Operations, Competitiveness & Quality & Cost &Flexibility& Speed Respond Roberta Russell.

Operations, Competitiveness & Quality & Cost

&Flexibility& Speed Respond

Roberta Russell Roberta Russell

Ch 1 - 2© 2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

The Operations Function

• Operations as a transformation process

• Operations as a basic function

• Operations as the technical core


Operations As A Transformation Process

OUTPUT

MaterialMachinesLaborManagementCapital

Goods or Services

INPUT Transformationprocess

Feedback


Transformation Processes

• Physical (manufacturing)• Locational (transport/storage)• Exchange (retail)• Physiological (healthcare)• Psychological (entertainment)• Informational (communications)


Operations As A Basic Function

MARKETING FINANCE

OPERATIONS


Operations As The Technical Core

Operations

Finance

Capital Markets, Stockholders

Marketing

Customers

Wor

kers

Sup

plie

rs

Pur

chas

ing

Per

sonn

el


Historical Events In Operations Manegement (OM)

• Industrial Revolution• Scientific Management• Human Relations• Management Science• Quality Revolution• Information Age• Globalization


Historical Events In POM

Industrial RevolutionSteam engine 1769 James WattDivision of labor 1776 Adam SmithInterchangeable parts 1790 Eli Whitney

Scientific ManagementPrinciples 1911 Frederick W. TaylorTime / motion study 1911 Frank & Lillian GilbrethActivity scheduling chart 1912 Henry Gant


Human RelationsHawthorne studies 1930 Elton MayoMotivation theories 1940s Abraham Maslow

1950s Frederick Hertzberg1960s Douglas McGregor

Management Science

Linear programming 1947 George DantzigDigital computer 1951 Remington RandSimulation, PERT/CPM, 1960 Research groupsWaiting line theoryMRP 1960s Joseph Orlicky, IBM


Quality RevolutionJIT 1970s Taiichi Ohno, ToyotaTQM 1980s W. Edwards Deming,

Joseph Juran, et. al.Reengineering 1990s Hammer, Champy

Information AgeEDI, EFT, 1970s NumerousCIM 1980s individuals and

1990s companiesInternet, World Wide Web 1990s Tim Berners-Lee


Globalization

Worldwide markets 1990s Numerous individualsand operations and companiesSupply chain managementElectronic commerceMass customization


TGW (Things Gone Wrong) In First Eight Months Per 100 Cars

Chrysler 285GM 256Ford 214Japanese 132

Toyota 55


Quality Of Semiconductors

U.S.Japan

Defective on delivery 16% 0%

Failure after 1000 hrs 14% 1%


Quality Of Room Air Conditioners

U.S.Japan

Fabrication defects 4.4% <0.1%Assembly line defects 63.5% 0.9%Service calls 10.5% 0.6%Warranty cost 2.2% 0.6%

(% of sales)


Quality Of Color TVs

U.S.Japan

Assembly defects 1.4 0.01Service calls 1.0 0.09

(per set)


Globalization

• Take advantage of favorable costs• Gain access to foreign markets• Reduced trade barriers• Changing markets


Hourly Wage Rates


Growth in Volume of World Trade


Impact of Trade Agreements


Risks In Globalization

• Weak infrastructure• Distinct languages, customs, trade barriers• Inefficient distribution channels• Instability of governments• Poor economic conditions


Competitiveness

The degree to which a nation, can, under demanding and rapidly changing market conditions, produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the

real incomes of its citizens.


Measures Of Competitiveness

• Gross domestic product (GDP)

• Import/export ratio

• Productivity = output / input


Productivity Increases When Firms

• Become more efficient• Downsize• Expand• Retrench • Achieve breakthroughs


Productivity In The ‘90s


Changes In Input and Output

. .


Competitive Industries

• Relatively equal in size and resources

• Standardized products and services

• Slow or exponential growth


Measuring Competitiveness

• Number of major players

• Average market share

• Average profit margin


Barriers To Entry

• Economies of scale• Capital investment• Access to supply and distribution channels• Learning curves


Issues & Trends In Operations

1. Intense competition2. Global markets, global sourcing,

and global financing3. Importance of strategy4. Product variety and mass customization5. More services


Issues & Trends In Operations

6. Emphasis on quality7. Flexibility8. Advances in technology9. Worker involvement10. Environmental and ethical concerns

Ch 1 - 31©2000 by Prentice-Hall IncRussell/Taylor Oper Mgt 3/e

Primary Topics In Operations Management

• Deploying strategy• Assuring quality• Designing products & services• Planning the production process• Laying out the facility


Primary Topics In Operations Management

• Designing jobs & work• Managing the supply chain• Forecasting demand for products & services• Production planning & scheduling


Organization Of Book

Strategy of productive systems

Designing productive systems

Operating Productive systems


Strategy Of Productive Systems

–1. Introduction to Operations & competitiveness–2. Operations strategy–3. Quality management–4. Statistical quality control

0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7


Designing Productive Systems

–5. Product & service design–6. Process planning, analysis and reengineering–7. Facility layout–8. Human resources in operations management–9. Supply chain management


Operating Productive Systems–10. Forecasting–11. Capacity planning & aggregate production

planning–12. Inventory management–13. Materials requirements planning–14. Scheduling–15. Just-in-time systems–16. Waiting line models for service improvement–17. Project management


Strategy Formulation

1. Define primary task2. Assess core competency3. Determine order winners & order qualifiers4. Position the firm


Competing On Cost

• Eliminate all waste• Invest in

–updated facilities & equipment–streamlining operations–training & development


Competing On Quality

Please the customer–Understand customer attitudes toward and expectations of quality


Competing On Flexibility

• Produce wide variety of products• Introduce new products• Modify existing products quickly• Respond to customer needs


Competing On Speed

• Fast moves

• Fast adaptations

• Tight linkages


Process-Centered Strategies

• Processes cut across functional lines and departments

• Strategy is led by competencies


Changing Focus from Function to Process


Exploiting Core Competencies

• Enhance value a competency provides to customers

• Transform internal competence into salable item• Apply competencies to new products & services• Create new ways of working & finding markets


Policy Deployment

• Focuses employees on common goals & priorities

• Translates strategy into measurable objectives• Aligns day-to-day decisions with strategic plan


Strategic PlanningMission & Vision

Business Strategy

Marketing Strategy

Operations Strategy

Financial Strategy

Voice of the Business

Voice of the Customer


Derivation of an Action Plan


Operations Role In Corporate Strategy

• Provide support for overall strategy of a firm• Serve as firm’s distinctive competence• Must be consistent• Must be consistent with overall strategy


Operations Strategy

Products

Processes andTechnology

Capacity

Human Resources Quality

Facilities Sourcing

Services

Operating Systems


Products & Services

• Make-to-order–made to customer specifications after order received

• Make-to-stock–made in anticipation of demand

• Assemble-to-order–add options according to customer specification


Processes & Technology

• Project–one-time production of product to customer order

• Batch production–process many jobs at same time in batch

• Mass production–produce large volumes of standard product for mass market

• Continuous processes–very high volume commodity product


Product-Process MatrixV

olu

me

LowLow High

High

Projects

Batchproduction

Massproduction

Continuousproduction

Standardization


Product-Process MatrixL

abo

r In

ten

sity

LowLow High

High

Professional Service

ServiceShop

MassService

ServiceFactory

Customization


Capacity & Facilities

• How much capacity to provide• Size of capacity changes• Handling excess demand• Hiring/firing workers• Need for new facilities


Facilities

• Best size for facility?• Large or small facilities• Facility focus• Facility location• Global facility


Human Resources• Skill levels required• Degree of autonomy• Policies• Profit sharing• Individual or team work• Supervision methods• Levels of management• Training


Quality• Target level• Measurement• Employee involvement• Training• Systems needed to ensure quality• Maintaining quality awareness• Evaluating quality efforts• Determining customer perceptions


Sourcing

• Degree of vertical integration• Supplier selection• Supplier relationship• Supplier quality• Supplier cooperation


Operating Systems

• Execute strategy daily• Information technology support• Effective planning & control systems• Alignment of inventory levels, scheduling

priorities, & reward systems

Purpose Of Text• Gain an appreciation of the strategic importance

of operations and how operations can provide a competitive advantage in the marketplace

• Understand the relationship between operations and other business functions

• Develop a working knowledge of the concepts and methods related to designing and managing operations

Operations, Competitiveness & Quality & Cost &Flexibility& Speed Respond Roberta Russell.

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