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OPERATIONSOPERATIONS
MANAGEMENTMANAGEMENT
O MPSTRATEGY, COMPETITIVENESS & PRODUCTIVITY
By: -By: -HAKEEMURREHMANHAKEEMURREHMAN
PCBAUCPPCBAUCP
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FOUR STEPS FORFOUR STEPS FOR
STRATEGY FORMULATIONSTRATEGY FORMULATIONn DEFINING A PRIMARY TASK
n What is the firm in the business of doing?
n ASSESSING CORE COMPETENCIESn What does the firm do better than anyone
else?
n DETERMINING ORDER WINNERS ANDORDER QUALIFIERSn What wins the order?n What qualifies an item to be considered for
purchase?
n POSITIONING THE FIRMn How will the firm compete?
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STRATEGY/MISSION/TACTICSTRATEGY/MISSION/TACTICSS
n STRATEGY: Provides direction for achieving amission
n MISSION: The reason for the existence of anorganization
n MISSION STATEMENT: States the
purpose of an organizationn GOALS: provide detail and scope of the
mission
n TACTICS: The methods and actions taken toaccomplish strategies
Strategy TacticsMission
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MAKINGMAKING
Mission
Goals
Organizational Strategies
Functional Goals
FinanceStrategies
OperationsStrategies
MarketingStrategies
Tactics Tactics Tactics
Operating
procedures
Operating
procedures
Operating
procedures
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STRATEGY EXAMPLESTRATEGY EXAMPLE
You are a business student at PCBA. You wouldlike to have a career in business, have a good
job, and earn enough income to livecomfortably
Mission: Live a good lifeGoal: Successful career, good incomeStrategy: Obtain a Business Degree from PCBA.Tactics: Select a business field of your interest and high
market valueOperations: Register, buy books, take courses study, graduate,apply & get job
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OPERATIONS STRATEGYOPERATIONS STRATEGY
nThe approach, consistent withorganization strategy that is used toguide the operations function.
n Organizational strategy is:n an over all big picture for the whole
organization. Longer in time horizonn Less detailed and broader in scope.
n Operational Strategy is:n Narrower in scope and in more detailn Prepared by middle management.n Should be in line with the Organization
strategy
STRATEGY DESIGN
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STRATEGY DESIGNPROCESSPROCESS
ExampleStrategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processesand Infrastructure
More Product
Increase Org.Size
Increase Production Capacity
Build New Factory
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FOUR STEPS FORFOUR STEPS FORSTRATEGY FORMULATIONSTRATEGY FORMULATIONn Defining a primary task
n What is the firm in the business ofdoing?
n
Assessing core com petenciesn What does the firm do bet ter than
anyone else?n Determ ining order winners and order
qualifiersn What wins the order?n What qualifies an item to be
considered for purchase?
n Posit ioning the f irm
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COMPETITIVENESSCOMPETITIVENESS
Competitiveness is howeffectively an organization
meets the needs andrequirements of customers
relative to other(Competitors) organizationsthat offer similar goods or
services.
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COMPETITIVE DIMENSIONSCOMPETITIVE DIMENSIONSn Cost or Price
n Make the Product or Deliver the ServiceCheap
n Qualityn Make a Great Product or Deliver a Great
Servicen Delivery Speed
n Make the Product or Deliver the ServiceQuickly
n
Delivery Reliabilityn Deliver It When Promised
n Coping with Changes in Demandn Change Its Volume
n Flexibility and New Product
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DEALING WITH TRADE-DEALING WITH TRADE-
OFFSOFFS
Cost
Quality
DeliveryFlexibility
For example, if we
improve customer serviceproblem solving by cross-training personnel to dealwith a wider-range ofproblems, they maybecome less efficient atdealing with commonlyoccurring problems.
For example, if we
improve customer serviceproblem solving by cross-training personnel to dealwith a wider-range ofproblems, they may
become less efficient atdealing with commonlyoccurring problems.
For example, if we reduce costs by reducing productquality inspections, we might reduce product quality.
For example, if we reduce costs by reducing productquality inspections, we might reduce product quality.
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FOUR STEPS FORFOUR STEPS FORSTRATEGY FORMULATIONSTRATEGY FORMULATIONn Defining a primary task
n What is the firm in the business ofdoing?
n
Assessing core com petenciesn What does the firm do bet ter than
anyone else?n Determ ining order winners and order
qualifiersn What wins the order?n What qualifies an item to be
considered for purchase?
n Posit ioning the f irm
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ORDER QUALIFIERS ANDORDER QUALIFIERS AND
WINNERSWINNERSn ORDER QUALIFIERS?
nThey are the basic criteria that permit the
firms products to be considered ascandidates for purchase by customers.
n ORDER WINNERS?nThey are the criteria that differentiates
the products and services of one firmfrom another.
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BREAKTHROUGHSBREAKTHROUGHS
n A brand namecar can be anorder
qualifier
Repair services can be order winners
Examples: Warranty, Roadside Assistance,Leases, etc.
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OPERATIONS STRATEGY:TYPES OF PROCESS
q
MAKE TO STOCK: Producing in anticipation of demand. (e.g., Televisions, Mobiles,Books, airline flights, etc)
Critical operations issues: Forecasting future demand, maintaininginventory levels
qMAKE TO ORDER: Producing to customer specifications after an order has been
received. (e.g., manufacturing furniture like bed, chairs etc.) Critical operations issues: Customer customization, minimizing the
time required to complete the order
qASSEMBLE TO ORDER (BUILD TO ORDER): adding options according to customer specifications. (e.g.,
Computer systems, Industrial equipments, etc.) Critical operations issues: minimizing the inventory level of standard
components, minimizing the delivery time of the finishedproducts.
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OPERATIONS STRATEGY: PRODUCTS AND SERVICES
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PROCESSES ANDPROCESSES AND
TECHNOLOGYTECHNOLOGYn PROJECTn one-at-a-time production of a product
to customer ordern BATCH PRODUCTION
n systems process many different jobs atthe same time in groups (or batches)
n MASS PRODUCTIONn
large volumes of a standard product fora mass marketn CONTINUOUS PRODUCTION
n used for very high volume commodity
products
THE PRODUCT PROCESSTHE PRODUCT PROCESS
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THE PRODUCT-PROCESSTHE PRODUCT-PROCESSMATRIXMATRIX
High
High
Low
Low STANDARDIZATION
VOLUME
Projects
BatchProduction
MassProduction
ContinuousProduction
The most important characteristics (in terms of process choice) are degree ofStandardization and Demand Volume.
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HIGH CONTACTHIGH CONTACT
SERVICESSERVICES
Customer is an essence in theproduction of services.
Scheduling is difficult as customerdemand varies.
Work force attitude effects the
customers view of the services. Examples: Teachers, Doctors, Taxi
drivers
LOW CONTACTLOW CONTACT
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LOW CONTACTLOW CONTACT
SERVICESSERVICES
Customer cannot strongly influencethe process by which the service isprovided.
Standardization makes managerialcontrol easy and straightforward.
Low contact service firms tend to have
a systematic and predictableoperation.
Example: Insurance Company, Post
Office etc.
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SERVICE STRATEGY:SERVICE STRATEGY:PROCESSES AND TECHNOLOGYPROCESSES AND TECHNOLOGY
n PROFESSIONAL SERVICE
n highly customized and very labor intensive (i.e.,Lawyer, Doctor)
n
SERVICE SHOPn customized and labor intensive (i.e., School,
Hospital)
n MASS SERVICE
n
less customized and less labor intensive (i.e.,Banking, Ticket Collectors at sports events andconcerts)
n SERVICE FACTORY
n least customized and least labor intensive (i.e.,Airlines)
THE SERVICE PROCESSTHE SERVICE PROCESS
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THE SERVICE-PROCESSTHE SERVICE-PROCESSMATRIXMATRIX
Low
Low
High
High Customization
LabourIntensity
Professional
Service
ServiceShop
MassService
ServiceFactory
The most important characteristics (in terms of process choice) are degree ofCustomization and Labour Intensity.
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FOUR STEPS FORFOUR STEPS FORSTRATEGY FORMULATIONSTRATEGY FORMULATIONn Defining a primary task
n What is the firm in the business ofdoing?
n Assessing core com petenciesn What does the firm do bet ter than
anyone else?n Determ ining order winners and order
qualifiersn What wins the order?n What qualifies an item to be
considered for purchase?n
Posit ioning the f irm
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OPERATIONS STRATEGY:OPERATIONS STRATEGY:CAPACITY AND FACILITYCAPACITY AND FACILITY
Capacity strategic decisions include:When, how much, and in what
form to alter capacity
Facility strategic decisions include:whether demand should be met
with a few large facilities or withseveral smaller oneswhether facilities should focus on
serving certain geographic
regions, product lines, or
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OPERATIONS STRATEGY:OPERATIONS STRATEGY:
HUMAN RESOURCESHUMAN RESOURCES
n What is skill levels required to operate productionsystem?
n What are training requirements and selectioncriteria?
n What are policies on performance evaluations,compensation, and incentives?
n Will workers be salaried, paid an hourly rate, or paida piece rate?
n Will workers perform individual tasks or work inteams?
n Will they have supervisors or work in self-managedwork groups?
n Will extensive worker training be necessary?n Should workforce be cross-trained?
OPERATIONSOPERATIONS
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OPERATIONSOPERATIONSSTRATEGY: QUALITYSTRATEGY: QUALITY
n What is target level of quality for ourproducts and serv ices?
n How will it be measured?
n What will be the responsibilit ies of thequality department?
n What types of system s will be set up to
ensure quality?n How will quality awareness be
maintained?n How will customer percept ions of
quality be determined?
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n PRODUCTIVITY
n A measure of the effective use of resources, usuallyexpressed as the ratio of output to input
n Productivity ratios are used for:
n Planning workforce requirements
n Scheduling equipment
n Financial analysis
WHAT IS PRODUCTIVITY?WHAT IS PRODUCTIVITY?
Product ivity = Output / Input
EFFECTIVENESS: It is the degree of accomplishment of the objectives that is:
How well a set of result is accomplished?How well are the resources utilized?
Effectiveness is obtaining the desired results. It may reflect output quantities, perceivedquality or both.
EFFICIENCY: (Actual Output / Standard Output)
This occurs when a certain output is obtained with a minimum of inputs.
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EXAMPLE : EFFICIENCYEXAMPLE : EFFICIENCYManagement of a hotel is concerned with laborefficiency, especially when labor is costly. To
determine how efficient labor is in a given situation,management sets an individual standard, a goalreflecting an average workers output per unit of timeunder normal working conditions. Say that the
standard in a cafeteria is the preparation of 200 saladsper hour. If a labor input produces 150 salads per hour,how efficient is the salad operation ?
ANSWER:Labor efficiency = Labor Outputs/Labor Input = 150 salads / 200 salads 100% = 75%
So, compared with the standard, this operation is 75% efficientin the preparation of salads.
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PRODUCTIVITYPRODUCTIVITYn PARTIAL MEASURES
n output/(single input)
n MULTI-FACTORMEASURESn output/(multiple inputs)
n TOTAL MEASUREn output/(total inputs)
Productivity =Output
Inputs
Product ivit y Growt h=Current Period Productivity Previous Period ProductivityPrev ious Period Product iv ity
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M EASURES OF PRODUCTIVITYM EASURES OF PRODUCTIVITY
PARTIAL Output Output Output Output
MEASURES Labor Machine Capital Energy
MULTIFACTOR Output Output
MEASURES Labor + Machine Labor + Capital + Energy
TOTAL Goods or Services Produced
MEASUREAll inputs used to produce them
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EXAMPLE OF PRODUCTIVITYEXAMPLE OF PRODUCTIVITYMEASUREMENTMEASUREMENT
You have just determined that your serviceemployees 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 480 forms. Is productivityincreasing or decreasing?
ANSWER:Last weeks productivity = 480/2000 =0.24, and this weeks productivity is = 560/2400
= 0.23. So, productivity is decreasing slightly.
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EXAMPLE OF PRODUCTIVITYEXAMPLE OF PRODUCTIVITYMEASUREMENTMEASUREMENT
A company that processes fruits and vegetables isable to produce 400 cases of canned peaches inone-half hour with four workers. What is labour
productivity?
ANSWER:
LabourProductivity = Quantity produced Labour Hours = 400 cases __. 4 workers X (1/2) hour /Worker = 200 cases per labour hour
O O CEXAMPLE OF PRODUCTIVITY
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EXAMPLE OF PRODUCTIVITYEXAMPLE OF PRODUCTIVITYMEASUREMENTMEASUREMENT
A Wrapping paper company produced2,000 rolls of paper one day.Standard price is $1/roll. Labour costwas $160, material cost was $50,and overhead was $320. Determinethe multifactor productivity.
ANSWER: MFP = (2000 Rolls) ($1/roll) $160+$50+$320 = 3.77 rolls per dollar
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FACTORS AFFECTINGFACTORS AFFECTINGPRODUCTIVITYPRODUCTIVITY
CAPITAL QUALITY
TECHNOLOGY MANAGEMENT
BOTTLENECK OPERATIONS
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BOTTLENECK OPERATIONBOTTLENECK OPERATION
Machine #2Machine #2 BottleneckOperation
BottleneckOperation
Machine #1Machine #1
Machine #3Machine #3
Machine #4Machine #4
10/hr
10/hr
10/hr
10/hr
30/hr
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QUESTIONQUESTION
SS