opsm 301 operations management class 2: operations management strategy and process selection chapter...
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OPSM 301 Operations Management
Class 2:Operations management strategy and process selectionChapter 2
Koç University
Zeynep [email protected]
Announcements
Web page available through Courseware link Please get copies of the course pack from Xerox
for case assignments coming up. Will skip sections on global operations and
strategy implementation in Chapter 2 Will cover Ch 7 p 254-263 today.
OPSM elective course: Operations Strategy
Operations & the Process View:What is a Process?
Inputs OutputsGoods
Services
Labor & Capital
Informationstructure
Network ofActivities and Buffers
Flow units(customers, data, material, cash, etc.)
Resources
ProcessManagement
Organization Chart
Process
customer customer
suppliers
What is Operations Management?
Management of business processes
How to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs.– What is appropriate?
What defines a “good process”?Performance: Financial Measures
Absolute measures: – revenues, costs, operating income, net income– Net Present Value (NPV) =
Relative measures:– ROI, ROE– ROA =
Survival measure:– cash flow
Assets Total Average
TaxEBIT
T
tt
t
r
C
0 1
Firms compete on product attributes.This requires process capabilities.
Price (Cost) P Quality Q
– Customer service– Product quality
Time T– Rapid, reliable delivery– New product development
Variety V– Degree of customization
“order winners”
To deliver we need “capabilities”
Fit between Strategy and Processes
Processes must fit the operations strategy of the firm:Competing on
-Cost (Southwest Airlines)-Quality (Toyota,Arçelik)-Flexibility (HP)-Speed (McDonalds)
all require different process designs and different measures to focus on.
Corporate StrategyKey Performance Indicators Operations StrategyProcess Design& Improvement
Performance Measures
Performance
Objective Some typical Measures
Cost Minimum delivery time/average delivery time, utilization of resources, labor productivity, added value, efficiency, cost per operation hour
Quality Number of defects per unit, level of customer complaints, scrap level, mean time between failures, customer satisfaction scores
Speed Customer query time, Order lead time, frequency of delivery, actual versus theoretical throughput time, cycle time
Flexibility Time needed to develop new products/services, range of products/services, machine change-over time, average batch size, time to increase activity rate, average capacity/maximum capacity, time to change schedules
Linking the strategic role & process view:Strategic Operational Audit
DesiredBusiness Strategy
Operations Strategy
DesiredCapabilities
Marketing, …, Financial Strategy
Desired Oper’l Structure:
Processes & Infrastructure
Product Attributes
P, T, Q, V
Process Attributes
C, T, Q, Flex
Existing Capabilities
Operational Structure:
Processes & Infrastructure
Existing Desired
FeasibleBusiness Strategies
Strategy Gap?
Measures
Capability Gap?
Process Gap?
Mission/Strategy
Mission - where you are going
Strategy - how you are going to get there; an action plan
Strategy Process
MarketingDecisions
OperationsDecisions
Fin./Acct.Decisions
CompanyMission
BusinessStrategy
Functional AreaFunctional AreaStrategies
Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current
positions in an industry
Responsiveness
operations frontier
A
B
C
PriceHigh Low
Video
King Soopers Bakery– How is bread made?– How does the pastry production process
differ? Customized cakes?– What are the different set-ups in each
process?
Classification Scheme forManufacturing Systems
Organizing production processes: Around the product or process?
Discrete Part Manufacturing– Job Shops– Batch Production– Mass Production
Continuous Processes
A Spectrum of Production Processes
Part Quantity
Part
VarietyJob
Shop Batch Prod.
Mass Prod.
(Flow Line)
ContinFlow Process
Fit of Process, Volume, and Variety (from Ch. 7)
Process focusprojects, job shops,
(machine, print, carpentry)
Standard RegisterRepetitive
(autos, motorcycles)Harley Davidson
Product focus(commercial baked goods, steel, glass)
Nucor Steel
High VarietyOne or few units per run, high variety(allows customization)
Changes in modulesModest runs, standardized modules
Changes in attributes (such as grade, quality, size, thickness, etc.) Long runs only
Mass Customization
(difficult to achieve, but huge rewards)
Dell Computer Co.
Poor strategy
Low-Volume(Intermittent)
Repetitive Process(Modular)
High-Volume(Continuous)
Process-Focused Strategy Examples
Bank
© 1995 Corel Corp.
Machine Shop© 1995 Corel Corp.
Hospital© 1995 Corel Corp.
Repetitive-Focused Strategy - Examples
Truck
© 1995 Corel Corp.
Clothes Dryer
© 1995 Corel Corp.
Fast Food
McDonald’sover 95 billion served
McDonald’sover 95 billion served
© 1984-1994 T/Maker Co.
Product-Focused Examples
© 1995 Corel Corp.
Light Bulbs (Discrete)
Paper (Continuous)© 1984-1994 T/Maker Co.
© 1995 Corel Corp.
Soft Drinks (Continuous, then Discrete)
Mass Flu Shots (Discrete)
© 1995 Corel Corp.
The Job Shop Process
Process Layout One of a Kind Build
– (To Customer Order)
Absence of Rigid Flow Pattern Usually High Product Mix
Process Layout
Lathe#Lathe#11
Lathe#Lathe#22
Lathe#Lathe#33
LatheLathe#4#4
Product #1735B: Start of Production
Drill Drill Press Press #1#1
Drill Drill Press Press #2#2
Paint Paint MachineMachine
Packaging Packaging Machine #1Machine #1
Packaging Packaging Machine #2Machine #2
Finish
Production
The Batch Flow Process
Process Layout Work Flow in Lots Absence of Rigid Flow Pattern
The Flow Line Process
Product Layout Discrete Parts Rigid Flow Pattern Product Mix of Standard Products
Product Layout
Product #1735B
LatheLatheStart
Production
Drill Drill Press #2Press #2 Paint MachinePaint Machine
Drill Drill Press #1Press #1
Packaging Machine #2Packaging Machine #2
Finish Production
Impetus for Strategy Change
Changes in the organization Stages in the product life cycle Changes in the environment