BS-OM Session 1c

8/8/2019 BS-OM Session 1c

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Business Services – Operations Management

Session 1 – Introduction & Overview

1

Business ServicesBusiness Services – –

Operations ManagementOperations Management

Facilitator:Facilitator:

Dr. Jonathan FarrellDr. Jonathan Farrell

Session 1 – Introduction &

Overview

2

This EveningThis Evening’’s Programs Program

•• IntroductionsIntroductions

•• Unit outlineUnit outline

•• LectureLecture -- Introduction to Operations ManagementIntroduction to Operations Management

•• Case StudiesCase Studies – – Concept Design Services, Central Evaluation Uni tConcept Design Services, Central Evaluation Uni t --

class discussionclass discussion

•• LittleLittle’’s Laws Law


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3

PlagiarismPlagiarism

• Plagiarism: “ using the work of another person and presenting it as your

own”

• If you use any source material from another source (e.g. text graphics,

charts, diagrams, etc.) you must acknowledge that source

• Contrary to popular belief, Plagiarism is easy to detect

• Your assignments will be checked for plagiarism, both manually and

electronically

• For more information, go to www.student.mq.edu.au/plagiarism

4

IntroductionsIntroductions(1 minute maximum)(1 minute maximum)

•• NameName

•• OrganisationOrganisation

•• PositionPosition

•• Type of operationType of operation

•• Why are you here?Why are you here?


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5

Gain an appreciation of technologies available, and how theyGain an appreciation of technologies available, and how they

are applied to operations.are applied to operations.

Develop an ability toDevelop an ability to integrateintegrate these technologies withthese technologies with

corporatecorporate and operationsand operations strategies.strategies.

RecogniRecognisse howe how successful osuccessful operationsperations mmanagementanagement can lead tocan lead to

ssustainableustainable ccompetitiveompetitive aadvantagedvantage..

Understand the dynamics of change management and theUnderstand the dynamics of change management and the

effects of changes on organisation culture.effects of changes on organisation cultu re.

Course ObjectivesCourse Objectives

6

The operations function is fashionable!The operations function is fashionable!

The consultancy services market

% of world revenues of 40 largest firms

Marketing/sales

2

Operations and process

management

31

Corporate strategy

17

IT strategy

17

Benefits/Actuarial16

Organizational design

11

Financial

6


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7

They are all

operations

Retail

operation

Back office

operation in a

bank

Take-out /

restaurant

operation

Kitchen unit

manufacturing

operation

8

A general model of operations management A general model of operations management

Inputtransformedresources

MaterialsInformationCustomers

FacilitiesStaff

Inputtransforming

resources

Planning and

control

ImprovementDesign

The operation’s

competitive role

and position

Operation’sstrategic objectives

Operations

strategy

Customers

Output products

and servicesInput resources

ENVIRONMENT

ENVIRONMENT


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9

Where does the business getWhere does the business get

its competitive advantage?its competitive advantage?

The way itThe way it

produces itsproduces its

goods andgoods and

services?services?

The way itThe way itpositions itselfpositions itself

in its market?in its market?

TheThe ““ technologicaltechnological ””

specification of itsspecification of its

product/service?product/service? Product/

Service

Technology

Marketing Operations

10

The three functions working together ....The three functions working together ....egeg. Swatch. Swatch

but

also

Standardise,

easy to make

product at high

volume so low

cost

Product/

service

design

OperationsMarketing

Further

innovations

which funds

which

funds etc.

Increased variety

does not increase

costsbut because volume

is high

Extended

range

Mass fashion

orientation

allows

which

gives

Innovative

plastic design

with few parts


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11

Core and support functionsCore and support functions

Account ing

and finance

function

Human

resources

function

Others

Engineering/

technicalfunction

Information/technical (IT)

function

Marketingfunction

Product/servicesdevelopment function

Operationsfunction

Core functions

Support functions

A broad defini tion ofoperationsmanagement

12

The posit ion of the operations functionThe position of the operations function


ChurchCall onnewcomers

Manageappeals

Retranslatescriptures

Conductweddings

Advert ise ontelevision

Paysuppliers

Designhamburgers

Makehamburgers

Sell tostores

Pay staff Design newfurniture

Assemblefurniture

Identifyneeds

Raisecapital

Developproduct

Make anddistribute

Account ing

and finance

Product

development

Fast food

chain

Furniture

manufacturer

Process

perspective


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13

The best way to start understanding the nature of“ Operations” is to look around you

Everything you can see around you (except the flesh and

blood) has been processed by an operation

Every service you consumed today (radio station, bus

service, lecture, etc.) has also been produced by an

operation

Operations Managers create everything you buy , sit on,

wear, eat, throw at people, and throw away

We will start by examining a “ high street” operation

14

IKEA STORE

Design elegant products

which can be flat-packed

efficiently

Design a store layout

which gives smooth and

effective flowEnsure that the jobs of all

staff encourage their

contribution to business

success

Maintain cleanlinessand safety of storage

area

Arrange f or f ast

replenishment of

products

Monitor and enhancequality of service to

customers

Site stores of an

appropriate size in

the most effective

locations

Continually examine

and improve operations

practice

Some operations management activ itiesSome operations management activ ities

at IKEAat IKEA


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15

PretPret a Mangera Manger“ High-end” sandwich and

snack retailer

Use only “ wholesome” ingredients

Al l shops have own kitchens which make fresh

sandwiches every day

Fresh ingredients delivered early every morning

Same staff who serve you at lunch made the sandwiches

that morning

“ We don’t work nights, we wear jeans, we party…”

16

The three basic funct ions atThe three basic funct ions at

PretPret a Manger a Manger


Promotional activities,

market research, etc.

Design, location and

management of st ores and

in-store processes and the

network that supplies them

Nutritional “ mechanical” and aesthetic

design of the sandwiches and snacks

Product/

Service Technology


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All o All operationsperations are transformationare transformation

processesprocesses

ENVIRONMENT

ENVIRONMENT

INPUT OUTPUTGOODS

AND

SERVICES

TRANSFORMED

RESOURCES

MATERIALS

INFORMATION

CUSTOMERS

FACILITIES STAFF

TRANSFORMING

RESOURCES

TRANSFORMATION

PROCESS

18

At At PretPret a Manger a Manger

ENVIRONMENT

ENVIRONMENT

INPUT OUTPUT

CUSTOMERS

“ ASSEMBLED”TO SNACKS

TRANSFORMED

RESOURCES

Food ingredients

Packaging

Customers

Kitchen equipmentShop fittings, Staff

TRANSFORMING

RESOURCES

TRANSFORMATION

PROCESS


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19

Operations ManagementOperations Management – – BasicBasic

PrinciplesPrinciples

Al l types of enterprise have an operations funct ion, even if it

isn’t called ‘operations.

Most operations produce both p roducts and services.

Materials

Products and

servicesInformation

Customers

Operations

management is

concerned with

producing and

delivering products

and services

20

Television programme and videoTelevision programme and video

production companyproduction company

Set and propsmanufacture

Engineering

Marketing andsales

Broadcasting andprogramme making

equipment

Test and repair

equipment

Staff

Adap ted ,

maintained

and repaired

equipment

Wood, steel

plastic etc.

Carpenters

Machines

Scenery

and props

Information

from customers

Computer

systems

Surveys and

analysis staff

Market

forecasts,

sales

proposals

and plans


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21

The two main processes at aThe two main processes at a

PretPret a Manger storea Manger store

INPUT OUTPUTTRANSFORMATION

PROCESS

Sandwichproduction

Bread, mayo,

fillings, packing,etc.

Staff

Packed, f resh

sandwiches

SandwichproductionStaff

Satisfied

customers

“assembled” tosandwiches

Packed, fresh

sandwiches

Customers

22

The three core functions as transformationThe three core functions as transformation

processprocess ‘‘operationsoperations’’

Designers

Designsoftware

App rop riat edesigns aspromised andto budget

Producing

effective new

products and

services

Marketingfunction

Product/services

developmentfunction

Operationsfunction

Transformed/transformingresources

Productsand servicesProducingservice value for

customers

Sales people

Marketeers

Marketinformation

Orders

Marketing plansas promisedand to budget

Producing

sales and

market plans


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23

The output from most types of operation is aThe output from most types of operation is a

mixture of goods and servicesmixture of goods and services

C r u d e o i l p r o d u c t i o n

Pure goodsTangible

Can be storedProduction precedes

consumptionLow customer contact

Can be transportedQuality is evident

IntangibleCannot be storedProduction andconsumption aresimultaneousHigh customer contact

Cannot be transportedQuality difficu lt to judge

Pure services

A l u m i n i u m s

m e l t i n g

S p e c i a l i s t m a c h i n e t o o l

m a n u f a c t u r e r

R e s t a u r a n t

C o m p u t e r s y s t e m s

s e r v i c e s

M a n a g e m e n t

c o n s u l t a n c y

P s y c h o t h e r a p y c l i n i c

24

The output from most operations is aThe output f rom most operations is a

mixture of goods and servicesmixture of goods and services

C R U D E O I L P R O D U C T I O N

A L U M I N I U M S

M E L T I N G

S P E C I A L I S T M A C H I N E T O O L

M A N U F A C T U R E R

R E S T A U R A N T

C O M P

U T E R

S Y S T E M S

S E R V I C E S

M A N A

G E M E N T

C O N S

U L T A N C Y

P S Y C H O T H E R A

P Y C L I N I C

PURE GOODSTangible

Can be stored

Production pr ecedesconsumption

Low customer contact

Can be transported

Quality i s evident

PURE SERVICES

Quality difficult to judge

Cannot b e transported

High customer contact

Production and

consumption aresimultaneous

Cannot be stored

Intangible

P r e t a M a n g e r


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25

A Typology of Operations A Typology of Operations

IMPLICATIONS IMPLICATIONS

High LowVisibilityVisibility

High LowVariation i n demandVariation i n demand

High LowVarietyVariety

Low HighVolumeVolume

Time lag between product ionand consumption

Standardised

Low contact skills

High staff utilisation

Centralization

Low unit costs

Short waiting tolerance

Satisfaction governed by

customer perceptionCustomer contact skillsneeded

Received variety is high

High unit cost

Changing capacity

Ant ici pati on

Flexibility

In touch with d emand

High unit cost

Flexible

Complex

Match customer needs

High unit cost

Low repetition

Each staff member performsmore of job

Less systemisation

High unit costs

Stable

Routine

Predictable

High utilisation

Low unit costs

Well defined

Routine

Standardised

Regular

Low unit costs

High repeatability

SpecialisationSystemisation

Capital int ensive

Low unit cost

26

Some configurations ofSome configurations of FormuleFormule 11

prepre--manufactured room unitsmanufactured room units


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Profile of two operationsProfile of two operations

Low

High

High

High

High

Low

Low

Low

Volume

Variety

Variation

Visibility

Island Resort Formule 1

28

Volume

Important to understand how different operations are positioned

on the 4 V’s.

Is their position w here they want to be?

Do they understand the strategic implications?

Variety

Variation

Visibility

Low

High

High

High

High

Low

Low

Low

Island

Resort

Hotel

Formule

1 type

Hotel


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Volume

Variety

Variation

Visibility

Low

High

High

High

High

Low

Low

Low

Pret a

Manger

IKEA

PretPret a Manger and IKEAa Manger and IKEA

4 V4 V’’s analysiss analysis

30

The activi ties of operations managementThe activi ties of operations management

ENVIRONMENT

ENVIRONMENT

INPUT OUTPUTGOODS

AND

SERVICES

INPUT

TRANSFORMED

RESOURCES

MATERIALS

INFORMATION

CUSTOMERS

FACILITIES STAFF

INPUT

TRANSFORMING

RESOURCES

OPERATIONS

STRATEGY

DESIGN

PLANNING ANDCONTROL

IMPROVEMENT

OPERATIONS

STRATEGIC

OBJECTIVES

THE

OPERATIONS

COMPETITIVE

ROLE AND

POSITION

Operations

strategy

Operations

management


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31

Operations Activities as Feedback LoopsOperations Activities as Feedback Loops

Design activities set the basic configu ration

Planning & control activiti es guide short/medium term changes

Planning & Control

Design

Improvement

Improvement activities guide longer term changes

32

Case StudyCase Study – – Central Design ServicesCentral Design Services

•• What are the inputs, transformation processes andWhat are the inputs, transformation processes and

outputs?outputs?

•• Why is operations management important to CDS?Why is operations management important to CDS?

•• Draw the four Vs forDraw the four Vs for CDSCDS’’ss products & services.products & services.

•• What would you recommend to CDS if you were askedWhat would you recommend to CDS if you were asked

to advise on improving its operations?to advise on improving i ts operations?


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Process DesignProcess Design

Processes that Design

Products

and Services

Concept Generation

Screening

Preliminary Design

Evaluation and

Improvement

Prototyping and final design

Processes that

Produce Products

and Services

Supply Network Design

Layout

and Flow

Process

TechnologyJob

Design

34

Nature and purpose of the design activityNature and purpose of the design activi ty

Products, services and the processes which

produce them all have to be designed

Decisions taken during the design of a product or

service will have an impact on the decisions taken

during the design of the process which produces

those products or services and vice versa.


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35

The pThe purposeurpose of design is to satisfyof design is to satisfy

customerscustomers

Product designers wil l seek to create things that:

- are aesthetically pleasing;

- satisfy needs;

- meet expectations;

- perform well;

- are reliable;

- are easy to manufacture and deliver.

Operations managers tend to focus on the design of thetransformation process

36

Design of the

Service

Design of the

Process

Design of the

ProductDesign of the

Process

In most service operations theoverlap between service and

process design is implicit in the

nature of service

In manufacturing operationsoverlapping the activities of

product and process design is

beneficial


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Decisions taken during the design of the product or service will have animpact on the process that produces them and vice versa

Products and servicesshould be designed in

such a way that they canbe created effectively

Processes should bedesigned so they can

create all products andservices which the

operation is likely tointroduce

Designing theProduct or Service

Designing theProcesses thatProduce the Product o r

Service

38

Finished designs which are:

High quality

Speedily produced

Dependably delivered

Produced flexibly

Low cost

TRANSFORMED

RESOURCES

Technical information

Market information

Time information

TRANSFORMING

RESOURCES

Test and design

equipment

Design and technicalstaff

THE DESIGN

ACTIVITYOUTPUTINPUTS


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Relatively early in the design activ ity theRelatively early in the design activi ty the

decisions taken will commit the operationdecisions taken will commit the operation

to costs which will be incurred later to costs which will be incurred later

100%

0%

Percentage of final

product cost

committed by the

design

Percentage of

design costs

incurred

Start of the

design activity

Finish of the

design activity

40

Broad categories of evaluation criteria for assessingBroad categories of evaluation cr iteria for assessing

design optionsdesign options

FEASIBILITY

How difficult is

it?

ACCEPTABILITY

How worthwhile is

it?

VULNERABILITY

What could go

wrong?

THE CRITERIA FOR ASSESSING

PROPOSED DESIGN OPTIONS

What INVESTMENT bot hmanagerial and financial

will be needed?

What RETURNin terms of f inancial and

performance improvementwill it give?

What RISKSdo we run if things

go wrong?


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41

Operation (an activity t hat

directly adds value)

Inspection (a check ofsome sort)

Transport (a movement ofsome thing)

Delay (a wait, e.g. for materials)

Storage (deliberate storage, as

opposed to a d elay)

Process mapping symbols derived

from “ Scientific Management”

Decision (exercising disc retion)

Process mapping symbols derived from

Systems Analysis

Direction of flow

Input or Output from the process

Act ivi ty

Beginning or end of process

Process Mapping SymbolsProcess Mapping Symbols

42

Standard sandwich process

Raw

Materials Assembl y Stored

SandwichesMove toOutlets

StoredSandwiches

SellTake Payment

Customer Request

Raw

Materials Assembl y Take Payment

Customer Request

Customised sandwich - old process

Process MappingProcess Mapping – – An Example An Example


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43

Prepare Assembl e asrequiredTake

payment

Bread and

Base filling

Stored

“Bases”

Fillings

Assembl e who le

sandwich

Customer Request

Use standard

“base”?

Assembl e fro m

standard “base”

No

Yes

The operation of making andselling customised sandwiches

The outline process of making andselling customised sandwiches

The detailed pr ocess of

assembling customised

sandwiches

Sandwich materials

and customers

Customers

“assembled” to

sandwiches

44

Bread and Base

filling

Assembl y of

“sandwich

bases”

Stored “Bases”

Fillings

Assemble whole

sandwich

Take

Payment

Customer Request

Customised sandwich new

process

Use standard

“base”?

Assembl e from

standard “base”

No

Yes


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Left hand Right hand

Pick up base plate

Insert into fixture

Pick up two supports

Locate back plate

Pick up screws

Locate screws

Pick up air driver

Fasten screws

Replace air driver

Pick up centre assembly

Inspect centre assembly

Locate and fix

Switch on timer

Wait to end test

Inspect

Transfer grasp

Put aside

Wait

Hold base plate

Wait

Hold centre assembly

Inspect

Transfer grasp

Wait

‘‘Two handedTwo handed’’ process chartprocess chart

46

VolumeLow High VolumeLow High

V a r i e t y

L o w

H i g h

V a r i e t y

L o w

H i g h

Project

Jobbing

Batch

Mass

Contin--uous

Professionalservice

Service shop

Mass service

Service processService processtypestypes

ManufacturingManufacturingprocess typesprocess types


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Project ProcessesProject Processes

•• OneOne--off,off, ccomplexomplex, large scale, high work content, large scale, high work content ““ productsproducts””

•• SpeciallySpecially made, every onemade, every one customicustomisseded

•• Defined start and fin ish:Defined start and fi nish: tt imeime, quality and cost objectives, quality and cost objectives

•• Many different skills have to be coordinatedMany different skills have to be coordinated

•• Fixed position layout, resources brought to productFixed position layout, resources brought to product

48

Jobbing ProcessesJobbing Processes

• Very small quantities: “ one-offs”, or on ly a few required

• Specially made. High variety, low repetition. “Strangers”

• Skill requirements are usually very broad

• Skilled jobber, or team of jobbers complete whole product

• Fixed position or process layout (routing decided by jobbers)


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49

Batch ProcessesBatch Processes

• Higher volumes and lower variety than for jobbing

• Standard products, repeating demand. But can make specials

• Specialized, narrower skills

• Set-ups (changeovers) at each stage of production

• Process or cellular layout, predetermined planned routing

50

Mass (Line)Mass (Line) ProcessesProcesses

• Higher volumes than Batch

• Standard, repeat products (“ runners” )

• Low and/or narrow skills

• No set-ups, or almost instantaneous ones

• Cell or product layout: a fixed sequence of operations


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Continuous ProcessContinuous Process

• Extremely high volumes and low variety: often single product

• Standard, repeat products (“ runners” )

• Highly captial-intensive and automated

• Few changeovers required

• Difficult and expensive to start and stop the process

• Product layout: usually flow along conveyors or pipes

52

The Product/Process MatrixThe Product/Process Matrix

Low volume

Low

standardisation

INCREASING VARIETY

Low volume

Multiple products

Higher volume

Few major

products

High volume

High

standardisation

PRODUCT CHARACTERISTICS

INCREASING VOLUME

Jumbledflow

(jobbing)

Disconnectedline flow

(batch)

Connectedline flow(mass )

Smooth f low(Continuous) P

R O C E S S C H A

R A C T E R I S T I C S

Randomflow

(project)


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Low volume

Low

standardisation

INCREASING VARIETY

Low volume

Multiple products

Higher volume

Few major

products

High volume

High

standardisation


INCREASING VOLUME

Too much

flexibility so high

costs

Too little

flexibility so high

costs

Jumbledflow

(jobbing)

Disconnectedline flow(batch)

Connected

line flow(mass )


R O C E S

S C H A R A C T E R I S T I C S

Randomflow

(project)

54


Low volume

Low

standardisation

INCREASING VARIETY

Low volume

Multiple products

Higher volume

Few major

products

High volume

High

standardisation


INCREASING VOLUME

Machine

tool maker

Custom

furniture

maker

Automobi le

factory

Petro-

chemical

refinery

Jumbledflow

(jobbing)

Disconnectedline flow

(batch)

Connectedline flow(mass )


R O C E S S C H A

R A C T E R I S T I C S

Randomflow

(project)


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Low volume

Low

standardization

INCREASING VARIETY

Low volume

Multiple products

Higher volume

Few major

products

High volume

High

standardization


INCREASING VOLUME

Customer

service

branch

Investment

banking

Bank call

centre

Credit card

processing

Jumbledflow

(jobbing)

Disconnectedline flow(batch)

Connected

line flow(mass )

Smooth f low(Continuous)

P R O C E S

S

C H A R A C T E R I S T I C S

Randomflow

(project)

56

Deviating f rom theDeviating f rom the ‘‘naturalnatural ’’ diagonal on thediagonal on the

productproduct--process matrix has consequences forprocess matrix has consequences forcost and flexibilitycost and flexibility

Project

Jobbing

Batch

Mass

Continuous

Professionalservice

ServiceShop

Massservice

None

None

Less processflexibilitythan is

needed sohigh cost

More processflexibility

than isneeded sohigh cost

The ‘natural’ line of fit of processto volume/variety characteristics

Manufacturingoperations process

types

Service operationsprocess types

Variety

Volume


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57

Case StudyCase Study – – Central Evaluation CentreCentral Evaluation Centre

Processing UnitProcessing Unit

•• Construct a Process Map for the new applicationsConstruct a Process Map for the new applications

•• Calculate the cycle time for the processCalculate the cycle time for the process

•• Calculate the number of people involved in theCalculate the number of people involved in the

processing of an applicationprocessing of an application

•• Why is it difficult to locate an individual file?Why is it difficult to locate an individual file?

•• What are the prob lems?What are the prob lems?

•• What suggestions would you make to Veronique toWhat suggestions would you make to Veronique to

improve her process?improve her process?

58

CECPU Process MapCECPU Process Map


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59

Process Cycle TimeProcess Cycle Time

The total work in progress (applications i n the in-trays) = 600 + (4 × 130) + 220= 1340 applications

Average th roughput tim e = 36 working days

Therefore, from Little’s Law: Throughput time = cycle time × work in progress (and working inhours)

36 × 7 = cycle time × 1340

Therefore, cyc le time = (36 × 7)/1340 = 0.188 hours

In other words, a fully processed application form i s emerging from the process every 0.188hours.

That is, in a 35 hour week, the Centre will process 35/0.188 = 186.17 applications per week

This is an im portant findi ng because 200 applications per week are entering the process, but

only 186.17 applications per week are emerging from the pro cess. In other words, inventor y

must be building up within the process.

60

Throughput (TH) = Work in process (WIP) × Cycle time (CT)

LittleLittle’’s Laws Law

Cycle time =

2 minutes

Throughput time = ?

WIP = 10

Throughput time = 10 × 2 minutes= 20 minutes

Also st ated as :

“ The average number of customers in a stablesystem (over some t ime interval) is equal to t heir average

arrival rate, multiplied by their average time in the system. “


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61

Throughput (TH) = Work in process (WIP) × Cycle time (CT)

LittleLittle’’s Laws Law

Throughput time = 5 days × 7 hours = 35 hours

500 exam scripts need to be marked in 5 days (working 7 hours a day).

It takes 1 hour to mark a script. How many markers are needed?

35 hours = 500 scripts × Cycle time

Cycle time = 35 hours500 scripts

= 0.07 hours

Number of markers = Work content = 1 hour = 14.29Cycle time 0.07

62

LittleLittle’’s Laws Law – – An Example An Example

Think of a tank of water with a constant in flow and a constant,

identical outflo w.

In this analogy, the input tap represents orders coming to the

factory. The outlet tap represents finished product. Water in the

tank represents WIP inventory. Average throughput or dwell time

in the tank i s 100 minutes.

(If we set the level to 100 gallons and maintain the same flow,

throughput time is only 10 minutes).


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63

Throughput efficiency =Work content

Throughput time× 100

Throughput efficiency is the work content of whatever is being

processed as a percentage of its throughput time

Throughput efficiencyThroughput efficiency

64

LittleLittle’’s Laws Law – – More ExamplesMore Examples

• At the supermarket a checkout operator has on average 4

customers and customers arrive every 2 minutes. Therefore

customers on average will be in line for 8 minutes.

• A restaurant holds about 60 people, and the average person

will be in there about 2 hours, so they're entering at the rate of

about 30 people an hour. The queue for the restaurant has 30

people in it, so that means I'll wait about an hour for a table.

• A fi nancial services organisat ion receives on average 160

enquiries per day about its products and services. If it takesaround 30 minutes to process each enquiry and management

want to ensure each enquiry is responded to on the same day

its received, how many people are needed to process the

enquiries?

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BS-OM Session 1c

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