Competing in Operations Management
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This document provides an overview of operations management. It discusses key concepts like transformation processes, the evolution of operations management over time, and competitive priorities around cost, quality, time, and flexibility. It also describes differences between goods and services and current issues in operations management like global competition and quality challenges. The overall goal is to help students understand the strategic importance of operations and develop skills for continuous improvement.
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Competing in Operations Management
- 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 AshokGuptaOM101 2 /27
- 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 AshokGuptaOM101 3 /27
- 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 AshokGuptaOM101 4 /27
- 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 AshokGuptaOM101 5 /27
- 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 AshokGuptaOM101 6 /27
- 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 AshokGuptaOM101 7 /27
- 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 AshokGuptaOM101 8 /27
- 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 AshokGuptaOM101 9 /27
- 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 AshokGuptaOM101 10 /27
- 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 AshokGuptaOM101 11 /27
- 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 AshokGuptaOM101 12 /27
- 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 AshokGuptaOM101 13 /27
- 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 1-14 14 /27
- 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 AshokGuptaOM101 15 /27
- 16. POSITIONING THE FIRM Cost Speed Quality Flexibility AshokGuptaOM101 16 /27
- 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 AshokGuptaOM101 17 /27
- 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) AshokGuptaOM101 18 /27
- 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 AshokGuptaOM101 19 /27
- 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 AshokGuptaOM101 20 /27
- 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 AshokGuptaOM101 21 /27
- 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 AshokGuptaOM101 22 /27
- 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) AshokGupta 23 /27 OM101
- 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 AshokGuptaOM101 24 /27
- 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) AshokGupta 26 /27 OM101
- 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 AshokGupta 27 /27 OM101
- 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”) AshokGupta 28 /27 OM101
- 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 AshokGuptaOM101 29 /27