Business Services – Operations Management Session 1c.pdf · Business Services – Operations Management Session 1 – Introduction & Overview 1 ... production company Set and props

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Business Services – Operations Management

Session 1 – Introduction & Overview

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Business Services Business Services ––Operations ManagementOperations Management

Facilitator:Facilitator:Dr. Jonathan FarrellDr. Jonathan Farrell


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This EveningThis Evening’’s Programs Program

•• IntroductionsIntroductions•• Unit outlineUnit outline•• Lecture Lecture -- Introduction to Operations ManagementIntroduction to Operations Management•• Case Studies Case Studies –– Concept Design Services, Central Evaluation Unit Concept Design Services, Central Evaluation Unit --

class discussionclass discussion•• LittleLittle’’s Laws Law

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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

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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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Gain an appreciation of technologies available, and how they Gain an appreciation of technologies available, and how they are applied to operations.are applied to operations.

Develop an ability to Develop an ability to integrateintegrate these technologies with these technologies with corporatecorporate and operations and operations strategies.strategies.

RecogniRecognisse how e how successful osuccessful operationsperations mmanagementanagement can lead to can lead to ssustainableustainable ccompetitiveompetitive aadvantagedvantage..

Understand the dynamics of change management and the Understand the dynamics of change management and the effects of changes on organisation culture.effects of changes on organisation culture.

Course ObjectivesCourse Objectives

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The operations function is fashionable!The operations function is fashionable!The consultancy services market

% of world revenues of 40 largest firms

Marketing/sales2

Operations and process management

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Corporate strategy17

IT strategy17

Benefits/Actuarial16

Organizational design11

Financial6

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They are all operations

Retail operation

Back office operation in a

bank

Take-out / restaurant operation

Kitchen unit manufacturing

operation

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A general model of operations managementA general model of operations management

Input transformed resources

Materials Information Customers

Facilities Staff

Input transforming

resources

Planning and control

ImprovementDesign

The operation’s competitive role

and position

Operation’s strategic objectives

Operations strategy

CustomersOutput products

and servicesInput resources

ENVIRONMENT

ENVIRONMENT

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Where does the business get Where does the business get its competitive advantage?its competitive advantage?

The way it The way it produces its produces its goods and goods and services?services?

The way it The way it positions itself positions itself in its market?in its market?

The The ““technologicaltechnological””specification of its specification of its product/service?product/service? Product/

Service Technology

Marketing Operations

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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 fundswhich

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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Core and support functionsCore and support functions

Accounting and finance

function

Human resources function

Others

Engineering/ technical function

Information/ technical (IT)

function

Marketing function

Product/services development function

Operations function

Core functions

Support functions

A broad definition of operations management

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The position of the operations functionThe position of the operations function


Church Call on newcomers

Manage appeals

Retranslate scriptures

Conduct weddings

Advertise on television

Pay suppliers

Design hamburgers

Make hamburgers

Sell to stores Pay staff Design new

furnitureAssemble furniture

Identify needs

Raise capital

Developproduct

Make and distribute

Accounting and finance

Product development

Fast food chain

Furniture manufacturer

Process perspective

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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

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IKEA STORE

Design elegant products which can be flat-packed efficiently

Design a store layout which gives smooth and effective flow

Ensure that the jobs of all staff encourage their contribution to business success

Maintain cleanliness and safety of storage area

Arrange for fast replenishment of products

Monitor and enhance quality of service to customers

Site stores of an appropriate size in the most effective locations

Continually examine and improve operations practice

Some operations management activities Some operations management activities at IKEAat IKEA

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PretPret a Mangera Manger

“High-end” sandwich and snack retailerUse only “wholesome” ingredientsAll 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…”

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The three basic functions at The three basic functions at PretPret a Mangera Manger


Promotional activities, market research, etc.

Design, location and management of stores 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 oAll operationsperations are transformation are transformation processesprocesses

ENVIRONMENT

ENVIRONMENT

INPUT OUTPUTGOODS

AND SERVICES

TRANSFORMED RESOURCES

MATERIALSINFORMATION CUSTOMERS

FACILITIES STAFF

TRANSFORMINGRESOURCES

TRANSFORMATION PROCESS

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At At PretPret a Mangera Manger

ENVIRONMENT

ENVIRONMENT

INPUT OUTPUTCUSTOMERS

“ASSEMBLED”TO SNACKS


Food ingredients Packaging Customers

Kitchen equipment Shop fittings, Staff

TRANSFORMINGRESOURCES

TRANSFORMATION PROCESS

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Operations Management Operations Management –– Basic Basic PrinciplesPrinciples

All types of enterprise have an operations function, even if it isn’t called ‘operations.

Most operations produce both products and services.

Materials

Products and services

Information

Customers

Operations management is concerned with producing and

delivering products and services

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Television programme and video Television programme and video production companyproduction company

Set and props manufacture

Engineering

Marketing and sales

Broadcasting and programme making equipmentTest and repair equipment

Staff

Adapted,maintainedand repaired equipment

Wood, steel plastic etc.

CarpentersMachines

Scenery and props

Information from customersComputer systems

Surveys and analysis staff

Market forecasts,salesproposals and plans

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The two main processes at a The two main processes at a PretPret a Manger storea Manger store

INPUT OUTPUTTRANSFORMATION PROCESS

Sandwichproduction

Bread, mayo, fillings, packing,

etc.

Staff

Packed, fresh sandwiches

SandwichproductionStaff

Satisfied customers “assembled” to sandwiches

Packed, fresh sandwiches

Customers

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The three core functions as transformation The three core functions as transformation process process ‘‘operationsoperations’’

DesignersDesign software

Appropriate designs as promised and to budget

Producing effective new products and

services

Marketing function

Product/ services

development function

Operations function

Transformed/ transforming resources

Products and services

Producing service value for

customersSales peopleMarketeersMarket information

OrdersMarketing plans as promised and to budget

Producing sales and

market plans

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The output from most types of operation is a The output from most types of operation is a mixture of goods and servicesmixture of goods and services

Cru

de o

il pr

oduc

tion Pure goods

TangibleCan be stored

Production precedes consumption

Low customer contactCan be transported

Quality is evident

IntangibleCannot be storedProduction and consumption are simultaneousHigh customer contactCannot be transportedQuality difficult to judge

Pure services

Alu

min

ium

sm

eltin

g

Spec

ialis

t mac

hine

tool

m

anuf

actu

rer

Res

taur

ant

Com

pute

r sys

tem

s se

rvic

es

Man

agem

ent

cons

ulta

ncy

Psyc

hoth

erap

y cl

inic

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The output from most operations is a The output from most operations is a mixture of goods and servicesmixture of goods and services

CR

UD

E O

IL P

RO

DU

CTI

ON

ALU

MIN

IUM

SM

ELTI

NG

SPEC

IALI

ST M

AC

HIN

E TO

OL

MA

NU

FAC

TUR

ER

RES

TAU

RA

NT

CO

MPU

TER

SYS

TEM

S SE

RVI

CES

MA

NA

GEM

ENT

CO

NSU

LTA

NC

Y

PSYC

HO

THER

APY

CLI

NIC

PURE GOODSTangible

Can be stored

Production precedes consumption

Low customer contact

Can be transportedQuality is evident

PURE SERVICESQuality difficult to judgeCannot be transportedHigh customer contact

Production and consumption are simultaneous

Cannot be stored

Intangible

Pret

a M

ange

r

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A Typology of OperationsA Typology of OperationsIMPLICATIONS IMPLICATIONS

High LowVisibilityVisibility

High LowVariation in demandVariation in demand

High LowVarietyVariety

Low HighVolumeVolume

Time lag between production and consumptionStandardisedLow contact skillsHigh staff utilisationCentralizationLow unit costs

Short waiting toleranceSatisfaction governed by customer perceptionCustomer contact skills neededReceived variety is highHigh unit cost

Changing capacityAnticipationFlexibilityIn touch with demandHigh unit cost

FlexibleComplexMatch customer needsHigh unit cost

Low repetitionEach staff member performs more of jobLess systemisationHigh unit costs

StableRoutinePredictableHigh utilisationLow unit costs

Well definedRoutineStandardisedRegularLow unit costs

High repeatabilitySpecialisationSystemisationCapital intensiveLow unit cost

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Some configurations of Some configurations of FormuleFormule 1 1 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

VisibilityIsland Resort Formule 1

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Volume

Important to understand how different operations are positioned on the 4 V’s.

Is their position where they want to be?Do they understand the strategic implications?

Variety

Variation

Visibility

Low

High

High

High

High

Low

Low

LowIsland Resort Hotel

Formule1 type Hotel

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Volume

Variety

Variation

Visibility

Low

High

High

High

High

Low

Low

LowPret a

MangerIKEA

PretPret a Manger and IKEAa Manger and IKEA

4 V4 V’’s analysiss analysis

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The activities of operations managementThe activities of operations management

ENVIRONMENT

ENVIRONMENT

INPUT OUTPUTGOODS

AND SERVICES

INPUT TRANSFORMED

RESOURCESMATERIALS

INFORMATION CUSTOMERS

FACILITIES STAFF

INPUT TRANSFORMING

RESOURCES

OPERATIONS STRATEGY

DESIGN

PLANNING AND CONTROL

IMPROVEMENT

OPERATIONS STRATEGIC

OBJECTIVESTHE

OPERATIONS COMPETITIVE

ROLE AND POSITION

Operations strategy

Operations management

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Operations Activities as Feedback LoopsOperations Activities as Feedback LoopsDesign activities set the basic configurationPlanning & control activities guide short/medium term changes

Planning & Control

Design

Improvement

Improvement activities guide longer term changes

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Case Study Case Study –– Central Design ServicesCentral Design Services

•• What are the inputs, transformation processes and What 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 for Draw the four Vs for CDSCDS’’ss products & services.products & services.•• What would you recommend to CDS if you were asked What would you recommend to CDS if you were asked

to advise on improving its operations?to advise on improving its 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 ServicesSupply Network Design

Layout and Flow

Process Technology

Job Design

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Nature and purpose of the design activityNature and purpose of the design activity

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

Product designers will 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 the transformation process

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Design of the Service

Design of the Process

Design of the Product

Design of the Process

In most service operations the overlap between service and

process design is implicit in the nature of service

In manufacturing operations overlapping 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 an impact on the process that produces them and vice versa

Products and services should be designed in

such a way that they can be created effectively

Processes should be designed so they can

create all products and services which the

operation is likely to introduce

Designing the Product or Service

Designing the Processes that

Produce the Product or Service

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Finished designs which are:

High quality

Speedily produced

Dependably delivered

Produced flexibly

Low cost


Technical informationMarket informationTime information

TRANSFORMING RESOURCES

Test and design equipment

Design and technical staff

THE DESIGN ACTIVITY OUTPUTINPUTS

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Relatively early in the design activity the Relatively early in the design activity the decisions taken will commit the operation decisions taken will commit the operation

to costs which will be incurred laterto 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

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Broad categories of evaluation criteria for assessing Broad categories of evaluation criteria for assessing design optionsdesign options

FEASIBILITYHow difficult is

it?

ACCEPTABILITYHow worthwhile is

it?

VULNERABILITYWhat could go

wrong?

THE CRITERIA FOR ASSESSING PROPOSED DESIGN OPTIONS

What INVESTMENT both managerial and financial

will be needed?

What RETURN in terms of financial and

performance improvement will it give?

What RISKSdo we run if things

go wrong?

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Operation (an activity that directly adds value)

Inspection (a check of some sort)

Transport (a movement of some thing)

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

Storage (deliberate storage, as opposed to a delay)

Process mapping symbols derived from “Scientific Management”

Decision (exercising discretion)

Process mapping symbols derived from Systems Analysis

Direction of flow

Input or Output from the process

Activity

Beginning or end of process

Process Mapping SymbolsProcess Mapping Symbols

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Standard sandwich process

Raw Materials Assembly Stored

SandwichesMove to Outlets

Stored Sandwiches Sell Take Payment

Customer Request

Raw Materials

Assembly Take Payment

Customer Request

Customised sandwich - old process

Process Mapping Process Mapping –– An ExampleAn Example

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PrepareAssemble as

requiredTake

payment

Bread and Base filling

Stored “Bases”

Fillings

Assemble whole sandwich

Customer Request

Use standard “base”?

Assemble from standard “base”

No

Yes

The operation of making and selling customised sandwiches

The outline process of making and selling customised sandwiches

The detailed process of assembling customised

sandwiches

Sandwich materials and customers

Customers “assembled” to

sandwiches

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Bread and Base filling

Assembly of “sandwich

bases”

Stored “Bases”

Fillings

Assemble whole sandwich

Take Payment

Customer Request

Customised sandwich new process

Use standard “base”?

Assemble from standard “base”

No

Yes

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Left hand Right handPick up base plate

Insert into fixturePick up two supportsLocate back plate

Pick up screws

Locate screwsPick 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

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VolumeLow High VolumeLow High

Varie

tyLo

wH

igh

Varie

tyLo

wH

igh

Project

Jobbing

Batch

Mass

Contin--uous

Professional service

Service shop

Mass service

Service process Service process typestypes

Manufacturing Manufacturing process 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 one made, every one customicustomisseded•• Defined start and finish: Defined start and finish: ttimeime, quality and cost objectives, quality and cost objectives•• Many different skills have to be coordinated Many different skills have to be coordinated •• Fixed position layout, resources brought to productFixed position layout, resources brought to product

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Jobbing ProcessesJobbing Processes

• Very small quantities: “one-offs”, or only 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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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

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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

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The Product/Process MatrixThe Product/Process Matrix

Low volumeLow

standardisation

INCREASING VARIETY

Low volumeMultiple products

Higher volumeFew major products

High volumeHigh

standardisation

PRODUCT CHARACTERISTICS

INCREASING VOLUME

Jumbled flow

(jobbing)

Disconnected line flow(batch)

Connected line flow(mass)

Smooth flow(Continuous)PR

OC

ESS

CH

AR

AC

TER

ISTI

CS

Randomflow

(project)

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Low volumeLow

standardisation

INCREASING VARIETY



High volumeHigh

standardisation


INCREASING VOLUME

Too much flexibility so high

costs

Too little flexibility so high

costs

Jumbled flow

(jobbing)




OC

ESS

CH

AR

AC

TER

ISTI

CS

Randomflow

(project)

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Low volumeLow

standardisation

INCREASING VARIETY



High volumeHigh

standardisation


INCREASING VOLUME

Machine tool maker

Custom furniture

maker

Automobile factory

Petro-chemical refinery

Jumbled flow

(jobbing)




OC

ESS

CH

AR

AC

TER

ISTI

CS

Randomflow

(project)

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Low volumeLow

standardization

INCREASING VARIETY



High volumeHigh

standardization


INCREASING VOLUME

Customer service branch

Investment banking

Bank call centre

Credit card processing

Jumbled flow

(jobbing)




OC

ESS

CH

AR

AC

TER

ISTI

CS

Randomflow

(project)

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Deviating from the Deviating from the ‘‘naturalnatural’’ diagonal on the diagonal on the productproduct--process matrix has consequences for process matrix has consequences for

cost and flexibilitycost and flexibility

Project

Jobbing

Batch

Mass

Continuous

Professionalservice

ServiceShop

Massservice

None

None

Less process flexibility than is

needed so high cost

More process flexibility than is

needed so high cost

The ‘natural’ line of fit of process to volume/variety characteristics

Manufacturing operations process

types

Service operations process types

VarietyVolume

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Case Study Case Study –– Central Evaluation Centre Central 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 the Calculate 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 problems?What are the problems?•• What suggestions would you make to Veronique to What suggestions would you make to Veronique to

improve her process? improve her process?

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CECPU Process MapCECPU Process Map

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Process Cycle TimeProcess Cycle Time

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

Average throughput time = 36 working days

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

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

In other words, a fully processed application form is 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 important finding because 200 applications per week are entering the process, butonly 186.17 applications per week are emerging from the process. In other words, inventorymust be building up within the process.

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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 stated as:“The average number of customers in a stable

system (over some time interval) is equal to their average arrival rate, multiplied by their average time in the system. “

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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

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LittleLittle’’s Law s Law –– An ExampleAn ExampleThink of a tank of water with a constant inflow and a constant, identical outflow.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 is 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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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

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LittleLittle’’s Law s 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 financial services organisation receives on average 160 enquiries per day about its products and services. If it takes around 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?

Documents

Business Services – Operations Management Session 1c.pdf · Business Services – Operations Management Session 1 – Introduction & Overview 1 ... production company Set and props