8/12/2019 1 Strategy- Final

1/12

Introduction to Operations Management: Session 1

Professor Gad Allon

Kellogg School of Management, Northwestern University

G. Allon

8/12/2019 1 Strategy- Final

2/12

What do youmean by Operations?

8/12/2019 1 Strategy- Final

3/12

What Is Meant by Operations?The secret of Zaras success is its speedfour weeks for a newfashion idea to hit the shopsand the feedback that store managerssend to head office, to help it fine-tune its ideas. There is also firmcontrol from Spain, the sole logistics hub.

The Economist Mar 10, 2011.

The average time patients spend waiting to see a health-careprovider is 22 minutes, and some waits stretch for hours.Orthopedists have the longest waits, at 29 minutes; dermatologiststhe shortest, at 20. The report also noted that patient satisfactiondropped significantly with each five minutes of waiting time.

The Wall St. Journal Oct 18, 2010.

Opus = Work (Latin)

8/12/2019 1 Strategy- Final

4/12

Who has better operations?

G. Allon4

8/12/2019 1 Strategy- Final

5/12

Southwest and Bags Fly Free

G. Allon5

What annoys travelers most, ConsumerReports, June 2010

8/12/2019 1 Strategy- Final

6/12

Three Questions on Improvement

G. Allon

! What is an improvement?! Linking operations to strategy

! Where to target improvement?! Linking operational flows to financial flows

! How to improve?

8/12/2019 1 Strategy- Final

7/12

Who has better operations?

G. Allon7

PriceShips everywhere

Absolutely, Positively,overnight

! Hub and Spoke! Five empty planes in indirect routes! 10% of planes fly half empty by design! Each package is inspected by three

employees

8/12/2019 1 Strategy- Final

8/12

Strategic View: Whats an improvement

G. Allon

8/12/2019 1 Strategy- Final

9/12

A Strategic Framework for Process Design and Improvement:Three questions

1. What is our strategic position: how do wecompete & provide value in the market?

! What is the value proposition to ourcustomers?

! Rank (Price, Time, Quality, Variety)

2. Given our strategic position, what mustoperations do particularly well?

! Which competencies must ops develop?! Rank (Cost, Time, Quality, Flexibility)

3. Given needed competencies, how shouldoperations processes be structured to developcompetencies that support strategy?

! Process choice (structure) and management

competitivestrategy

Processstructure & mgt

operationsstrategy

Alignment

8/12/2019 1 Strategy- Final

10/12

Southwest Airlines vs. American Airlines

G. Allon10

Competitive Strategy: Price On time performance

Process: Flying point to point Flying to smaller airport No assigned seats Bags fly free Limited number of aircraft

Competitive Strategy: Variety of origins and

destinations

Process:

Hub and spoke Different types of aircrafts Baggage fees

8/12/2019 1 Strategy- Final

11/12

Summary

! Whats an improvement:! Maximizing Value! Alignment (Tradeoff)

G. Allon

11

8/12/2019 1 Strategy- Final

12/12

Next:Process View: Where to target improvement

G. Allon