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Trends and IssuesIn

Operations Management-Prof. M. Ray

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Operations Management

Operations management is defined as

the design , operation , andimprovement of the systems thatcreate and deliver the firms primaryproducts and services .

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Why Study Operations Management?

OperationsManagement

Business Education/ Career Opportunities

Systematic Approachto Org. Processes

Increase CompetitiveAdvantage/Survival

Cross-FunctionalApplications

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Current Trends

96 of the top 100 industries in the U.S. have large $worth of exports. Exporting industries arecharacterized by early ongoing investments in

advanced product and process technologies.Productivity is increasing and has become a basis forcompetition. Success domestically and globally isdependent on the ability to compete on many fronts,

including operations (e.g., internet - easy to findpotential customers, but hard to deliver)Outsourcing of manufacturing and services (e.g., Indiaand China) is accelerating.

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Factors Affecting a Firm's Ability to Ward off Imports and/or Export

Externaltransportation costs logistics resources labor supply, capabilities training resources communications public infrastructure

Environmental/socialenvironmental protection health costs labor unions education system consumer tastes retailing capabilities employee

Economic/Politicalexchange rates trade barriers capital costs inflation capital availability social costs/legal funds flows savings rate interest rates minimum wage

Suppliersabilities coordination location competition cooperation

TechnologicalR&D engineering product development process development new products

development process

Corporatestrategy risk avoidance role of functions Fin-Mktg-Mfg-Eng-R&D balance sheet

financial capacity marketing policies export sales competencies Technological sophistication of mgt

Operationscosts/productivity quality delivery cycle delivery reliability flexibility for prod change

flexibility for vol. change New product introduction inventory mgt. Prod. Planning Control Equip. & process tech #, size, location of facilities logistics customer service

information technology

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Operations Decision Making

People Plants Parts Processes

Planning and Control

Materials &Customers

Products &Services

Input Output

Operations Management

Marketing StrategyFinance Strategy

Marketplace

Corporate Strategy

Operations Strategy

The Transformation Process (value adding) 4

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Key OM Concepts

Efficiency - Doing something at the lowestpossible cost

Effectiveness - Doing the right things to createthe most value for the organization

Value - Quality divided by price

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Transformations

Physical--manufacturing

Locational--transportation

Exchange--retailing

Storage--warehousing

Physiological--health care

Informational--telecommunications

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What about McDonalds?

Service or Manufacturing?

The company certainly manufactures tangibleproducts

Why then would we consider McDonalds aservice business?

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Core Factory Services

Core Services are basic things that customerswant from products that they purchase.

QualityFlexibility

Speed

Price (or production cost)

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Value-Added Services

Value-added services differentiate the organizationfrom competitors and build relationships that bindcustomers to the firm in a positive way.

Information

Problem Solving and Field Support

Sales Support

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Development of OM as a Field The Names andEmphasis Change, but the Elements RemainBasically the Same!

ScientificManagement

Moving AssemblyLine

HawthorneStudies

OperationsResearch

HistoricalUnderpinnings

ManufacturingStrategy

TQM &Six Sigma

JIT/LeanManufacturing Business ProcessReengineering

ManufacturingResources Planning

ElectronicEnterprise

Service Qualityand Productivity

Global SupplyChain Mgt.

OMs Emergence

as a Field 13

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Some Current Issues

Implementing/sustaining Quality Management initiatives

Consolidating operations resulting from mergers

Speeding up the time to get new products to marketDeveloping flexible production systems to enable masscustomization of products and services

Developing and integrating new technologies

Managing global supplier, production and distributionnetworks

Outsourcing

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Operations Strategy

Customer Needs

Corporate Strategy

Operations Strategy

Decisions on Processesand Infrastructure

ExampleStrategy Process

More Product

Increase Org. Size

Increase Production Capacity

Build New Factory

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Competitive Dimensions

CostQuality and Reliability

DeliveryFlexibilitySpeedReliability

Coping with Changes in DemandNew Product IntroductionSpeedFlexibility

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Dealing with Trade-offs

Cost

Quality

DeliveryFlexibility

Example II, if we improvecustomer service problemsolving by cross-trainingpersonnel to deal with awider-range of problems,they may become lessefficient at dealing withcommonly occurringproblems.

For example, if we reduce costs by reducing productquality inspections, we might reduce product quality.

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Strategy Begins with PrioritiesConsider the personal computer assembler 1. How would we segment the market according to

product group?2. How would we identify product requirements,

demand patterns, and profit margins for each group?3. How do we identify order winners and order qualifiers

for each group?

4. How do we convert order winners into specificperformance requirements?

Us

(Core competencies )

Competition

(Them) Differentiation

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Four Stages of Service FirmCompetitiveness

Stage I. Available for Service

Stage II. Journeyman

Stage III. Distinctive Competence Achieved

Stage IV. World Class Service Delivery

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U. S. Competitiveness Drivers

Product Developmentspeed development & enhance manufacturability

Waste Reduction (JIT Philosophy)WIP, space, tool costs, and human effort

Improved Customer-Supplier Relationshipsborrowed from Japanese Keiretsu

Improved Leadershipstrong, independent boards of directors

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Productivity

Partial measuresoutput/(single input)

Multi-factor measuresoutput/(multiple inputs)

Total measureoutput/(total inputs)

InputsOutputs

=tyProductivi

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Balanced Scorecard

1. Financial perspective

2. Internal perspective

3. Customer perspective

4. Innovation and learning perspective

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Thanks