Intro to Operations Mgmt

8/3/2019 Intro to Operations Mgmt

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Ashok Kumar

Discover the Value

Conceptual

Contemporary

Experiential

Learning

Operations Management

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Todays class you will learn..

Role of Operations Strategy

Developing an Operations Strategy

Linking it to Practice Competitive priorities of Operations function

Strategic Role of Technology

Home Assignment

Internet research and Case let

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Inputs to a Business strategy



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Business /Functional Strategy



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Importance of Operations Strategy

Essential differences between operational

efficiency and strategy:

Operational efficiency is performing tasks well,

even better than competitors

Strategy is a plan for competing in the

marketplace

Operations strategy ensures all tasksperformed are the right tasks

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Operations Strategy Designing the

Operations Function

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OMs Contribution to Strategy

Product

Quality

Process

Location

Layout

Human resource

Supply-chain

Inventory

Scheduling

Maintenance

FLEXIBILITYSonys constant innovationof new products....DesignHPs ability to followthe printer marketVolume

Southwest Airlines No-frills service....LOW COST

DELIVERYPizza Huts five-minuteguarantee at lunchtime......SpeedFederal Expresss absolutely,positively on time...Dependability

QUALITY

Motorolas automotive productsignition systems......ConformanceMotorolas pagers...Performance

IBMs after-sale serviceon mainframe computers....AFTER-SALE SERVICE

Fidelity Securitys broadline of mutual funds.BROAD PRODUCT LINE

Figure 2.4

Operations Specific Competitive

Decisions Examples Strategy Used Advantage

Response(Faster)

Costleadership(Cheaper)

Differentiation(Better)

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Process Design

Low Moderate HighVolume

High

Moderate

Low

VarietyofProducts

Process-focused

JOB SHOPS

(Print shop, emergencyroom, machine shop, fine

dining Repetitive (modular)

focusASSEMBLY LINE

(Cars, appliances,TVs, fast-foodrestaurants) Product focused

CONTINUOUS

(steel, beer, paper,bread, institutional

kitchen)

Mass Customization

Customization at highVolume

(Dell Computers PC)



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Operations Strategies for Two

Drug CompaniesBrand Name Drugs, Inc. Generic Drug Corp.

CompetitiveAdvantage

Product Differentiation Low Cost

ProductSelection andDesign

Heavy R&D; labs; focuson development in abroad range of drugcategories

Low R&D; focus ondevelopment of genericdrugs

Quality Major priority, exceedregulatory requirements

Meets regulatoryrequirements on acountry by countrybasis

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Process Product and modularprocess; longproduction runs inspecialized facilities;build capacity ahead of

demand

Process focused;general processes; jobshop approach, shortproduction runs; focuson high utilization

Location Still located in the citywhere it was founded

Recently moved to low-tax, low-labor-costenvironment



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Scheduling Centralized productionplanning

Many short-runproducts complicatescheduling

Layout Layout supportsautomated product-focused production

Layout supportsprocess-focused jobshop practices



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HumanResources

Hire the best;nationwide searches

Very experienced topexecutives; otherpersonnel paid belowindustry average

Supply Chain Long-term supplierrelationships Tends to purchasecompetitively to findbargains



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Inventory High finished goodsinventory to ensure alldemands are met

Process focus drives upwork-in-processinventory; finishedgoods inventory tendsto be low

Maintenance Highly trained staff;extensive partsinventory

Highly trained staff tomeet changing demand



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Strategic Options to Gain aCompetitive Advantage

28% - Operations Management

18% - Marketing/distribution

17% - Momentum/name recognition

16% - Quality/service

14% - Good management4% - Financial resources

3% - Other



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Elements of OperationsManagement Strategy

Low-cost product

Product-line breadth Technical superiority

Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to

consumers

Engineering research development Location Scheduling



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Strategy Development and

Implementation

Identify critical success factors

Build and staff the organization

Integrate OM with other activities

The operations managers job is to implement anOM strategy, provide competitive advantage, and

increase productivity



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Product Life Cycle

Best period toincrease marketshare

R&D engineering iscritical

Practical to changeprice or qualityimage

Strengthen niche

Poor time to changeimage, price, orquality

Competitive costsbecome criticalDefend marketposition

Cost controlcritical

Introduction Growth Maturity Decline

Comp

anyStrategy/I

ssues

Internet

Flat-screenmonitors

Sales

DVD

CD-ROM

Drive-throughrestaurants

Fax machines

3 1/2Floppydisks

Color printers

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Product Life Cycle

Product designand developmentcritical

Frequent product

and processdesign changes

Short productionruns

High productioncosts

Limited modelsAttention toquality

Introduction Growth Maturity Decline

OM

Strategy/Issu

es

Forecasting critical

Product andprocess reliability

Competitiveproductimprovements andoptions

Increase capacity

Shift towardproduct focus

Enhancedistribution

Standardization

Less rapid productchanges moreminor changes

Optimum capacity

Increasing stabilityof process

Long productionruns

Product

improvement andcost cutting

Little productdifferentiation

Costminimization

Overcapacityin the industry

Prune line toeliminate itemsnot returninggood margin

Reducecapacity

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Competitive Priorities- The Edge

Four Key Operations Questions:

Will you compete on

Cost?Quality?

Time?

Flexibility? All of the above? Some? Tradeoffs?

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Competing on Cost

Offering product at a low price relative to competition

Typically high volume products

Often limit product range & offer little customization

May invest in automation to reduce unit costs

Can use lower skill labor

Probably uses product focused layouts

Process chain lean and less waste

Low cost does not mean low quality

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Competing on Quality

Quality is often subjective

Quality is defined differently depending on who is defining it

Two major quality dimensions include High performance design:

Superior features, high durability, & excellent customer service

Product & service consistency: Meets design specifications

Close tolerances

Error free delivery

Quality needs to address Product design quality product/service meets requirements

Process quality error free products

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Competing on Time

Time/speed one of most important competition priorities

First that can deliver often wins the race

Time related issues involve

Rapid delivery:

Focused on shorter time between order placement and delivery

On-time delivery:

Deliver product exactly when needed every time

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Competing on Flexibility

Company environment changes rapidly

Company must accommodate change by being flexible

Product flexibility:

Easily switch production from one item to another

Easily customize product/service to meet specific requirements of a

customer

Volume flexibility:

Ability to ramp production up and down to match market demands

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The Need for Trade-offs

Decisions must emphasize priorities that support business strategy

Decisions often required trade offs

Decisions must focus on order qualifiers and order winners Which priorities are Order Qualifiers?

Must have excellent quality since everyone expects it

Which priorities are Order Winners?

Dell competes on all four priorities

Southwest Airlines competes on cost

McDonalds competes on consistency

FedEx competes on speedCustom tailors compete on flexibility

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Translating to Production Requirements

Specific Operation requirements include two

general categories

Structure decisions related to the production

process, such as characteristics of facilities used,selection of appropriate technology, and the flow

of goods and services

Infrastructure decisions related to planning and

control systems of operations

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Translating to Production Requirements

Dell Computer examplestructure & infrastructure

They focus on customer service, cost, and speed

ERP system developed to allow customers to order directly

from Dell Product design and assembly line allow make to order

strategy lowers costs, increases turns

Suppliers ship components to a warehouse within 15

minutes of the assembly plant - VMI Dell set up a shipping arrangement with UPS

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Strategic Role of Technology

Technology should support competitive priorities

Three Applications: product technology, process

technology, and information technology Products - Teflon, CDs, fiber optic cable

Processes flexible automation, CAD

Information Technology POS, EDI, ERP, B2B

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Technology for Competitive Advantage

Technology has positive and negative potentials

Positive

Improve processes

Maintain up-to-date standards Obtain competitive advantage

Negative

Costly

Risks such as overstating benefits

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Technology for Competitive Advantage

Technology should:

Support competitive priorities

Can require change to strategic plans

Can require change to operations strategy

Technology is an important strategic decision

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Wrap-Up: World-Class Practice

Put customers first

Get new products/services to market faster

Are high quality producers Have high labor productivity & low production

costs

Carry little excess inventory . . . more



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Wrap-Up: World-Class Practice

Think more globally in purchasing and selling

Quickly adopt and develop new technologies

Trim organizations to be lean and flexible Are less resistant to strategic alliances/joint

ventures

Consider relevant social issues when settingstrategies


Intro to Operations Mgmt

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