session 2 - introduction and strategy - students

7/29/2019 Session 2 - Introduction and Strategy - Students

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Introduction tothe Field &StrategySession 2


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GlobalizationWith increasing Global Competition andthe Economic situation, the impact ofcosts on businesses has becomesubstantial

Competition redefinedPrice cannot be increased, hence costs have

to be minimized to optimize profitsCompete on efficiency


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Operations?At a basic level

Day to day work:QuicklyEfficientlyWithout errorsAt low costs

Firms aim for the sameE.g. Delay at a cash counter due to price printingerrors


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Value?Efficiency:

Doing at the lowest possible cost

Lowest possible resource inputEffectiveness:

Doing the right thing to create more valueConflict between efficiency and effectivenessValue = Quality

PriceSmart Management = higher value


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Operations ManagementWhy study OM?Operations Management:

Activities to create and deliver products/servicesDesign the systemOperate itImprove it

Difference between Ops research and OMSupply Network

OM decision phases:StrategicTacticalOperational Planning & Control


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Transformation ProcessesInputs to outputsProcesses:

Physical manufacturingLocation transportationExchange retailingStorage warehousingPhysiological health careInformational telecommunications

Not mutually exclusive e.g. departmentalstores


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Goods vs. ServicesDifference between goods and servicesService orientation in manufacturing:

Core servicesValue added servicesInformationProblem solvingSales supportField support

Value added services for external customers:Differentiate productsBuild relationships


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StrategyStrategy

Operations effectivenessCustomer managementProduct innovation

Operations management relates to all 3components

Competitiveness: relative position of acompany in comparison to other firms inthe local/ global market


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Operations StrategySetting plans for resources to support thecompetitive strategy

Operations competitiveness:Cost or PriceQualityDelivery speed and reliabilityCoping with changes in demand volumeFlexibility and new product introductionspeedSupport (technical, after-sale etc.)


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Trade-OffsE.g. Speed of delivery vs. varietyPWP: Each location within a plant has itsown operations strategyStraddling:

Companies trying to match benefits ofother successful model whilemaintaining its own

Continental Airlines mimicked SouthwestAirlines (no meals, lowered fares)Still went through travel agents being full

service lost money


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Wal-Mart vs. K-MartWal- Marts competitive advantage

Systems to manage warehouses and storesLocation

Initially in rural areas away from direct competitionThen to urban areas with a cost advantage at hand

Efficient SystemValues, Skills, HR, Motivational approachTechnologySupplier-customer relationship

K-Mart copied the system late and thenlacked trained personnel


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ProductivityHow well resources are utilizedProductivity = Outputs

InputsPartial productivity measureMultifactor productivity measure

Total factor productivity measure


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Worked ExampleOutputs:

Finished Units Rs. 10,000

WIP Rs. 2,500Dividends Rs. 1,000

Rs. 13,500Inputs:

Human Rs. 3,000Material Rs. 153Capital Rs. 10,000Energy Rs. 540Other expenses Rs. 1,500

Rs. 15,193


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Class AssignmentA retail store had sales of Rs. 45,000 in Apriland Rs. 56,000 in May. The store employs

eight full-time workers who work a 40-hourweek. In April the store also had seven part-time workers at 10 hours per week, and inMay the store had nine part-timers at 15 hoursper week (assume four weeks in eachmonth). Using sales value as the measure ofoutput, what is the percentage change inproductivity from April to May?

session 2 - introduction and strategy - students

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