimensions of cost and quality

Systems-based Capacities that are broad-based involving the entire

operating system and provide advantages of shortlead times and customize on demand

Organization-based

Capacities that are difficult to replicate and provideabilities to master new technologies

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What is Productivity?

Defined

Productivity is a common measure on howwell resources are being used. In the

broadest sense, it can be defined as thefollowing ratio:

OutputsInputs

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Total Measure Productivity

Total Measure Productivity = Outputs

Inputs

or

= Goods and services produced

All resources used

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Partial Measure Productivity

Partial measures of productivity =

Output or Output or Output or Output

Labor Capital Materials Energy

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Multifactor Measure Productivity

Multifactor measures of productivity =

Output .

Labor + Capital + Energy

or

Output .

Labor + Capital + Materials

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Example of Productivity Measurement You have just determined that your service

employees have used a total of 2400 hours oflabor this week to process 560 insuranceforms. Last week the same crew used only2000 hours of labor to process 480 forms.

Which productivity measure should be used?

Answer: Could be classified as a TotalMeasure or Partial Measure.

Is productivity increasing or decreasing? Answer: Last week’s productivity = 480/2000 = 0.24, and

this week’s productivity is = 560/2400 = 0.23. So,productivity is decreasing slightly.



1.Intro, Operations Strategy, Competitiveness

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