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The Operations Function
Prepared by
Boman Moradian
Reference
Operations Management by Roger G. Schroeder
Operations Management by N Slack, S Chambers, C arland, ! arrison, R"ohnston
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Operations as a System Operations can be de#ned as a transformation
system that con$erts inputs into outputs
Inputs Outputs
%nergy Goods or
Materials Ser$ices
&abo'r
Capital(nformation
Con$ersion Process ) Methods and Proced'res
Conversionprocess
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Operations as a SystemOperation Inputs Outputs
Bank *ellers, Sta+, %'ipment,-acilities
&oans, eposits,Safekeeping
Resta'rant Cooks, /aiters, %'ipment,-ood, -acilities
Meals, %ntertainment,Satis#ed C'stomers
ospital octors, N'rses, Sta+,%'ipment, -acilities
ealth Ser$ices,ealthy Patients
!irline Planes, -acilities, Pilots,!ttendants, Maint Sta+,%nergy
*ransportation of Peopleand Goods
0ni$ersity -ac'lty, Sta+, &ibrary,%'ipment
%d'cated St'dents,Research
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Operations as a System epartmental Stores1
*ransporter1
*elephone Ser$ice Pro$ider1
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Operations as a System
Mktg
Mr Boman K
Moradian:
Mr Boman K
Moradian:
%ngg
R
-inance!cco'nts M(S
TransformationSystem
S'ppliers
C'stomers
CompetitorsGo$ernment
Society
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Outputs
P're Goods P're Ser$icesTangible Intangible
Output can be stored Output cannot be stored
Output can be resoldNo resale possible
Output can be transported Cannot be transported
Production precedes usage Simultaneous usage
Low customer contact High customer contact
Output can be demonstrated Output does not eist
!uality is e"ident !uality is #udged
Capital intensi"e Labour intensi"e
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Outputs
P're Goods P're Ser$ices
Cr'de oil prod'ctionSpecialist machines man'fact'rer
-ast food resta'rant
Comp'ter systems
!'to maintenance
airc'tManagement cons'ltancy
Psychotherapyclinic
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Characteristics of Outputs 2ol'me
2ariety
2ariation in demand egree of c'stomer contact
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Characteristics of Outputs2ol'me
Low High
Low $epetition High%ultis&ill S&ills Specialisation
Low Systemisation High
Labour Intensi"eness Capital
High 'nit Cost Low
(ourmet restaurant Fast food
Tai ser"ice %ass transport
(enerator factory T) factory
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Characteristics of Outputs2ariety
Low High
Standardised Systemisation FleibleLow 'nit Cost High
Standardised Customer needs)ary
$eadymade garment Tailor
*eans shop +epartment stores
Financial audit Ta ad"ice
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Characteristics of Outputs2ariations in emand
Low High
High 'tilisation of resources LowLow 'nit Cost High
Consulting ,udits
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Characteristics of OutputsC'stomer Contact
Low HighHigh Cycle time to manufacture Low
Low S&ills High
High Systemisation Low
Low 'nit Cost High
%ost manufacturing %ost ser"ices
Fast food (ourmet restaurant
+istance learning %usic teacher
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Cross-Functional +ecision
%a&ing Marketing
/ho is the c'stomer1 /hat does the c'stomer
need1 3'ality management
Market si4e1 Capacity, *ype of processes
istrib'tion channel1 (n$entory, /here to stock
Ne5 prod'ct de$elopment1 Cross6f'nctional teams
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Cross-Functional +ecision
%a&ing -inance and !cco'nting
Capital
Capacity, !'tomation, Process selection,(n$entory
%7ciency Process selection, 2al'e6added
Cash -lo5 (n$entory
Performance Meas'rement Costing system
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Cross-Functional +ecision
%a&ing 'man Reso'rces
Skill le$el of employees
Process type selection, !'tomation N'mber of employees
Capacity, Sched'ling decisions "ob design
Process, *echnology choice
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Cross-Functional +ecision
%a&ing (nformation Systems
Soft5are e$elopment
-orecasting, Capacity, 3'ality, (n$entorycontrol, Sched'ling, Material !cco'nting ard5are !c'isition
!'tomation s'pport, Soft5are operation
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Historical Summary of O% 89::s ; Craftsmen
898:s ; Principles of Scienti#c Management :s ; Operations Research < Manyresearchers
89?:s ; 0se of Comp'ters in b'siness < (BM
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Historical Summary of O% 89@:s ; "(* < Ohno
3'ality Circles
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The $ole of Operations Function !s the implementer of b'siness strategy
!s a support to b'siness strategy
!s the driver of b'siness strategy
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*udging Operation.s Contribution
Stop holdingtheorganisationbac&
/e as good ascompetitors
/e the /est inthe industry
$ede0ne
industry.sepectations
1ternally
supporti"e
Internallysupporti"e
1ternallyneutral
Internallyneutral
Stage 2 Stage 3 Stage 4 Stage 5 Implementer Supporter +ri"er
Operations
,d"antage
Lin&Strategy
,dopt /estpractices
Correct worstproblems
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Hayes-6heelwright 5-Stage
%odel Stage 8 ; (nternal ne'trality
(n5ard looking, reacti$e
No originality, air, competiti$e dri$e !$oiding bigger mistakes Necessary e$il
Stage D ; %Eternal ne'trality Begin comparing itself Not yet creati$e Not holding the company back
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Hayes-6heelwright 5-Stage
%odel Stage = ; (nternally s'pporti$e
Broadly 'p 5ith the Best
!spire to be the Best Organise and de$elop reso'rces to eEcel and
compete
Stage F ; %Eternally s'pporti$e
One step aheadH of competitors Creati$e and proacti$e Capable of adaptation as markets change
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Operations Strategy 7Competiti"eness
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Operations Strategy 7
Competiti"eness Operations Priorities
6 Cost
6 Prod'ct 'ality6 Reliability
6 eli$ery speed
6 eli$ery reliability
6 Coping 5ith changes in demand
6 Range of prod'cts
6 Ne5 prod'ct introd'ction speed
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Operations Strategy 7
Competiti"eness Cost
Market $ery large
Prod'ct commodity6likeI c'stomers cannotdisting'ish prod'cts of one #rm from thoseof another
Competition is #erce
-ail're rate high !fter all, there can only be one lo56cost
prod'cer, 5hich 's'ally establishes theselling price
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Operations Strategy 7
Competiti"eness Product 8uality
Goal in establishing the proper le$el ofprod'ct 'ality is to foc's on there'irement of c'stomers
Je.g. childKs #rst t5o 5heeled bicycle $Asbicycle of a 5orld6class cyclistL
!fter sales s'pport
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Operations Strategy 7
Competiti"eness $eliability
%rror6free prod'cts
Prod'ct speci#cations m'st match theintended 'se
!dherence to tolerances essentialI process'ality is critical
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Operations Strategy 7
Competiti"eness +eli"ery speed
!bility to deli$er more 'ickly thancompetitors
Better prices possible
More orders possible
-'nction of in$entory, re5ork, distance
tra$eled, m'lti6skilled operators, set6'ptimes, do5ntimes, etc.
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Operations Strategy 7
Competiti"eness +eli"ery reliability
!bility of the #rm to s'pply on or before apromised deli$ery d'e dateI credibility iss'e
Penalties a$oided
Cancellations a$oided
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Operations Strategy 7
Competiti"eness Coping with changes in demand
!bility to e+ecti$ely deal 5ith dynamicmarket demand o$er the long term
(n$estment in ne5 technology
(n$estment in capacity
B'+er capacity
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Operations Strategy 7
Competiti"eness $ange of products
C'stomisation
i+erent market segments addressed Cope 5ith changes in demand
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Operations Strategy 7
Competiti"eness New product introduction speed
-irst entrant ad$antage
Organisation Str'ct'res Jmore than ones'periorL
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Order 5inners A Order 'ali#ers
Core competencies 1
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Order !uali0ers
Companies need to be as good as competitors
Order 6innersCompanies need to be better than competitors
Both are essential.
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T l i
Criteria Small Large
Product !uality 49 :;
Price 99 4;
,fter-Sales-Ser"ice 2; 2;
+eli"ery $eliability !! !!
$ange of Products ! !
Customer $elations ! !!