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II. Operations Strategy and Process Choice

1. Operations Management and Competitive Advantages– “An Efficiency Drive”– “Case Study: Burger Time”

2. Process Types and The Product-Process Matrix

3. Case Discussion: Kristen’s Cookies

4. Process Flow Diagram and Gantt Chart

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An Efficiency Drive

• How critical is time for drive-through?

• Is drive-through a good deal for the restaurants?

• What are the efforts to save time?

• Implications

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Case Discussion: Burger Time

• What are the major operational differences between McDonald’s and Burger King?

• How do these differences relate to each company’s competitive strategies?

• What implications do these differences have for the management of operations?

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Competitive Advantages and Operations Management

Competitive Advantages

• Price – Cost

• Quality– Customer service– Consistent quality

• Time– Rapid, reliable delivery

• Variety

Operations Management • Match supply with demand• Quantitative methods and

qualitative strategies to• ensure efficient use of

resources

• find the right balance between competing objectives

• improve performance along multiple dimensions simultaneously

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Performance Dimensions in Retail Banking

• Quality: courteous services, consistency (reliability), accurate information (credibility), empathy, timely information (customer responsiveness), conformance, employee skill and knowledge

• Time: delivery speed (waiting time), convenient services (access), on time delivery (account statements), handling customer complaints

• Flexibility: a broad line of financial products, system responsiveness, new product introduction speed, rapid staff changes, customizations

• Cost: cost effective back and front-office labor productivity, cost effective back-office technology innovations, transaction processing costs

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The changing sources of competitive advantage

• Low Cost & Scale Economies (< 1960s)

• Focused Factories (mid 1960s)

• Flexible Factories and Product variety (1970s)

• Quality (1980s)

• Time (late 1980s-1990s--> )

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Process types: Match Supply with Demand• Economics

• Two options• Make supply after demand: Make to order (MTO)

• Make supply before demand: Make to stock (MTS)

• Matching supply with demand means

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Process Types: Resource Types and Layout• Job Shop process

– General purposed/flexible resources– Process focused layout: Jobs have flexible routing, go from one resource

to another as needed– Wide variety of products, customized products

• Batch process– Similar to JS, but with larger lot sizes, some EOS, more commonality in

the resources required, still not cost effective to build a dedicated assembly line.

• Discrete flow process– Product focused layout: Fixed (possibly automated) flow of products,

tightly connected stages (WIP is automatically managed), specialized tasks

– Heavily capitalized – High volume

• Continuous flow process– Product focused layout– heavily capitalized – Product is a commodity – no discrete units, minimal variety, high volume

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Matching Products and ProcessesProduct

Process

Jumbled Flow.Process segmentsloosely linked.

Disconnected LineFlow/Jumbled Flowbut a dominant flowexists.

JOB SHOP

(Commercial Printer,Ph.D program)

BATCH

(Heavy Equipment,MBA program)

DISCRETE FLOWS

(Auto Assembly)

CONTINUOUS FLOW

(Oil Refinery)

Low volumeLow Standardization

One of a kind

Low volume

Many Products

Higher volume

Few Major Products

High volumeHigh StandardizationCommodity Products

Connected LineFlow (assembly line)

Continuous, automated,rigid line flow.Process segments tightlylinked.

Bidding, delivery,product design flexibility

Quality & Product Differentiation,output volume flexibility

Price

Scheduling,Materials Handling,Shifting Bottlenecks

Worker Motivation,Balance,Maintaining Flexibility

ManagerialChallenges

Opportunity

Costs

Out-of-pocket

CostsCapital Investment for bigchunk capacity,Technological Change,Vertical Integration

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Process Flow Diagram: Kristen’s Cookies

Mix Spoon Set oven

Bake Cool Pack Pay

Time 6 2 1 9 5 2 1

Max batch 3d d d d

Resources K K R, Oven Oven R R

Capacity

(minutes/dozen)

(dozen/minute, for orders of 1 dozen)

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5 10 15 20 25 30 35 40 45 50

Mix and Spoon

Bake

Cool

Pack

Tray #2

Tray #3

Tray #4

Pay

Kristen

Room-mate

Tray #1

Gantt Chart

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16

~ 160 m

Iron OreFines

CFBPreheater

InclinedBucket

Elevator

1st StageCFB Reactor

2nd StageFB Reactor

BriquettingPlant

HBI Product

ProcessGasHeatExchanger

Process GasCompressor

Fired Gas Heaters

~ 1

10

m

ElectricalSubstation&ControlRoom

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Pile of Iron ore fines

Pre-Heater

Briquet- tingFlash

heater

Dis-charge

Finishedgoods

Lock Hoppers

1st Reactor

2nd Reactor

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Process Flow Diagram and Gantt Chart• Process Flow Diagram: Illustrates the flow of product or service from input to

final output (stages).

– Software (Visio et al.)

• Gantt Chart: Illustrates the interplay between resources at all time

– Important for scheduling and coordinating production– Software (Microsoft Project)

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Today’s Takeaways 1. Operations management and competitive advantages

2. Process Types and The Product-Process Matrix– Process Types

• Matching supply with demand: MTO vs. MTS • Resource types and layout: job shop, batch, discrete flow,

continuous flow

– The Product-Process Matrix: Diagonal

3. Case discussion: Kristen’s Cookies

4. Process Flow Diagram and Gantt Chart– Flow Diagram: stages products flow through– Gantt Chart: interplay of resources Operational Measures