01- Competing With Operations (1)

TAPMI, Term 2, B2013-15, Oct-Dec 2013 Prof. Kedar P. Joshi

Operations Management -1 Competing With Operations

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OPERATIONS MANAGEMENT -1

Term 2, B2013-15, Oct-Dec 2013



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Session No.

Topic Pre mid- Coverage Pre Session Readings Case/ Operations Tour and/or other Special Topic

1 Competing with Operations

Process View of Operations Management Nested Processes

Service and Manufacturing Processes

Core Processes and Support Processes

Operations Strategy and Link to Corporate Strategy

Competitive Priorities and Capabilities

Operations Strategy as a Pattern of Decisions

Productivity

Challenges in Operations Management

Chapter 1 of Text Book

2 & 3 Process Strategy

Process Strategy Across the Organization

Process Strategy Decisions

Process Structure in Services

Process Structure in Manufacturing

Production and Inventory Strategies

Layout Customer Involvement: Advantages & Disadvantages

Resource Flexibility

Capital Intensity

Economic Scope

Strategic Fit for Manufacturing processes & Service processes

Strategies for Change


Case: Chad’s Creative Concepts, p30-31 of Textbook

(odd group) Case: Custom Molds, Inc., p119-120 of text book

(even group) 6 Videos:

4 & 5 Process Analysis 1

Process Analysis across the organization

A Systematic Approach (six steps) Flow Charts, Service Blueprints

A note on Process Analysis (Abridged)


Case*: Stonehaven, Inc. (Harvard: 9-696-048) 2 Videos: Case related (batch shop)



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Session No.

Topic Pre mid- Coverage Pre Session Readings

Case/ Operations Tour and/or other Special Topic

6 & 7 Process Analysis 2

Measuring Output Rates (Work measurement – Time Study Method, Work Sampling) Learning Curve Analysis (optional, if time permits) Evaluating Performance (Checklists, Scatter Diagrams, Pareto Chart, Cause-and-Effect Diagram)

Supplement H & G from Krajewski resources

8 & 9

Constraint Management

The Theory of Constraints

Key Principles of the TOC

How the Firm’s Operational measures relate to its Financial measures (optional) Identification and Management of bottlenecks in service processes & manufacturing processes

Line Balancing


Case*: Don’t Bother Me, I Can’t Cope

3 Videos: Case related (line shops)

10 & 11 Capacity Planning

Planning Capacity Across the organization

Measures of Capacity and Utilization

Economies of Scale

Capacity Timing and Sizing Strategies

A Systematic Approach to Long-term capacity decisions


Case: Natural Blends, Inc. (Harvard: 9-698-012) 2 Videos: Case related (flow shop)



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Session No.

Topic Post mid- Coverage Pre Session Readings

Case/ Operations Tour and/or other Special Topic

12 & 13 Quality and Performance

Quality and Performance Across the organization

Costs of Quality: (Prevention, Appraisal, Internal and External) Total Quality Management Six Sigma and DMAIC process

Acceptance Sampling (optional) Control Charts for Variables

Control Charts for Attributes

Process Capability

International Quality Documentation Standards


Text book exercises

14 & 15 Project Management

Defining and Organizing Projects

Selecting the Project Manager and Organizational Structures for projects

Work Breakdown Structures

Diagramming the Network (PERT) CPM- Cost/Time Tradeoffs) (optional) Assessing Risks in Projects


Text book exercises

16 Wrap up

Buffer session for Assignment discussion, extra discussions, or for spill overs.



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Quiz 1Quiz 2

GroupAssignment 1 Mid-term

Examination GroupAssignment 2 Quiz 3

End-termExamination

10% 5% 10%

25%

10% 10%

30%

10% 15% 25%

50% 60% 70%

100%

Evaluation Scheme

Weightage cumulative



Prescribed Text Book: Krajewski, Lee J., Ritzman, Larry P., Malhotra, Manoj K., and Srivastava, Samir K. (2011/latest), Operations Management – Processes and Supply Chains, (9th/Latest Edition), Indian Subcontinent Adaptation, Pearson Education Inc., New Delhi.

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• Please do all the pre reads regularly and thoroughly, and be ahead of the class.

• Be an active listener in the class and be an active participant, and contribute. Both are important for becoming effective managers and leaders. If lectures are missed, a large amount of learning is lost. Hence please attend all lectures.

• Read business papers and journals regularly to identify and track Operations Management Trends

• No Mobile phones are allowed inside the classroom.



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Competing With Operations

OPERATIONS MANAGEMENT -1

Term 2, B2013-15, Oct-Dec 2013



Agenda

• Process View of Operations Management

• Nested Processes

• Service and Manufacturing Processes

• Core Processes and Support Processes

• Operations Strategy and Link to Corporate Strategy

• Competitive Priorities and Capabilities

• Operations Strategy as a Pattern of Decisions

• Productivity

• Challenges in Operations Management

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10

Organizational Functions

Marketing Gets customers

Operations creates product or service

Finance/Accounting Obtains funds

Tracks money



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Options for Increasing Contribution

Marketing Option Finance & Accounting Option

OM Option

Current Sales Revenue : +50% Finance Costs: -50% Production Costs: -20%

Sales $100,000 $150,000 $100,000 $100,000

Cost of Goods Sold -80,000 -120,000 -80,000 -64,000

Gross Margin 20,000 30,000 20,000 36,000

Finance Costs -6,000 -6,000 -3,000 -6,000

Net Margin

14,000 24,000 17,000 30,000

Taxes @ 25% -3,500 -6,000 -4,250 -7,500

Contribution 10,500 18,000 12,750 22,500



Changing Business Environment

Liberalization & Entry of Competitive Firms

Large Scale Product Substitution by Large Variety and Small Volumes

Service Integration with Manufacturing

Disinvestments in Public sectors

New Parameters of Competition

Pervasive Influence of Technology

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Challenges for the Indian Industry Global Competition &

Export Orientation

Increased Technological advancements

Shorter Product

Life Cycles

Informed Consumers

Market Share

Flexibility, Time

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Because of the changed operating environment most of yesterday’s ideas may no longer relevant !



A Situation of Competitive Advantage

Pizza Hut traditionally had eat-in and take-out channels. Domino’s entered the market with delivery and take-out channels, providing more convenience at a lower price.

Pizza Hut was forced to respond with a delivery channel. Correspondingly, to stay in the mind space of their customers, Domino’s also opened eat-in restaurants at many locations.



Operations Management

• T h e s y s t e m a t i c d e s i g n , d i r e c t i o n , a n d c o n t r o l o f p r o c e s s e s t h a t t r a n s f o r m i n p u t s i n t o s e r v i c e s a n d p r o d u c t s f o r i n t e r n a l a n d c u s t o m e r s



Operations Management

is

the process of managing resources to deliver

Goods & Services to Customers



Processes and operations

1

2

3

4

5

Inputs

• Workers

• Managers

• Equipment

• Facilities

• Materials

• Land

• Energy

Outputs

• Goods

• Services

A Process View External environment

Information on performance

Internal and external customers



Some questions…

• Can we store 3 seats from an 8 a.m. Mangalore – Delhi flight fro use tomorrow?

• Can beauty parlor provide you service at 10 am while you are attending a class in college?

• Can you touch, feel, count and assess in a very objective fashion a music concert you attended?

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A Process View

Figure 1.3

• 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



The Supply Chain View Support Processes

Exte

rnal

su

pp

liers

Extern

al custo

me

rs

Supplier relationship process

New service/ product development

Order fulfillment process

Customer relationship management



The Supply Chain View • Core processes are sets of activities that deliver value to

external customers

1. Supplier relationship process

2. New service/product development process

3. Order fulfillment process

4. Customer relationship process

• Support processes provide vital resources and inputs to the core processes



Support Processes TABLE 1.1 EXAMPLES OF SUPPORT PROCESSES

Capital acquisition The provision of financial resources for the organization to do its work and to execute its strategy

Budgeting The process of deciding how funds will be allocated over a period of time

Recruitment and hiring The acquisition of people to do the work of the organization

Evaluation and compensation The assessment and payment of people for the work and value they provide to the company

Human resource support and development The preparation of people for their current jobs and future skills and knowledge needs

Regulatory compliance The processes that ensure that the company is meeting all laws and legal obligations

Information systems The movement and processing of data and information to expedite business operations and decisions

Enterprise and functional management The systems and activities that provide strategic direction and ensure effective execution of the work of the business



Operations Strategy

• Specifies the means by which operations implements corporate strategy and helps build a customer-driven firm

• Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions



Operations Strategy

Figure 1.5

Corporate Strategy

• Environmental scanning

• Core competencies

• Core processes

• Global strategies

Market Analysis

• Market segmentation

• Needs assessment

Competitive Priorities

• Cost

• Quality

• Time

• Flexibility

Operations Strategy

Decisions

• Managing processes

• Managing supply chains

Competitive Capabilities

• Current

• Needed

• Planned

Performance

Gap?

No

Yes

New Service/

Product Development

• Design

• Analysis

• Development

• Full launch



Competitive Priorities TABLE 1.2 | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES

COST Definition Process Considerations Example

1. Low-cost operations

Delivering a service or a product at the lowest possible cost

Processes must be designed and operated to make them efficient

Costco

QUALITY

2. Top quality Delivering an outstanding service or product

May require a high level of customer contact and may require superior product features

Ferrari

3. 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

4. Delivery speed Quickly filling a customer’s order

Design processes to reduce lead time Dell

5. On-time delivery Meeting delivery-time promises Planning processes to increase percent of customer orders shipped when promised

United Parcel Service (UPS)

6. Development speed

Quickly introducing a new science or a product

Cross-functional integration and involvement of critical external suppliers

Li & Fung



Competitive Priorities TABLE 1.2 | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES

FLEXIBILITY Definition Process Considerations Example

7. Customization Satisfying the unique needs of each customer by changing service or products designs

Low volume, close customer contact, and easily reconfigured

Ritz Carlton

8. Variety Handling a wide assortment of services or products efficiently

Capable of larger volumes than processes supporting customization

Amazon.com

9. Volume flexibility Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand

Processes must be designed for excess capacity

The United States Postal Service (USPS)



Order Winners and Qualifiers Sa

les

(Rs)

Achievement of competitive priority

Low High

Order Winner

Figure 1.6

Sale

s (R

s)

Achievement of competitive priority

Low High

Order Qualifier

Threshold



Operations Strategy TABLE 1.3 OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS

Competitive Priority Measure Capability Gap Action

Low-cost operations Cost per billing statement

$0.0813 Target is $0.06 Eliminate microfilming and storage of billing statements

Weekly postage

$17,000 Target is $14,000

Develop Web-base process for posting bills

Consistent quality Percent errors in bill information

0.90% Acceptable No action

Percent errors in posting payments

0.74% Acceptable No action

Delivery speed Lead time to process merchant payments

48 hours Acceptable No action

Volume flexibility Utilization 98% Too high to support rapid increase in volumes

Acquire temporary employees

Improve work methods



Trends in Operations Management

• Productivity improvement

• Global competition

• Ethical, workforce Diversity and Environmental issues



Problem 1 Student tuition at Boehring University is $150 per semester credit hour. The state supplements school revenue by $100 per semester credit hour. Average class size for a typical 3-credit course is 50 students. Labor costs are $4,000 per class, material costs are $20 per student per class, and overhead costs are $25,000 per class.

a. What is the multifactor productivity ratio for this course process?

b. If instructors work an average of 14 hours per week for 16 weeks for each 3-credit class of 50 students, what is the labor productivity ratio?



Solved Problem 1 SOLUTION a. Multifactor productivity is the ratio of the value of output to the value of input resources.

Value of output = 50 student

class

$150 tuition + $100 state support

credit hour

3 credit hours

student

Value of inputs = Labor + Materials + Overhead

Multifactor productivity = = 1.25 Output

Input

= $37,500/class

= $4,000 + ($20/student 50 students/class) + $25,000

= $30,000/class



Solved Problem 1 SOLUTION b. Labor productivity is the ratio of the value of output to labor hours. The

value of output is the same as in part (a), or $37,500, so

Labor hours of input = 14 hours

week

16 weeks

class

Labor productivity = = $37,500/class

224 hours/class

Output

Input

= 224 hours/class

= $167.41/hour



Solved Problem 2

Natalie Attire makes fashionable garments. During a particular week employees worked 360 hours to produce a batch of 132 garments, of which 52 were “seconds” (meaning that they were flawed). Seconds are sold for $90 each at Attire’s Factory Outlet Store. The remaining 80 garments are sold to retail distribution at $200 each. What is the labor productivity ratio of this manufacturing process?



Solved Problem 2

SOLUTION

Labor productivity = = $20,680

360 hours

Output

Input

Labor hours of input = 360 hours

Value of output = (52 defective 90/defective)

+ (80 garments 200/garment)

= $20,680

= $57.44 in sales per hour

Documents

01- Competing With Operations (1)