- 1. Outlines for Introducing Operations Management
- What is OM? Why Study OM?
- Philosophy and New Trends in OM
- Operations in the Service Sector
- How would OM affect other functions in a firm?
- Achieving Competitive Advantage through Operations
- Defining Global Operations
- Why Global Operations are Important
- Achieving Global Operations
2. Background: Steve Peng
- Ph.D. York University, Toronto,Operations Management, 2001
- M.Sc National Tsinghua University, Taiwan,Electrical
Engineering, 1992
- B.Sc National Tsinghua University, Taiwan,Electrical
Engineering, 1990
- Risk control and financing mechanism design fornew aircraft
projects
- Contract design for risk sharing and coordination in supply
networks
- Stochastic models for supply chain management
- Consultant, Bombardier Aerospace,Toronto, 3/2001 6/1999
- Risk management in new aircraft project
- R&D Engineer, S-Tech Inc,Toronto, 3/1994 6/1996
- Design and manufacturing of industrial gas detecting
system
- Project Engineer, General Instrument,9/1992 12/1993
- CATV system design and manufacturing
3. What is Operations Management
- Managing the activities that creates goods and services through
the transformation of inputs into outputs
- Focusing on both manufacturing and service operations
- Modern OM often across organizational and geographical
boundaries
4. Operations Management INPUTS _____________ Labor Materials
Technology Capacity VALUE-ADDING ACTIVITIES _________________
Performed with tools, machines, techniques, and human skills
OUTPUTS ____________ Goods and/or services Management Process
(planning, organizing, staffing, leading, and controlling) embedded
in IT infrastructures 5. Operations in Manufacturing Firm Consumer
Retailer Manufacturing Material Flow VISA Credit Flow Supplier
Supplier Wholesaler Retailer Cash Flow Order Flow Schedules 6.
Operations in Different Firms
7. Organizational Charts Airline Operations Ground support
equipment Maintenance Ground Operations Facility maintenance
Catering Flight Operations Crew scheduling Flying Communications
Dispatching Management science Finance & Accounting Accounting
Payables Receivables General Ledger Finance Cash control
International exchange rates Marketing Traffic administration
Reservations Schedules Tariffs (pricing) Sales Advertising 8.
Organizational Charts Manufacturing Operations Facilities:
Construction:maintenance Production & inventory control
Scheduling: materials control Supply-chain management Manufacturing
Tooling, fabrication,assembly Design Product development and design
Detailed product specifications Industrial engineering Efficient
use of machines, space, and personnel Process analysis Development
and installation of production tools and equipment Finance &
Accounting Disbursements/credits Receivables Payables General
ledger Funds Management Money market International exchange Capital
requirements Stock issue Bond issues and recall Marketing Sales
promotions Advertising Sales Market research 9. Organizational
Charts Commercial Bank Operations Teller Scheduling Check Clearing
Transactions processing Facilities design/layout Vault operations
Maintenance Security Finance Investments Security Real Estate
Accounting Auditing Marketing Loans Commercial Industrial Financial
Personal Mortgage Trust Department 10. Characteristics of Service
Operations
- Produced & consumed at same time
- High customer interaction
- Quality is difficult to measure
- Site of facility is important for customer contact
- Often difficult to automate
11. Why Study OM?
- OM is one of three major functions (marketing, finance, and
operations) of any organization
- OM plays a crucial role in managing organizations effectively
and efficiently, improving quality, increasing productivity, and
reducing costs
- We want (and need) to know how goods and services are produced
and managed
- OM will help you to better understand and manage other
functions in organizations (marketing, finance, accounting, sales,
human resources, purchasing, etc.)
12. The Role of OM during Business Turbulence 13. The Hard Rock
Cafe
-
- Now 110 restaurants in over 40 countries
- Creates value in the form of good food and entertainment
- 3,500 +custom meals per day
- How does an item get on the menu?
- Role of the Operations Manager
14. Top Managements Goal
- Design new product quickly
- Achieve sustainable competitive advantages
15. Customers Requirements
- Lead time (responsiveness)
- What can a firm get after satisfying customers needs?
16. Business Mission and Operations Strategy
- Operations strategy is derived from the organization
mission.
- Mission - where you are going
- Provides boundaries & focus for a companys vision and
represents the direction for the whole company to satisfy
customer's needs
- Strategy - how you can get there
- Action plans to achieve the mission
- Company has overall business strategies and each functional
area also has strategies
17. Sample Mission - Merck
- The mission of Merck is to provide society with superior
products and services - innovations and solutions that improve the
quality of life and satisfy customer needs - to provide employees
with meaningful work and advancement opportunities and investors
with a superior rate of return
18. Mission of the Hard Rock Caf
- To spread the spirit of Rock n Roll by delivering an
exceptional entertainment and dining experience.We are committed to
being an important, contributing member of our community and
offering the Hard Rock family a fun, healthy, and nurturing work
environment while ensuring our long-term success.
19. Strategy Process Marketing Decisions Operations Decisions
Fin./Acct. Decisions Company Mission Business Strategy Functional
Area Functional Area Strategies 20. Webvans Mission and Operations
Strategies
- Mission: Change the way how people do grocery shopping in the
Internet era
- Operations strategies: introduce the service to 200 cities in
30 states within 3 years.
- In retrospect : Understand how to evaluate the consistency
between a companys mission and operations strategies is
important
21. Notes on Business Mission and Operations Strategy
- Mission communicates and impress potential shareholders
- Mission presents vision to employees in different
functions
- Mission provides the direction in which the strategy is
designed to achieve.
- Strategies are specific and executable plans usually develop
and known only by senior managers
- Operations strategies usually tie to the 10 OM decisions
- Similar strategy can be applied to different missions
22. Concepts for Developing Operations Strategies
- Exploit external opportunities and internal strengths
- Neutralize threat from competitors and avoid existing
weaknesses
- Three concepts or options:
- Differentiation(unique or better)
- Quick response(flexible or responsive)
23. Advantage through Operations
- Competing on differentiation
- Uniqueness - can go beyond both the physical characteristics
and service attributes to encompass everything that impacts
customers perception of value. A company can differentiate from
other competitors on the basis of superb quality, new products or
services, product/service features, product service, etc.
24. Advantage through Operations
- Maximum value as defined by customer with the lowest possible
cost
- Does not imply low value or low quality
- Competing on quick, flexible, and reliable Response
- Requires institutionalization within firm of ability to
respond
25. Combination of Three Concepts
- Sound OM strategies usually include more than one strategic
concept or option.
- The key is to make sure the secondary concept in the strategies
will not conflict with the primary concept
- AchieveDifferentiation ,Low Cost , andResponsevia 10 OM
decisions
26. Ten Critical Decisions
- Service, product design..
- Process, capacity design..
- Human resources, job design..
Ch. 5 Ch. 6, 6S Ch. 7, 7S Ch. 8 Ch. 9 Ch. 10, 10S Ch. 11,11s Ch.
12, 14, 16 Ch. 3, 13, 15 Ch. 17 27. Strategic Decisions in OM
(Designing Operations)
- Design of Goods and Services(from new aircraft to wrapping
paper for Taco)
- What product or service should we offer?
- How to design these products and services?
- Who is responsible for quality?
- How do we define and improve quality?
- Design Process and Capacity
- What processes will the products require and in what
order?
- What equipment and technology is best for the processes?
28. Strategic Decisions in OM (Designing Operations)
- Where should we put the facilities (in a global view)
- On what criteria should we base for location decision
- Layout Design(e.g. semiconductor fab)
- How should we arrange the facility?
- How large a facility is required?
- Human Resources and Job Design(e.g. design course)
- How do we provide a reasonable work environment?
- How much can we expect our employees to produce?
29. Strategic Decisions in OM (Managing Operations)
- Should we make or buy this item?
- Who are our good suppliers and how many should we have? How to
develop and deliver a product on-time?
- Inventory, Material Requirements Planning, Just-in-Time
- How much inventory of each item should we have?
- When do we re-order? Whats the tradeoffs?
- What is the best inventory schedule?
30. Strategic Decisions in OM (Managing Operations)
- Immediate, short term, and master scheduling
- How many employees do we need to schedule on a daily
basis?
- What is best way to complete a job or project?
- What is the shortest time and lowest cost to accomplish a job?
(e.g. staff scheduling for check in counters)
- Maintenance(machine and other resources)
- Who is responsible for maintenance?
- How to organize, schedule, and control maintenance?
31. Jobs in Operations Management
- Facilities/space utilization
- Strategic issues (e.g. technology selection)
- Productivity improvement (e.g. Six Sigma)
32. Significant Events in Operations Management 33. The Heritage
ofOperations Management Division of labor (Adam Smith 1776 and
Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific
Management (Taylor 1881) Coordinated assembly line
(Ford/Sorenson/Avery 1913) Gantt charts (Gantt 1916) Motion study
(Frank and Lillian Gilbreth 1922 Quality control (Shewhart 1924;
Deming 1950) Computer (Atanasoff 1938) CPM/PERT (DuPont 1957) 34.
The Heritage of Operations Management - Continued Material
requirements planning (Orlicky 1960) Computer aided design (CAD
1970) Flexible manufacturing system (FMS 1975) Baldrige Quality
Awards (1980) Computer integrated manufacturing (1990)
Globalization(1992) Internet (1995) 35.
- LEVEL MANUFACTURING SERVICE
-
___________________________________________________________________
- Upper V.P. of Manufacturing V.P. of Operations
(airline)Regional Manager of Chief Administrator (hospital)
- Middle Plant Manager Store Manager
- Program Manager Facilities Manager (warehouse)
- Operations Manager Branch Manager (bank)
- Lower Department Supervisor Operations Manager (bank)Foreman
Department Supervisor
- Team Leader (insurance company)
- Staff Production Scheduler Procedures Analyst
- Inventory Analyst Purchasing Agent
- Quality Specialist Inspector
- Materials Specialist Customer Service Rep.
36. Productivity Measurement
- Measure of process improvement
- Represents output relative to input
- Overall productivity (efficiency):
- Productivity growth improves standards of living
- Productivity increased in U.S. at a 2.5% annual rate between
1994 and 2004.
37. Reasons for Operating Globally
- Reduce costs (labor, taxes, tariffs, etc.)
- Reduce risks (foreign exchange, etc.)
- Provide better goods and services
- Learn to improve operations
- Attract and retain global talent
38. Examples of Global Operations
- Boeing - both its sales and subsystem production are
world-wide
- Benetton - moves inventory to stores around the world faster
than its competitors
- Sony - purchases components from suppliers in Thailand,
Malaysia, etc.
- General Motors - simultaneously building four similar plants in
Argentine, Poland, China, and Thailand so that they can learn from
each other and drive down cost while increasing quality
39. Evolution of Komatsus Global Strategy
- 1960s use international licensing to augment product line and
improve quality
- 1970s build export market, reduce cost, and set global service
departments
- 1980s start to manufacture outside of Japan due to strong
yen
- 1990s improve quality, reduce cost, use new technologies
- 2000s use joint ventures to extend global OM
40. Issues in Global Service Operations
- For example, airline, fast food chain, banking, accounting,
consulting, semiconductor foundry
- Capacity planning : due to difficult to set inventory
- Location planning : global presence but under limited
resources
- Facility design and layout : to incorporate market or culture
differences
- Scheduling : lead time and time difference increase
complexity
41. Trade and Tariffs
- Maquiladoras - Mexican factories located along the U.S.-Mexico
border that receive preferential tariff treatment
- WTO World trade Organization has helped reduce tariffs from 40%
in 1940 to 3% in 1995
- NAFTA - a free trade agreement between Canada, Mexico, and the
United States
- GATT, APEC, SEATO, MERCOSUR -international treaties that help
promote world trade by lowering barriers to the free flow of goods
across borders
42. Global Integration of Operations
- International strategy - engages in cross-border
transactions
- Multidomestic strategy- has extensive involvement in
international business, owning or controlling facilities in more
than one country
- Global strategy - integrates operations from different
countries, and views world as a single marketplace
- Transnational strategy - seeks to combine the benefits of
global scale efficiencies with the benefits of local
responsiveness
43. Considerations in Global Operations
- Integrate different technology and expertise
- Overcome social and cultural differences that affect customers
needs
- Use modularized design to defer the differentiation
- Global process design and technology
- Information technology enables management of integrated,
globally dispersed operation
- Production, purchasing, human resource, and financial
planning
44. Considerations in Global Operations
- Global factory location analysis (long term planning)
- Cost advantage and risk control (e.g. exchange rates)
- Incentives or import restrictions from foreign government
- Productivity of workers and product liability laws
- Availability of raw materials and reduces time-to-market
- Impact of culture and ethics
- Concerns about globalization including third-world debt,
environment damage, child labor, sweat factory, and so on
- Underlying question: Who will benefit from globalization?
45. Minit-Lube Inc
- 1. What constitutes the mission of Minit-Lube.
- 2. How does the Minit-Lube operations strategy provide
competitive advantage? Answer this question by evaluating how
Minit-Lubes traditional competitors perform the 10 decisions of
operations management vs. how Minute-Lube performs them.
- 3. Is it likely that Minit-Lube has increased productivity over
their more traditional competitors? Why? How would you measure
productivity in this industry?
46. Issues in Minit-Lube Inc
- Type of product: goods vs. service
- Whats Minit-lubes operations strategy?
- How to create or maintain the sustainable advantage through the
10 OM decisions
- What are the competitors possible missions, advantages, and
strategies/decisions
47. Competition Analysis
- Who are direct competitors? Who are potential entrants?
- Identify all competitors competitive advantages
- Analyze competitors operations strategies and 10 OM
decisions
- Verify that Minit-Lubes strategies are sustainable and can
support its mission
48. Strength and Opportunity vs. Weakness and Threat
- Economies of scale (achieved by franchise chain) on training
and material purchasing
- Lower overhead investment than traditional garages
- Clean, friendly, and unified product image
- Imitation due to low entry barrier
- Inventory and technique challenges for serving multi-brands and
models
- Limits (e.g.warrantee) imposed by dealer
- Operations are run by individual participant
- Certain parts are controlled by competitors
49. Mission Statement and Potential Competitive Advantage
- For a franchise chain, it is important to use mission statement
to communicate parent companys vision and to highlight the
direction for the whole organization
- Minit-Lube may need to compete on all three dimensions but with
different weights ( e.g. differentiation > response/flexibility
> cost )
50. 10 Strategic Operations Decisions in Minit-Lube Inc
- Goods and service design : define product line based on the
competitive advantage
- Quality : set detail operations guide lines and standards to
ensure the customers satisfaction
- Process and capacity design : select technology to optimize
efficiency and cost; arrange resources and capital commitments with
participants
- Layout design : to maximize throughput, minimize customers
waiting, remove bottleneck
- Location selection : convenience vs. rent
51. 10 Strategic Operations Decisions in Minit-Lube Inc
- Human resources and job design : develop training and
evaluation system to unify the product quality delivered by each
franchise
- Supply chain management : make or buy decisions; focus on
quality and JIT
- Inventory : different policies for common parts and genuine
parts
- Scheduling : identify demand patterns to optimize human
resource and facility utilization
- Maintenance : for equipment and environment
52. Mission, Strategy and Ten OM Decisions in Kaiser Permanents
New Facility
- Define Kaisers overall strategy when establish new
facility
- Develop and address 10 OM decision for Kaisers decision
makers
53. 10 Strategic OM Decisions in Kaisers New Hospital
- Process and capacity design
- Human resources and job design
