introduction & strategy module introduction & administrative

Introduction & Strategy Module

Introduction & Administrative www.kellogg.northwestern.edu/course/opns430/emp/vanmieghem/

What is operations Process view of Ops

What is a good operation? A Strategic Framework for Ops

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

Operations as a managerial integration function Evaluation and Improvement

Course is structured to answer:

1. What is an improvement? Strategic role of ops

2. Where target improvements? Identify metrics by linking process flows with financial flows

3. How improve? Improve each metric

Course: Goals and Overview

Slide 2 © J. A. Van Mieghem

What is Operations?

“The planning and execution of work” (JVM 2008)

“Creation and delivery of products and services to customers” (JVM 2008)

3 Views of Operations

Slide 4 © J. A. Van Mieghem

Competencies

Operations StrategyResources Processes

Max NPV

Operations strategy is a plan for developing resources and configuring processes such that the resulting competencies maximize NPV

A process is a well-structured transformation of inputs into outputs

Outputs

GoodsServices

Inputs

Flow units/Entities(customers, data,

material, cash, etc.)

Labor & Capital

Resources

Network ofActivities and Buffers

Slide 5 © J. A. Van Mieghem

The three ‘colors’ of operational excellence

Management Infrastructure

“The formal structures, processes and systems through which resources are managed in support of the operating system”

“The way people think, feel and conduct themselves in the workplace, individually and collectively”

Mindsets, Capabilities & Behaviors

“The way assets and resources are configured and optimised to create value and minimise losses”

Operating System

Source: John Drew

What defines a “good process”? Delivered value / Supply chain surplus

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)

I am looking for a small batch of printed books

Which location seems better: a printer in the US or in China?

A question

Slide 8 © J. A. Van Mieghem

A question… Competitive analysis: cost v. quantity

$-

$5

$10

$15

$20

$25

1,000 2,000 3,000 4,000 5,000

BioPrint (Minneapolis, MN)

Jostens (Topeka, KS)

AsianPrinting (middleman in L.A., CA)

Aomeiya (Shandong, China)

BookMasters (Grand Rapids, MI)

Caxton Printers (Caldwell, Idaho)

Imaging Hawaii (Honolulu)

Lithopak (Shenzhen, China)

Lotsize

Cost/book

Slide 9 © J. A. Van Mieghem

A question… Competitive analysis: cost v. responsiveness

BioPrint (Minneapolis, MN)

Jostens (Topeka, KS)

AsianPrinting (middleman in L.A., CA)

Aomeiya (Shandong, China)

BookMasters (Grand Rapids, MI)

Caxton Printers (Caldwell, Idaho)

Imaging Hawaii (Honolulu + Hong Kong)

Lithopak (Shenzhen, China)

$5 $10 $15 $20 $25

Cost efficiency ($/book)

Responsiveness (weeks)

BookMasters (Grand Rapids)2

3

7

8

Aomeiya (Shandong)

Slide 10 © J. A. Van Mieghem

What defines a good operation?

A good operation

structures the processes and resources to

align and adapt the operational competencies

with the needs of the customer(s)

Slide 11 © J. A. Van Mieghem

A Framework for designing an Operations Strategy and Structure

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

Resources & Processes

operationalcompetencies

What defines a good operation?Achieving alignment at Shouldice Hospital

Slide 13 © J. A. Van Mieghem

Wriston Manufacturing

Handouts to be distributed in class

Slide 14 © J. A. Van Mieghem

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

Slide 15 © J. A. Van Mieghem

Recall the two fundamental strategies:1. Doing the same things as rivals but better

2. Doing different things

Focused, tailored operations are more competitive than generics

What is your plan to get to or push out the frontier?

The Fundamentals: Competitive Advantage through Tailored Operations

Cost efficiency

Cus

tom

izat

ion

A

efficient frontier

Slide 16 © J. A. Van Mieghem

The Concept of Operational Focus

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

efficient frontier = current state of best practice

Slide 17 © J. A. Van Mieghem

Summary: Introduction & Strategy Module

Operations is the process of bringing goods and services to customers Process view = viewing an organization as a transformation of inputs into outputs through a

network of activities and buffers, utilizing resources, IT and mgt

A good operation maximizes value or supply chain surplus A strategic framework for operations for increasing the value of operations by aligning the

competencies of the operations structure (resources & processes) with corporate strategy

Aligning strategy and operations can be achieved through: Focus Process choice

Cases: Shouldice Hospital Wriston Manufacturing