Download - 01. competing with operations
COMPETINGWITH
OPERATIONS
LECTURE OUTLINE
What is Operations ManagementCorporate & Operations strategies
Evolution of OMDifferences between Services and Goods
Current Issues in Operations Management
Learning Objectives for This Course
Ashok Gupta
OM
101
2/27
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
Ashok Gupta
OM
101
3/27
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
Ashok Gupta
OM
101
4/27
A PROCESS VIEW
External environment
Information on
performance
Customers
Processes and
operations1
2
3
4
5
Inputs• Workers• Managers• Equipment• Facilities• Materials• Land• Energy
Outputs• Goods• Services
Ashok Gupta
OM
101
5/27
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
Ashok Gupta
OM
101
6/27
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
Ashok Gupta
OM
101
7/27
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
Ashok Gupta
OM
101
8/27
HISTORICAL EVENTS IN OPERATIONS MANAGEMENT
Era Events/Concepts Dates Originator
IndustrialRevolution
Steam engine 1769 James WattDivision of labor 1776 Adam SmithInterchangeable parts 1790 Eli Whitney
Scientific Management
Principles of scientificmanagement
1911 Frederick W. Taylor
Time and motion studies 1911 Frank and
Lillian GilbrethActivity scheduling chart 1912 Henry Gantt
Moving assembly line 1908 Walter Flanders
Ashok Gupta
OM
101
9/27
HISTORICAL EVENTS IN OPERATIONS
MANAGEMENT
Era Events/Concepts Dates Originator
Human Relations
Hawthorne studies 1930 Elton Mayo
Motivation theories1940s Abraham Maslow1950s Frederick Herzberg1960s Douglas McGregor
Operations Research
Linear programming 1947 George DantzigDigital computer 1951 Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM
1950s Operations Research groups
MRP, EDI, EFT, CIM 1960s, 1970s
Joseph Orlicky, IBMand others
Ashok Gupta
OM
101
10/27
HISTORICAL EVENTS IN OPERATIONS
MANAGEMENT
Era Events/Concepts Dates Originator
QualityRevolution
JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total qualitymanagement)
1980sW. Edwards Deming, Joseph Juran
Strategy andoperations
1980sWickham Skinner, Robert Hayes
Reengineering 1990sMichael Hammer,James Champy
Six Sigma 1990s GE, Motorola
Ashok Gupta
OM
101
11/27
HISTORICAL EVENTS IN OPERATIONS
MANAGEMENT
Era Events/Concepts Dates OriginatorInternet Revolution
Internet, WWW, ERP, supply chain management
1990s ARPANET, TimBerners-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
1990s2000s
China, India, emerging economies
Ashok Gupta
OM
101
12/27
HISTORICAL EVENTS IN OPERATIONS
MANAGEMENT
Era Events/Concepts Dates OriginatorGreen Revolution
Global warming, An Inconvenient Truth, Kyoto
Today Numerous scientists, statesmen and governments
Ashok Gupta
OM
101
13/27
Copyright 2011 John Wiley & Sons, Inc.Copyright 2011 John Wiley & Sons, Inc.
STRATEGIC PLANNING
Missionand Vision
Corporate Strategy
OperationsStrategy
MarketingStrategy
FinancialStrategy
Voice of theBusinessVoice of the
Customer
1-14
14/27
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
Performance Gap?
No
Yes
Ashok Gupta
OM
101
15/27
POSITIONING THE FIRM
Cost Speed Quality Flexibility
Ashok Gupta
OM
101
16/27
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
Ashok Gupta
OM
101
17/27
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)
Ashok Gupta
OM
101
18/27
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
Ashok Gupta
OM
101
19/27
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
Ashok Gupta
OM
101
20/27
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
Ashok Gupta
OM
101
21/27
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
Ashok Gupta
OM
101
22/27
WHAT IS A SERVICEWHAT 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)
Ashok Gupta
23/27
OM
101
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
Ashok Gupta
OM
101
24/27
THE GOODS-SERVICE CONTINUUM
Ashok Gupta
OM
101
25/27
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)
Ashok Gupta
26/27
OM
101
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
Ashok Gupta
27/27
OM
101
QUESTION BOWL
In the Input-Transformation-Output relationship, a typical “input” for a department store is which of the following
a. Displaysb. Stocks of goodsc. Sales clerksd. All of the abovee. None of the above
Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”)
Ashok Gupta
28/27
OM
101
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
Ashok Gupta
OM
101
29/27