POM as Competitive Weapon1
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Transcript of POM as Competitive Weapon1
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Operations as aCompetitive Weapon
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So, what is management?
Classic definition: Getting thingsdone through people. This assumes you are managing people.
How about one person overseeing anautomated production line. There are no people to manage.
An operations manager manages people,resources and/or processes.
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Production Management
What is Production?
The act of producing To bring into existence
To create something having exchangevalue
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Definition of Operations Mgt.
Previous Edition: The direction and control of theprocesses that transform inputs into products andservices.
Our Text: The systematic design, direction, andcontrol of processes thattransform inputs into servicesand products for internal, as well as externalcustomers.
My Definition:The systematic design, direction, andcontrol of processes thatcreate or add value to services
and products for internal, as well as external customers
InputsTransformation Processes
(Adding value)Outputs
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Operations Management versusProduction Management
Production managementwastraditionally associated with goodsproduction.
Operations managementwas created forthe management of production of services.
Operations Management is now used for
both goods and services production.
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Exchange Value
Exchange
Value
Production
Management
Operations
Management
Goods
Services
Operations
Management
Services
and Goods
Exchange
Value
Current View
Traditional View
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ManufacturingInputs and Outputs
INPUTS
Raw Materials
Employees
Plant
Equipment
Financing
OUTPUTS
Consumer Goods
Materials forpurchase by otherfirms
Services
Payments toemployees
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UniversityInputs and Outputs
INPUTS Students
Faculty and Staff Facilities Equipment and
Supplies
Financing
OUTPUTS
Educated citizens
Research Public service
Payments to
employees
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Grocery StoreInputs and Outputs
INPUTS
Items for resale
Customers
Employees
Facilities and
Equipment Financing
OUTPUTS
SatisfiedCustomers
Service
Payments to
employees
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FedEx Why are they successful?
Fast
On-time deliveries
Relatively low cost
Technology in shipment tracking
O ti
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Operations as aManagement Function
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Processes
Processes should add value.
Processes can be broken down into sub-
processes, which in turn can be broken
down further.
Any process that is part of a larger process
is considered a nested process.
Each process and each nested process hasinputs and outputs.
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Examples of Processes
Manufacturing something Warehousing of raw materials Processing insurance claims Teaching a class Getting a product to the customer Taking inventory The supply chain Staff scheduling
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Nested Processes Example
Advertisement Design and Planning Process
Creative design process Receive work request Assemble team Prepare several designs Receive inputs from
Account Executive
Prepare final concept Revise concept per
clients inputs
Creative design process Receive work request Assemble team Prepare several designs Receive inputs from
Account Executive
Prepare final concept Revise concept perclients inputs
Media planning process Receive work request Prepare several media
plans Receive inputs from
Account Executive
Prepare final plan Revise plan per clients
inputs
Media planning process Receive work request Prepare several media
plans Receive inputs from
Account Executive
Prepare final plan Revise plan per clientsinputs
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Process Viewof an Ad Agency
Inpu
ts
Accounting process
Production process Prepare ad for publication
and deliver to mediaoutlets
Advertisementdesign and
planning process Create the ad to the
needs of the clientand prepare a planfor media exposure
Output interfaceprocess
Communicate withclient, get needs, andcoordinate progress
Clien
ts
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External Vs. Internal Customers
External Customers are those whopurchase the goods and services
Internal Customers are those who receivethe output of others within the firm. Theyare part of the transformation process.
Inputs fromotherprocesses
Transformation Processes(Adding value)
OutputstoExternal
orInternal
customers
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External Vs. Internal Suppliers
External Suppliers: The businesses or individuals
who provide the resources, services, products, and
materials for the firms short-term and long-term
needs. Internal Suppliers: The employees or processes
that supply important information or materials to a
firms processes.
External &
Internal
Suppliers
Transformation Process(Adding value)
Outputs toinside orto outsidecustomers
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Service Processes VersusManufacturing Processes
Manufacturing processes change materialsin one or more of the following dimensions: Physical properties
Shape Fixed dimensions
Surface finish
Joining parts and materials
If a process isnt doing at least one of these, then it isa service process (non-manufacturing) .
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Manufacturingand Service
Goods Production Tangible
Can be inventoried Low customer contact Longer response time Capital Intensive
Quality easilymeasured Goods can be shipped
Service Production Intangible
Cant be inventoried High customer contact Shorter response time Labor Intensive Quality hard to
measure Locate near customers
Most firms provide both goods and services.
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Shared Problems byManufacturing & Service
Both have to match capacity withdemand. Harder to do for service providers
Both have to worry about quality. Easier to change a service than a
product.
Both have to deal with internal andexternal customers
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Value Chains
Value chains are an interrelated seriesof processes that produce a service orproduct to the satisfaction of
customers. Any process / value chain does two
things.
Produces or adds value Consumes resources
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Core Processes and SupportProcesses
Value chains may have coreprocesses, support processes, orboth.
Core processes deliver value toexternal customers.
Support processes provide vital
inputs for the core processes
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4 Core Processes1. Customer relationship processes
Identify, attract, and build relationships with externalcustomers and facilitates the placement of orders.
1. New service/product development processes Designing and developing new services or products from
inputs received from external customer specifications.1. Order fulfillment processes
The activities required to produce and deliver the serviceor product to the external customers.
1. Supplier relationship processes Selecting suppliers of services, materials and information
and facilitates the timely and efficient flow of these itemsinto the firm.
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Productivity
Productivity is the value of outputs(services and products) produced,divided by the value of input resources(wages, costs of equipment, etc.)
Production is the process of creating something havingExchange value.
Value of OutputsValue of Inputs
Productivity =
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Measuring Productivity
Single Factor methods EG: Time or cost to produce a widget
Multi-Factor methods Combines two or more single-factor methods
EG: Cost per hour to produce widgets.
Multiple methods Several separate single-factor and/or multi-factor
methods
Best way to measure productivity
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Productivity Calculation
A team of workers make 400 units of a product, valuedby its standard cost of$10 each (before markups forother expenses and profit). The accounting departmentreports that the actual costs are $400 for labor, $1,000for materials, and $300 for overhead. Calculate theproductivity. (value of output / value of input)
Multifactor productivity =Quality at standard cost
Labor cost + Material Cost + Overhead cost
(400 units) ($10/unit)
$400 + $1000 + $300= = 2.35
$4,000
1,700=
These figures must be compared with performance levels in priorperiods and with future goals.
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How We ImproveProductivity
Decrease inputs relative to outputs
Speed up the through-put
Increase output relative to input
Improve Quality
Inputs Transformation Outputs
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History of U.S.Productivity
1950s 2.8% annual growth
1960s 2.8% annual growth
1970s 2.0% annual growth
1980s 1.4% annual growth
1990s 1.9% annual growth
(Growth is mostly from manufacturing productivity increases)
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Determinates ofNational Productivity
LABOR16%
CAPITAL20%
MANAGEMENT64%
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Service Sector
Accounts for approximately 80% of USjobs (non-farm)
Three approximately equal sectors:
1. Government Sector
2. Wholesale & Retail Sales3. Other Services
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Sector Productivityin the 90s
Productivity in the 80% service sector hadless than 1% annual growth.
Productivity in the smaller manufacturingsector increased roughly 3.6% per year.
Thus the lions share of the nations overallproductivity gain has been fromManufacturing.
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Why LowService Productivity?
Hard to automate services
Often brain work rather than machine
work
Tend to be more labor intensive
Hard to measure service productivity
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Operations as acompetitive weapon
Companies use operations to compete invarious ways: High quality Consistent quality Quick delivery Fast development High technological efficiency Low cost efficiency
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Global Competition
Businesses must accept the fact that, to prosper, they mustview customers, suppliers, facility locations, and competitorsin global terms.
Most products today are composites of materials and servicesfrom all over the world.
Forces that created increased global competition: Improved transportation and communication technologies
Loosened regulations on financial institutions
Increased demand for imported services and goods
Reduced import quotas and other trade barriers Comparative cost advantages
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Global CompetitionDisadvantages
May have to relinquish proprietarytechnology.
Political risks
Alienate U.S. customers by sending jobsoverseas.
Lower skill levels in some areas
Difficulty with cross-functional coordination Harder to produce products and services
that can compete.
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Other Challenges in OperationsManagement
Rapid Technological Change
Ethical issues
Increasing diversity of the
workforce Environmental impact issues
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Adam Smith
Economist and Philosopher
1723 - 1790
"An Inquiry into the Nature &
Causes of the Wealth of Nations,"Covered such concepts as the
role of self-interest, the division oflabor, the function of markets, andthe international implications of alaissez-faire economy.
Historic Development
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Historic Development
Eli Whitney
Born Dec 8 1765 - Died Jan 8 1825He translated the concept ofinterchangeable parts into amanufacturing system, giving
birth to the American mass-production concept.
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Historic Development
Develop a "science" for every job
Carefully select workers with the rightabilities for the job.
Carefully train these workers to do the
job, and give them proper incentives
Support these workers by planningtheir work and by smoothing the way
as they go about their jobs.
Frederick Winslow Taylor
March 20, 1856 - March 21, 1915
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Historic Development
Henry Ford
1863-1947
Using a constantly-movingassembly line, subdivision oflabor, and careful coordinationof operations, Ford realizedhuge gains in productivity.
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Importance of Operations
The two major functions
of business areproduction and selling. Allother functions aresecondary to these.
-- PeterDrucker
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Addressing the Challenges inOperations Management
Managing Processes
Process Strategy
Process Performance& Quality
Constraint Management
Process Layout
Lean Systems
Process Analysis
Using Operations
to Compete
Operations As aCompetitive Weapon
Operations Strategy
Project Management
Managing Value Chains
Supply Chain Strategy
Inventory Management
Location
Forecasting
Sales & OperationsPlanning
Scheduling
Resource Planning
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THANK YOU