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o p e r a t !o n s
m a n a g e m e n t
PirzadaJanuary 31, 2012
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Assignment 1
Due next Tuesday
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Outsourcing1111111111111111111111111111111111111111111111111111
Smart Factories
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RFIDs
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Uses of RFIDs
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http://www.ccint.net/services.phpCompetitive capabilities International
http://www.ccint.net/services.phphttp://www.ccint.net/services.php8/2/2019 OM Chapter 2 Spring 2012
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operat!ons strategy
competitiveness
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Objectives
Operations Strategy
Competitive Dimensions
Order Qualifiers and Winners
Strategy Design Process
A Framework for Manufacturing Strategy
Service Strategy Capacity Capabilities
Productivity Measures
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Strategy
"Strategy is the directionand scope of
an organization over the long-term:
which achieves advantage for the
organization through its
configuration ofresources within a
challenging environment, to meetthe needs ofmarkets and to fulfill
stakeholderexpectations".
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Strategy
What resources (skills, assets, finance, relationships, technical
competence, facilities) are required in order to be able to
compete? (resources)?
What external, environmental factors affect the businesses'ability to compete? (environment)?
What are the values and expectations of those who have
power in and around the business? (stakeholders)
http://tutor2u.net/business/strategy/what_is_strategy.htm
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Competitive Dimensions
Cost or Price Make the Product or Deliver the Service Cheap
Quality
Make a Great Product or Deliver a Great Service
Delivery Speed Make the Product or Deliver the Service Quickly
Delivery Reliability
Deliver It When Promised
Coping with Changes in Demand
Change Its Volume Flexibility and New Product Introduction Speed
Change It
Other Product-Specific Criteria
Support It
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Trade-offs
For example, if we reduce costs by reducing productquality inspections, we might reduce product quality.
For example, if we improve customer service problem
solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient atdealing with commonly occurring problems.
Cost
Quality
DeliveryFlexibility
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Plant-within-a-Plant-I
A facility that is attempts too much or is optimized for the
wrong task can be a millstone.
The plant layout has regions that become, essentially,
standalone factories. Each has (at least substantially) its
own area and infrastructure such as maintenance,
purchasing and engineering.
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Plant-within-a-Plant-II
Example
Two major product lines had
conflicting demands from
customers and conflictingdemands on the factory's
infrastructure.
In addition, one of the
product lines had highlydissimilar processes. The
factory was split into three
Focused Factories, as shown.
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Reading Assignment 2
Read the case ofStraddling on Page 27-28.
Find another case from Web.
Get ready for discussion in the next class.
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Order Qualifiers and Winners
Order qualifiers are the basic criteria that permit thefirms products to be considered as candidates for purchase bycustomers
Order winners are the criteria that differentiates theproducts and services of one firm from another
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Service Breakthroughs
Abrand name can be an order
qualifier
Repair services can beorder
winners
Examples: Warranty, Roadside
Assistance, Leases, etc
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Kaplan and Nortons Generic Strategy Map-I
- Financial Perspective
The Productivity Strategy is generally made up from two components:
Improve cost structure: Lower direct and indirect costs
Increase asset utilization: Reduce working and fixed capital
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Kaplan and Nortons Generic Strategy Map-II
Revenue Growth Strategy is generally made up fromtwo components:
Build the franchise: Develop new sources of revenue
Increase customer value: Work with existing customers to
expand relationships with company
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Kaplan and Nortons Generic Strategy Map-I
- Financial Perspective
The Productivity Strategy is generally made up from two components:
Improve cost structure: Lower direct and indirect costs
Increase asset utilization: Reduce working and fixed capital
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Kaplan and Nortons Generic Strategy Map-I
- Financial Perspective
The Productivity Strategy is generally made up from two components:
Improve cost structure: Lower direct and indirect costs
Increase asset utilization: Reduce working and fixed capital
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Kaplan and Nortons Generic Strategy Map-III
- Customer Perspective
The 3 suggested ways as means of differentiating a
company from others in a marketplace:
Product leadership
Customer intimacy
Operational excellence
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Kaplan and Nortons Generic Strategy Map-IV
- Learning & Growth Perspective
There are 3 principle categories of intangible assets needed
for learning:
Strategic competencies
Strategic technologies
Climate for action
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Kaplan and Nortons Generic Strategy Map-IV
- Learning & Growth Perspective
There are 3 principle categories of intangible assets needed
for learning:
Strategic competencies
Strategic technologies
Climate for action
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Developing a Manufacturing Strategy
Segmentthe market according to the product group
Identify product requirements1, demand patterns2, and profit
margins3 of each group
Determine order qualifiers and winners for each group
Convert order winners into specific performance
requirements
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Service Strategy Capacity Capabilities
Process-based Capacities that transforms material or information and provide
advantages on dimensions of cost and quality
Systems-based
Capacities that are broad-based involving the entire operatingsystem and provide advantages of short lead times and customize ondemand
Organization-based Capacities that are difficult to replicate and provide abilities to
master new technologies
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Productivity Total and Partial
A common measure on how well resources are being used.
Defined as the following ratio: Outputs
Inputs
Total Productivity = OutputsInputs
or = Goods and services produced
All resources used
Partial Productivity =Output or Output or Output or Output
Labor Capital Materials Energy
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Multifactor Productivity
Multifactor Productivity =
Output .
Labor + Capital + Energy
or
Output .
Labor + Capital + Materials
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Example
Problem:
Your service employees have used a total of 2400 hours oflabor this week to process 560 insurance forms. Last week
the same crew used only 2000 hours of labor to process 480forms. Has productivity increased or decreased?
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Example
Answer:
Last weeks productivity = 480/2000 = 0.24.
This weeks productivity is = 560/2400 = 0.23.
So, productivity has decreased slightly.
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Definitions
- It is all becoming a great manager
Operations management (OM) is defined as the design,
operation, and improvement of the systemsthat create and
deliver the firms primary products and services.
It is getting the dayto-day work done quickly,
efficiently, without errors and at low cost.
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Definitions
Efficiencymeansdoing something at the lowest possible cost.
(- at smallest input).
Effectivenessmeansdoing the right thing to creat the most
value for the company.
Value- Quality/ price
Smart management can achieve high value that is key to
corporate competitiveness .
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Reasons for Studying OM
Provides:
Understanding of modern approaches to managing
operations.
Systematic way of looking at organizational processes.
Career opportunities
Tools of Operations Management are useful in many other
functions of business (daily life).
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Transformations
Physical- manufacturing
Locational- transportation
Exchange- retailing
Storage- warehousing
Physiological- health care
Informational- telecommunications
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Services or Goods?
A service is an intangible process.
Service facility and direct customers at same location.
Direct involvement of customer.
If you drop it on your foot, it wont hurt you.
(Good or service?)
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Core Services
Core services are basic things that customers want
from products they purchase
Value-added services features other than essentialyrequired in the product or services that make the
customers life easier. Value added services build
relationships that generates loyal customers.
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Value-added services
Information
- Critical data on product performance, process
parameters e.g. quality data material property data.
Problem solving
- Troubleshooting in operations and quality
Sales support
- Demonstrating technology, equipment
Field support.- replacing defective parts, replenish stocks
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Historical Development of OM
See Exhibit 1.4 on page 16
Recent Concepts
JIT Just in time manufacturing aiming at reducing of inventoriesTQC Total quality control for eliminating of wastes
BPR Business Process reengineering making radical changes
MRP/ERP Supply chain Management
E-Commerce On-line business
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Current Issues
Contract manufacturing
Optimizing global business
Co-production
Managing customer touch points
Raising awareness
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Core Services Performance Objectives
Speed Quality
Flexibility Price
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The Progressive Corporation
commonly known as the
Progressive Casualty Insurance Company
Business Vehicle Insurance
Headquarters: Mayfield Village, Ohio, U.S.
Revenue: $15 Billion USD (2010)
Employees: 27,250 (2010)
www.progressive.com
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Combined Ratio Analysis
Combined Ratio Analysis
(expenses + claims payouts) / insurance premium
Progressive 96 percent
Others 102 percent (recover from insurance)
Introduced a new concepts!
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Concepts
Immediate response claims handling short cycle time
24-7 service
Inspection within 9 hours
A check at the spot
Faster service
Less hustle
Reduce cost to progressive10,000 claims daily
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Pay As You Drive insurance
- also generically known as usage-based insurance (1990- )
Snapshot : Voluntary discount program where drivers can save
money on their car insurance by sharing their driving habits
with Progressive.
Best for people who drive less, in safer ways and duringsafer
times of day.
Making changes to their driving habits can lead to bigger
discounts .
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