COMPETINGWITH

OPERATIONS

LECTURE OUTLINE

What is Operations ManagementCorporate & Operations strategies

Evolution of OMDifferences between Services and Goods

Current Issues in Operations Management

Learning Objectives for This Course

Ashok Gupta

OM

101

2/27

WHAT OPERATIONS AND SUPPLY CHAIN MANAGERS DO

• What is Operations a function or system that transforms

inputs into desired outputs• What is a Transformation Process

a series of activities along a value chain extending from supplier to customer

• What is Operations Management systematic design, running &

improvement of systems that transform inputs into services and products and deliver them to customers

Ashok Gupta

OM

101

3/27

ACROSS THE ORGANIZATION

Material & Service Inputs

Sales Revenue

Product & Service Outputs

Finance

Acquires financial resources and

capital for inputs

Marketing

Generates

sales of outputs

Operations

Translates materials

and service into

outputs

Support Functions• Accounting• Information Systems• Human Resources• Engineering

Ashok Gupta

OM

101

4/27

A PROCESS VIEW

External environment

Information on

performance

Customers

Processes and

operations1

2

3

4

5

Inputs• Workers• Managers• Equipment• Facilities• Materials• Land• Energy

Outputs• Goods• Services

Ashok Gupta

OM

101

5/27

TRANSFORMATION PROCESSES

• Physical: as in manufacturing operations• Locational: as in transportation• Spatial: as in warehouse operations• Exchange: as in retail operations• Physiological: as in health care• Psychological: as in entertainment• Informational: as in communication• Academicals: imparting knowledge/skills• Agricultural: growing crops• Federal: government actions – licensing

Question: What is honeybee cultivation What is poultry farming

Ashok Gupta

OM

101

6/27

EVOLUTION OF OPERATIONS MANAGEMENT

Craft production process of handcrafting products or

services for individual customers Division of labor

dividing a job into a series of small tasks each performed by a different worker

Interchangeable parts standardization of parts initially as

replacement parts; enabled mass production

Ashok Gupta

OM

101

7/27

EVOLUTION OF OPERATIONS MANAGEMENT

Scientific management systematic analysis of work methods

Mass production high-volume production of a

standardized product for a mass market

Lean production adaptation of mass production that

prizes quality and flexibility

Ashok Gupta

OM

101

8/27

HISTORICAL EVENTS IN OPERATIONS MANAGEMENT

Era Events/Concepts Dates Originator

IndustrialRevolution

Steam engine 1769 James WattDivision of labor 1776 Adam SmithInterchangeable parts 1790 Eli Whitney

Scientific Management

Principles of scientificmanagement

1911 Frederick W. Taylor

Time and motion studies 1911 Frank and

Lillian GilbrethActivity scheduling chart 1912 Henry Gantt

Moving assembly line 1908 Walter Flanders

Ashok Gupta

OM

101

9/27

HISTORICAL EVENTS IN OPERATIONS

MANAGEMENT

Era Events/Concepts Dates Originator

Human Relations

Hawthorne studies 1930 Elton Mayo

Motivation theories1940s Abraham Maslow1950s Frederick Herzberg1960s Douglas McGregor

Operations Research

Linear programming 1947 George DantzigDigital computer 1951 Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM

1950s Operations Research groups

MRP, EDI, EFT, CIM 1960s, 1970s

Joseph Orlicky, IBMand others

Ashok Gupta

OM

101

10/27

HISTORICAL EVENTS IN OPERATIONS

MANAGEMENT

Era Events/Concepts Dates Originator

QualityRevolution

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)

TQM (total qualitymanagement)

1980sW. Edwards Deming, Joseph Juran

Strategy andoperations

1980sWickham Skinner, Robert Hayes

Reengineering 1990sMichael Hammer,James Champy

Six Sigma 1990s GE, Motorola

Ashok Gupta

OM

101

11/27

HISTORICAL EVENTS IN OPERATIONS

MANAGEMENT

Era Events/Concepts Dates OriginatorInternet Revolution

Internet, WWW, ERP, supply chain management

1990s ARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE, Dell

E-commerce 2000s Amazon, Yahoo, eBay, Google, and others

Globalization WTO, European Union, Global supply chains, Outsourcing, Service Science

1990s2000s

China, India, emerging economies

Ashok Gupta

OM

101

12/27

HISTORICAL EVENTS IN OPERATIONS

MANAGEMENT

Era Events/Concepts Dates OriginatorGreen Revolution

Global warming, An Inconvenient Truth, Kyoto

Today Numerous scientists, statesmen and governments

Ashok Gupta

OM

101

13/27

Copyright 2011 John Wiley & Sons, Inc.Copyright 2011 John Wiley & Sons, Inc.

STRATEGIC PLANNING

Missionand Vision

Corporate Strategy

OperationsStrategy

MarketingStrategy

FinancialStrategy

Voice of theBusinessVoice of the

Customer

1-14

14/27

OPERATIONS STRATEGY

Corporate Strategy• Environmental scanning• Core competencies• Core processes• Global strategies

Market Analysis• Market segmentation• Needs assessment

Competitive Priorities

• Cost• Quality• Time• Flexibility

New Service/Product Development• Design• Analysis• Development• Full launchOperations Strategy

Decisions• Managing processes• Managing supply chains

Competitive Capabilities• Current• Needed• Planned

Performance Gap?

No

Yes

Ashok Gupta

OM

101

15/27

POSITIONING THE FIRM

Cost Speed Quality Flexibility

Ashok Gupta

OM

101

16/27

COMPETITIVE PRIORITIES

DEFINITIONS, PROCESS CONSIDERATIONS & EXAMPLES OF COMPETITIVE PRIORITIES

COST Definition Process Considerations Example

Low-cost operations

Delivering a service or a product at lowest possible cost

Processes must be designed and operated to make them efficient

Costco, WalMart

QUALITY

Top quality Delivering an outstanding service or product

Requires superior product features. May require a high level of customer contact

Ferrari

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

Delivery speed

Quickly filling a customer’s order

Design processes to reduce lead time

Dell

On-time delivery

Meeting delivery-time promises

Planning processes to continuously increase percent of on-time delivery

United Parcel Service (UPS)

Development speed

Quickly introducing a new science or a product

Cross-functional integration and involvement of critical external suppliers

Li & Fung

Zara

Ashok Gupta

OM

101

17/27

COMPETITIVE PRIORITIES

DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES

FLEXIBILITY Definition Process Considerations Example

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

Low volume, close customer contact, and easily reconfigured product/service offerings

Ritz Carlton

Variety Handling a wide assortment of services or products efficiently

Capable of larger volumes than processes supporting customization

Amazon.com

National Bicycle

Volume flexibility

Accelerating or decelerating the rate of production quickly to handle large fluctuations in demand

Processes must be designed for excess capacity

The United States Postal Service (USPS)

Ashok Gupta

OM

101

18/27

POSITIONING THE FIRM: COST

Waste elimination relentlessly pursuing the removal

of all waste Examination of cost structure

looking at the entire cost structure for reduction potential

Lean production providing low costs through

disciplined operations

Ashok Gupta

OM

101

19/27

POSITIONING THE FIRM: SPEED

Fast moves, Fast adaptations, Tight linkages

Internet Customers expect immediate responses

Service organizations always competed on speed (McDonald’s,

LensCrafters, and Federal Express) Manufacturers

time-based competition: build-to-order production and efficient supply chains

Example two-week design-to-rack lead time of Spanish

retailer, Zara

Ashok Gupta

OM

101

20/27

POSITIONING THE FIRM: QUALITY

Minimizing defect rates or conforming to design specifications

Ritz-Carlton - one customer at a time Service system designed to “move heaven

and earth” to satisfy customer Employees empowered to satisfy a

guest’s wish Teams set objectives and devise quality

action plans Each hotel has a quality leader

Ashok Gupta

OM

101

21/27

POSITIONING THE FIRM: FLEXIBILITY

Ability to adjust to changes in product mix, production volume or design

Mass customization: the mass production of customized parts

National Bicycle Industrial Company supplies customised bicycle mass

produced offers 11,231,862 variations delivers within two weeks at costs only

10% above standard models

Ashok Gupta

OM

101

22/27

WHAT IS A SERVICEWHAT IS A GOODS

“If you drop it on your foot, it won’t hurt you” (Goods or service)

“Services never include goods and goods never include services” (True or false)

Ashok Gupta

23/27

OM

101

A PROCESS VIEW OF GOODS/SERVICE

• 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

Ashok Gupta

OM

101

24/27

THE GOODS-SERVICE CONTINUUM

Ashok Gupta

OM

101

25/27

ORDER QUALIFIERS & WINNERS

Order qualifiers are basic criteria that permit a firm’s products/services to be considered as candidates by customers

Order winners are the criteria that differentiate the products and services of one firm from another (USPs)

Ashok Gupta

26/27

OM

101

CURRENT ISSUES IN OM

Coordinate relationships between mutually supportive but separate organizations

Optimizing global supplier, production, and distribution networks

Increased co-production of goods and services

Global Competition Quality, Customer Service, and Cost

Challenges Social-Responsibility Issues

Ashok Gupta

27/27

OM

101

QUESTION BOWL

In the Input-Transformation-Output relationship, a typical “input” for a department store is which of the following

a. Displaysb. Stocks of goodsc. Sales clerksd. All of the abovee. None of the above

Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”)

Ashok Gupta

28/27

OM

101

LEARNING OBJECTIVES OF THIS COURSE

Gain an appreciation of strategic importance of operations and supply chain management in a global business environment

Understand how operations relates to other business functions

Develop a working knowledge of concepts and methods related to designing and managing operations and supply chains

Develop a skill set for continuous improvement

Ashok Gupta

OM

101

29/27