Competitive Priorities

Cost 1. Low-cost operations

Quality 2. Top quality

3. Consistent quality

Time 4. Delivery speed

5. On-time delivery

6. Development speed

Flexibility 7. Customization

8. Variety

9. Volume flexibility

Strategic GapsPRIORITIES GAPS

1.

2.

3.

4.

Recommendations

Key Concepts in Operations Management

A Systematic Approach to Process Analysis

Identify Opportunity

1

DefineScope

2

DocumentProcess

3

Evaluate Performance

4

RedesignProcess

5

ImplementChanges

6

Figure 3.3Figure 3.3

Customer-Contact Model for Processes

Front office

Hybrid office

Back office

(1)(1) (2)(2) (3)(3)High interaction withHigh interaction with Some interaction withSome interaction with Low interaction withLow interaction withcustomers, highlycustomers, highly customers, standardcustomers, standard customers, standardizedcustomers, standardizedcustomized servicecustomized service services with some optionsservices with some options servicesservices

ProcessProcessCharacteristicsCharacteristics

(1)(1)Jumbled flows,Jumbled flows,complex work withcomplex work withmany exceptionsmany exceptions

(2)(2)Flexible flows withFlexible flows withsome dominantsome dominantpaths, moderate jobpaths, moderate jobcomplexity withcomplexity withsome exceptionssome exceptions

(3)(3)Line flows, routineLine flows, routinework easilywork easilyunderstood byunderstood byemployeesemployees

Le

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Less Customer Contact and CustomizationLess Customer Contact and Customization

Service PackageService Package

Figure 3.6Figure 3.6

Product-Process Matrix for Processes

(1)(1) (2)(2) (3)(3) (4)(4) (5)(5)One of a kindOne of a kind Low volume,Low volume, MultipleMultiple Few majorFew major High volumeHigh volumeproducts, madeproducts, made lowlow productsproducts products,products, highhighto customer to customer standardizationstandardization moderate moderate higherhigher standardization,standardization,orderorder volumevolume volumevolume commoditycommodity

productsproducts

ProcessProcessCharacteristicsCharacteristics

(1)(1)Complex and Complex and highly customized highly customized process, unique process, unique sequence of taskssequence of tasks

(2)(2)Jumbled flows, Jumbled flows, complex work with complex work with many exceptionsmany exceptions

(3)(3)Disconnected line Disconnected line flows, moderately flows, moderately complex workcomplex work

(4)(4)Connected line, Connected line, routine workroutine work

(5)(5)Continuous Continuous flows, highly flows, highly repetitive workrepetitive workL

es

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Less Customization and Higher VolumeLess Customization and Higher Volume

Product DesignProduct Design

Continuousprocess

Projectprocess

Lineprocess

Batchprocess

Jobprocess

Waiting Line ModelsWaiting Line ModelsCustomer population

Service system

Served customers

Waiting line

Priority rule

Service facilities

Figure C.1

Operating CharacteristicsOperating Characteristics

Line lengthLine length

Number of customers in systemNumber of customers in system

Waiting time in lineWaiting time in line

Total time in systemTotal time in system

Service facility utilizationService facility utilization

Decision AreasDecision Areas

Arrival rates Number of service

facilities Number of phases Number of servers

per facility Server efficiency Priority rule Service facility

arrangement

Applying the TheoryApplying the Theory of Constraints of Constraints

1. Identify the bottlenecks.

2. Optimize the schedule of the bottleneck.

3. Schedule all other resources to support the

bottleneck.

4. If the bottleneck is still restrictive, increase its capacity.

5. Once the bottleneck has been relieved, check for other bottlenecks.

A15

B120

B230

B315

C20

D10

How Can I Tell Which Markets Will How Can I Tell Which Markets Will Be Most Profitable?Be Most Profitable?

Contribution per hour

c = contribution to profits and overhead per unit

s = changeover time (hrs.)

p = productivity rate (units per hour)

T = total resource hours required for customer order

= contribution per hourHC

cp( s)H

TC

T

E

X

T

E

R

N

A

L

S

U

P

P

L

I

E

R

S

E

X

T

E

R

N

A

L

C

U

S

T

O

M

E

R

S

Support Processes Support Processes

Business- to- Business (B2B)

Customer Relationship

Process

Supplier Relationship

Process

Order -Fulfillment

Process

Supplier Relationship

Process

Order -Fulfillment

Process

Business-to-Customer

(B2C)

Customer Relationship

Process

First-Tier Supplier Service/Product Provider

New Service/Product

Development Process

New Service/Product

Development Process

External Value-Chain LinkagesExternal Value-Chain Linkages

0

2,000

4,000

6,000

8,000

10,000

SU

/Week

Consumer

CustomerK-C

Package Supplier

VariabilityVariability

Facial TissueFacial Tissue Facial TissueFacial Tissue

Inventory Inventory MeasuresMeasures

Average inventory = $2 millionAverage inventory = $2 millionCost of goods sold = $10 millionCost of goods sold = $10 million52 business weeks per year52 business weeks per year

Weeks of supply = = 10.4 weeksWeeks of supply = = 10.4 weeks$2 million$2 million

($10 million)/(52 weeks)($10 million)/(52 weeks)

Inventory turns = = 5 turns/yearInventory turns = = 5 turns/year$10 million$10 million

$2 million$2 million

Example 9.1Example 9.1

Environments & Design Features

Design Factors Efficient Supply Chains Responsive Supply Chains

Environment Factors Efficient Supply Chains Responsive Supply Chains

The Shaping of Modern Value Chains

Ten Forces that Flattened the World

6. Offshoring

7. Supply Chaining

8. In-Sourcing

9. In-Forming

10. The Steroids

1. Berlin Wall and Windows Operating System

2. Web Browsers

3. Work Flow Software

4. Open Sourcing

5. Outsourcing