OPNS 430 Professor Wuqin Lin. Lin/Operations/Strategy2 Class Material + Grading Course Pack 1 (Cases & Readings) Course Pack 2 (Slides) The Goal Managing

OPNS 430

Professor Wuqin Lin

Lin/Operations/Strategy 2

Class Material + Grading

• Course Pack 1 (Cases & Readings)

• Course Pack 2 (Slides)

• The Goal

• Managing Business Process Flows (MBPF)

• The Course Web-Page

Group Assignments 20%, Midterm 30%, Final 40%, Class Participation 10%


Topics – 6 Modules

Module 1 : Operations Strategy (Shouldice, Wriston)

Module 2 : Process Analysis (CRU-Pizza Pazza, NCC)

Module 3 : Lean Operations (Toyota)

Module 4 : Supply Chain Management (Palu Gear)

Module 5 : Services (The BAT case)

Module 6 : Quality (Quality Wireless, FlyRock)


Introduction Goals and Key Paradigms of Course

» Strategic role of Ops» Process view of Ops

A Strategic Framework for Ops» Strategy: Product attributes and the Competitive Product Space» Ops: Capabilities and Processes

Aligning strategy and operations:» Focus» Relationship between process choice and strategy» Shouldice Hospital» Wriston Manufacturing

Introduction & Strategy Module


What do you mean by “Operations”?


What Is Meant by “Operations”?

“New York-based Merrill, the world's largest brokerage firm and a major investment bank, has been overhauling operations …”

“Microsoft splits into five groups in reorganization”

– Microsoft announced a long-awaited reorganization, dividing the company to five major groups and naming two veteran executives to head its online operations.


Goals of this course

1. Introduction to operations as a managerial integration function

2. Evaluation and Improvement

We will adopt two paradigms


Key Paradigm of Course:1. The Strategic Role of Ops

“A company’s operations function is

either a competitive weapon

or

a corporate millstone.

It is seldom neutral.” [Skinner ’69]


The Strategic Role of Ops…

Most operational decisions have strategic impact– IT at Walmart

Strategic decisions impact operations – FedEx-USPS


Key Principle of Course:2. The Process View of Ops

Chicago Tribune reported: By rethinking the IBM Austin assembly plant and introducing cells, – distance traveled by a card was cut from 1.5 miles to 200

yards

– floor space was reduced to half

– production tripled with about the same number of workers.

[Chicago Tribune, July 1992.]


1. What is a Process?


Operations & the Process View:What is a Process?

Inputs OutputsGoods

Services

Labor & Capital

Informationstructure

Network ofActivities and Buffers

Flow units(customers, data, material, cash, etc.)

Resources

ProcessManagement


Advantages of Adopting a Process View of Organizations Properties:

– Applies to any organization

» Service operations (health care), manufacturing operations

– Applies at any level

» 1 activity, 1 clinical service group, 1 hospital, 1 health care supply chain

– Is always “customer aware” and focused on outcomes

Key Property: focus on flows rather than snapshots


What is Operations Management?

Management of business processes

How to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs.– What is appropriate?


2. What is a “good” Process?


What defines a “good process”?Performance: Financial Measures

Absolute measures: – revenues, costs, operating income, net income

– Net Present Value (NPV) =

Relative measures:– ROI, ROE

– ROA =

Survival measure:– cash flow

Assets Total Average

TaxEBIT

T

tt

t

r

C

0 1


What defines a “good process”? All organizations compete on delivered value

Example: patient value priorities for– Emergency care

Delivered value of process = benefit to process customers – total process

cost

Benefit driven by customer value

Variety V(flexibility)

Quality Q: •of product or outcome•of service

Time T:•Rapid, reliable delivery•New product development

Price p (Cost)


A Strategic Framework for Process Design and Improvement:Three questions

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

» What is the value proposition to our customers?

Rank (p, T, Q, V)

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

» Which competencies must ops develop? Rank (c, T, Q, Flex)

3. Given needed competencies, how should operations processes be structured to develop competencies that support strategy? Process choice (structure) and management

competitivestrategy

Processstructure & mgt

operationsstrategy


Representation of Strategy:Current Position and Strategic Directions of Movement in the competitive product space

Price

Responsiveness

B

A

High Low


Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current positions in an industry

Responsiveness

operations frontier

A

B

C

PriceHigh Low


Shouldice Hospital


Price

Variety in care

B

AHigh Low

Question 1: Representation of Strategy:Strategic Position in customer value space


Question 2: Need competencies to deliver value proposition

Customer valueproposition

Price

Variety

Shouldice

High Low

Cost

Flexibility

B

AHigh Low

Needed Process Competencies


Question 3: what is the best process design that has the right process competencies to deliver customer value proposition?

A focused process attempts to deliver one specific and narrow customer value proposition (i.e., its priority ranking is clear and constant for all patients)

– It is optimized to deliver the needed competencies for one narrow patient segment– Focus does not imply standardization: ER is focused on providing timeliness and flexibility to patient

needing emergency care

Cost efficiency

Flexibility(responsiveness)

World-classEmergency Room

World-classspecialty non-emergencyShouldice Hospital

One generalhospital

Productivity frontier = current state of best

practice

Needed competencies for a given patient

type/segment


Wriston Manufacturing


Total Burden Rates (total overhead cost / direct labor cost)

01234567

Free capacity and Throughput

$0

$50

$100

$150

$200

Sandusky,OH

Essex,Canada

Detroit, MI

Saginaw,MI

Lima, OH

Lebanon,PA

Tiffin, OH

Fremont,OH

Maysville,KY

Sandusky,OH

Essex,Canada

Detroit, MI

Saginaw,MI

Lima, OH

Lebanon,PA

Tiffin, OH

Fremont,OH

Maysville,KY

Wriston’s HED Division Plant NetworkExhibit 2A


Classification of Processesby process architecture

Project

Job Shop

Batch

Line Flow

Continuous Flow

Job Shop

Flow Shop


Characteristics of Processes:Comparison of Process Types

Type of Process

Product Volume

Specialized Equipment

Product Variety

Machine Setup

Frequency

Labor Skills

Variable Cost

Job Shop

Flow Shop

Q: what are the typical managerial challenges in JS vs FS?


ProcessFlexibility

Jumbled Flow.Process segmentsloosely linked.

Disconnected LineFlow/Jumbled Flowbut a dominant flowexists.

JOB SHOP

(Commercial Printer,Architecture firm)

BATCH

(Heavy Equipment,Auto Repair)

LINE FLOWS

(Auto Assembly,Car lubrication shop)

CONTINUOUSFLOW

(Oil Refinery)

ProductVariety

LowLow Standardization

One of a kindLow Volume

Many ProductsFew Major Products

High volume

High StandardizationCommodity Products

Connected LineFlow (assembly line)

Continuous, automated,rigid line flow.Process segments tightlylinked.

Oppor

tunity

Costs

Out-of

-poc

ket

Costs

High

Low

High

Matching Process Choice with Strategy:Product-Process Matrix


Learning Objectives Operations & Strategy

What is operations?

What makes a good operations?

Two key paradigms of course

Link between business strategy, operations strategy, and operations structure

– Product Attributes / Operational Capabilities/Operations structure

– Strategy vs. Operational Effectiveness

– Trade-offs:

– Operational Focus

– Process Classification and Relationship with strategy

Documents

OPNS 430 Professor Wuqin Lin. Lin/Operations/Strategy2 Class Material + Grading Course Pack 1 (Cases & Readings) Course Pack 2 (Slides) The Goal Managing