Chap1 operations iipm

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Chap1 operations iipm

  1. 1. OPERATIONSAND VALUECHAINMANAGEMENT© Prentice Hall, 2002 19-1
  2. 2. Learning ObjectivesYou should learn to:– Describe the role of the transformation process inoperations management– Explain why operations management is importantto all types of organizations– Define value chain management– Discuss the goal of value chain management– Explain the organizational and managerialrequirements for value chain management© Prentice Hall, 2002 19-2
  3. 3. Learning Objectives (cont.)You should learn to:– Describe the benefits of and obstacles to valuechain management– Discuss technology’s role in operationsmanagement– Describe how quality affects operationsmanagement– Explain ISO 9000 and Six Sigma© Prentice Hall, 2002 19-3
  4. 4. What Is Operations Management?Operations Management– the design, operation, and control of the transformationprocess that converts such resources as labor and rawmaterials into goods and services that are sold tocustomers– every organization has an operations system that createsvalue by transforming inputs into outputs• every unit in an organization also has an operationssystem© Prentice Hall, 2002 19-4
  5. 5. The Operations System• People• Technology• Capital• Equipment• Materials• InformationInputs Outputs• Goods• ServicesTransformationProcess© Prentice Hall, 2002 19-5
  6. 6. Why Is Operations Management Important?Encompasses Services and Manufacturing– manufacturing organization - produces physical goods– service organization - produces nonphysical outputs inthe form of services• U.S. economy currently dominated by the creation andsale of servicesManaging Productivity– productivity - overall output of goods or services dividedby the inputs needed to generate that output– increasing productivity is key to global competitiveness– productivity is a composite of people and operationsvariables© Prentice Hall, 2002 19-6
  7. 7. Deming’s 14 Points for Improving Management’s Productivity© Prentice Hall, 2002 19-7
  8. 8. Importance Of Operations Management (cont.)Strategic Role of Operations Management– manufacturing operations taken for granted priorto 1970– in 1970s U.S. executives recognized that theywere facing a crisis• began incorporating existing and futureproduction requirements into the organization’soverall strategic plan© Prentice Hall, 2002 19-8
  9. 9. Value Chain ManagementWhat is Value Chain Management?– value - performance characteristics, features, andattributes, and any other aspects of goods andservices for which customers are willing to giveup resources• organizations must provide value to attract andkeep customers• value provided through the transformation ofraw materials into some product or service thatend-users need where, when, and how theywant it© Prentice Hall, 2002 19-9
  10. 10. What is Value Chain Management? (cont.)– value chain - entire series of work activities that addvalue at each step of the transformation process– value chain management - process of managing anentire sequence of activities along the entire value chain• is externally oriented–focuses on both incoming materials and outgoingproducts and services• is effectiveness oriented and aims to create the highestvalue for customers– supply chain management - is internally orientedValue Chain Management (cont.)© Prentice Hall, 2002 19-10
  11. 11. Value Chain Management (cont.)Goal of Value Chain Management– create a value chain strategy that meets and exceedscustomers’ needs• recognizes that ultimately customers are the ones withpower– create a full and seamless integration among all membersof the chain• sequence of participants work together as a team• each adds a component of value to the overall process• the better the collaboration among chain participants,the better the customer solutions© Prentice Hall, 2002 19-11
  12. 12. Value Chain Management (cont.)Requirements for Value Chain Management– business model - strategic design for how a companyintends to profit from its broad array of strategies,processes, and activities– Coordination and Collaboration - comprehensive andseamless integration among all members of the chain• each partner must identify things that customers value• requires sharing of information and being flexible– Technology Investment - information technology can beused to restructure the value chain to serve end-users• enterprise resource planning software - links all of anorganization’s activities with trading network partners© Prentice Hall, 2002 19-12
  13. 13. Value Chain Management (cont.)Requirements for Value Chain Management (cont.)– Organizational Processes - the way that organizationalwork is done• must examine core competencies to determine wherevalue is being added• non-value-adding activities should be eliminated• processes must change in the following ways:–better demand forecasting is necessary–selected functions may need to be donecollaboratively–new metrics required for evaluating performancealong the chain© Prentice Hall, 2002 19-13
  14. 14. Value Chain Management (cont.)Requirements for Value Chain Management (cont.)– Leadership - outlines expectations for organization’spursuit of value chain management– Employees/Human Resources• flexibility in the design of jobs–jobs should be designed around work processesthat link functions involved in creating value• hiring of workers who have the ability to learn andadapt• significant investments in continual and ongoingemployee training© Prentice Hall, 2002 19-14
  15. 15. Value Chain Management (cont.)Requirements for Value Chain Management (cont.)– Organizational Culture and Attitudes - important foremployees to have favorable attitudes regarding sharing,collaborating, openness, flexibility, mutual respect, andtrust• these attitudes must characterize internal and externalpartnersBenefits of Value Chain Management– improved customer service - the major benefit– cost savings– accelerated delivery times– improved quality© Prentice Hall, 2002 19-15
  16. 16. The Requirements For Successful Value ChainManagementTechnologyInvestmentOrganizationalCulture andAttitudesEmployeesOrganizationalProcessesLeadershipValueChainStrategyCoordination andCollaboration© Prentice Hall, 2002 19-16
  17. 17. Value Chain Benefits© Prentice Hall, 2002 19-17
  18. 18. Value Chain Management (cont.)Obstacles to Value Chain Management– Organizational Barriers - among the most difficult• include refusal or reluctance to share information,shake up the status quo, and deal with security issues– Cultural Attitudes• lack of trust - reluctance to share information,capabilities, and processes• too much trust - leads to theft of intellectual property–intellectual property - proprietary companyinformation that is critical to competitiveness• collaboration results in a loss of control© Prentice Hall, 2002 19-18
  19. 19. Value Chain Management (cont.)Obstacles to Value Chain Management (cont.)– Required Capabilities - essential to capturing andexploiting the value chain• coordination and collaboration• ability to configure products to satisfy customers• ability to educate internal and external partners– People - must be committed to value chain management• must be flexible• must be willing to expend incredible amounts of timeand energy• experienced managers a critical resource© Prentice Hall, 2002 19-19
  20. 20. Obstacles To Successful Value ChainManagementCulturalAttitudesOrganizationalBarriersRequiredCapabilitiesPeopleObstacles toValue ChainManagement© Prentice Hall, 2002 19-20
  21. 21. Current Issues In Operations ManagementTechnology’s Role in E-Manufacturing– smart companies trying to harness Web technology toimprove operations management– link plant-floor automation with enterprise-wide businessnetwork systems• synchronize enterprise operations with customers– technology is helping to reduce manufacturing costs• e-manufacturing technology is affecting equipmentmaintenance• prevents equipment breakdowns and subsequentproduction downtime© Prentice Hall, 2002 19-21
  22. 22. Current Issues (cont.)Quality Initiatives– strategic initiatives that promote quality and continuousimprovement are critical to manufacturing excellence– quality - the ability of a product or service to reliably dowhat it’s supposed to do and to satisfy customerexpectations– Planning for Quality - need quality improvement goalsand strategies to achieve those goals– Organizing and Leading for Quality - two approaches• cross-functional teams• self-directed or empowered teams© Prentice Hall, 2002 19-22
  23. 23. Current Issues (cont.)Quality Initiatives (cont)– Controlling for Quality - monitor and evaluatethe progress of quality improvement efforts• e.g., standards for inventory control, defectrate, and raw materials procurement• defect prevention rather than defect detection isa priority–quality is the responsibility of all employees© Prentice Hall, 2002 19-23
  24. 24. Current Issues (cont.)Quality Goals– ISO 9000 - series of international qualitymanagement standards proposed by theInternational Organization for Standardization• uniform guidelines for processes to ensure thatproducts conform to customer requirements• internationally recognized–ISO certification becoming a prerequisite forglobal business© Prentice Hall, 2002 19-24
  25. 25. Quality Dimensions of Goods and Services© Prentice Hall, 2002 19-25
  26. 26. Reasons For Pursuing ISO 9000 CertificationCompetitivepressuresCustomerdemands andexpectationsCorporatestrategyProductioncostsQualityISO 9000certificationuseful for:Marketadvantage© Prentice Hall, 2002 19-26
  27. 27. Current Issues (cont.)Quality Goals (cont.)– Six Sigma - a quality standard that establishes agoal of no more than 3.4 defects per million unitsor procedures– is essentially a zero-defects standard• quality-driven businesses use it to judge theirsuppliers© Prentice Hall, 2002 19-27

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