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COMPETING WITH OPERATIONS

Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

For Operations Management, 9e by Krajewski/Ritzman/Malhotra 2010 Pearson Education11

Operations Management The systematic design, direction, and control of processes that transform inputs into services and products for internals, as well as external, customers Processes can be linked together to form a supply chain interrelated processes within a firms and across different firms that produce a service or product to the satisfaction of the customersCopyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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Operations Management isThe systematic design, direction and control of processes that transform inputs into services and products for internal, as well as external, customers.

Inputs

Transformation Processes (Adding value)

Outputs

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OM as a Set of DecisionsUSING OPERATIONS TO COMPETE

In practice, managers make strategic and tactical decisions1. Each part of the organization designs and operates processes 2. Each function is connected through shared resources

Competing with Operations Project Management

MANAGING PROCESSES

Process Strategy Process Analysis Quality and Performance Capacity Planning Lean Systems

MANAGING SUPLY CHAINS

Supply Chain Design Supply Chain Integration Location Inventory Management Forecasting Operations Planning and Scheduling Resource Planning

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10 Critical OM Decisions6. 7. 8. 9. Human resources and job design Supply chain management Inventory Scheduling

1. 2. 3. 4. 5.

Goods and service design Quality Process and capacity design Location selection Layout design

10. Maintenance

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Across the OrganizationFinanceAcquires financial resources and capital for inputs

Material & Service Inputs Support Functions Accounting Information Systems Human Resources Engineering

Sales Revenue

OperationsTranslates materials and service into outputs

MarketingGenerates sales of outputs

Product & Service OutputsCopyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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A Process ViewExternal environmentInternal and external customers Inputs Workers Managers Equipment Facilities Materials Land Energy Outputs Goods Services 5 2 4

Processes and operations 1 3

Information on performance

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A Process View

More like a manufacturing process

More like a service process

Physical, durable output Output can be inventoried Low customer contact Long response time Capital intensive Quality easily measured

Intangible, perishable output Output cannot be inventoried High customer contact Short response time Labor intensive Quality not easily measured

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The Supply Chain ViewSupport Processes

External suppliers

New service/ product development

Customer relationship management

External customers

Supplier relationship process

Order fulfillment process

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The Supply Chain View Core processes are sets of activities that deliver value to external customers1. Supplier relationship process 2. New service/product development process 3. Order fulfillment process 4. Customer relationship process

Support processes provide vital resources and inputs to the core processesCopyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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Support ProcessesEXAMPLES OF SUPPORT PROCESSES Capital acquisition The provision of financial resources for the organization to do its work and to execute its strategy The process of deciding how funds will be allocated over a period of time The acquisition of people to do the work of the organization The assessment and payment of people for the work and value they provide to the company The preparation of people for their current jobs and future skills and knowledge needs The processes that ensure that the company is meeting all laws and legal obligations The movement and processing of data and information to expedite business operations and decisions The systems and activities that provide strategic direction and ensure effective execution of the work of the business

Budgeting Recruitment and hiring Evaluation and compensation

Human resource support and development Regulatory compliance Information systems

Enterprise and functional management

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Operations Strategy Specifies the means by which operations implements corporate strategy and helps build a customer-driven firm Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions

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Operations StrategyCorporate Strategy Environmental scanning Core competencies Core processes Global strategies Market Analysis Market segmentation Needs assessment Competitive Priorities Cost Quality Time Flexibility New Service/ Product Development Design Analysis Development Full launch Yes Operations Strategy Competitive Capabilities Current Needed Planned

No Performance Gap?

Decisions Managing processes Managing supply chains

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Corporate Strategy Environmental scanning Developing core competencies1. Workforce 2. Facilities 3. Market and financial know-how 4. Systems and technologies

Developing core processes Global strategiesCopyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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Market Analysis Market segmentation Needs assessment Service

or product needs system needs needs

Delivery Volume Other

needs

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Competitive PrioritiesDEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES COST 1. Low-cost operations QUALITY 2. Top quality Delivering an outstanding service or product Producing services or products that meet design specifications on a consistent basis Quickly filling a customers order Meeting delivery-time promises Quickly introducing a new science or a product May require a high level of customer contact and may require superior product features Processes designed and monitored to reduce errors and prevent defects Ferrari Definition Delivering a service or a product at the lowest possible cost Process Considerations Processes must be designed and operated to make them efficient Example Costco

3. Consistent quality

McDonalds

TIME 4. Delivery speed 5. On-time delivery 6. Development speed Design processes to reduce lead time Planning processes to increase percent of customer orders shipped when promised Cross-functional integration and involvement of critical external suppliers Dell United Parcel Service (UPS) Li & Fung

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Competitive PrioritiesDEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES FLEXIBILITY 7. Customization Definition Satisfying the unique needs of each customer by changing service or products designs Handling a wide assortment of services or products efficiently Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand Process Considerations Low volume, close customer contact, and easily reconfigured Example Ritz Carlton

8. Variety

Capable of larger volumes than processes supporting customization Processes must be designed for excess capacity

Amazon.com

9. Volume flexibility

The United States Postal Service (USPS)

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Order Winners and QualifiersOrder Winner

Sales ($)

Order Qualifier

Low

High

Achievement of competitive priority

Sales ($)

Low

Threshold

High

Achievement of competitive priority

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Using Competitive PrioritiesAt an airline Customer relationship Top

quality quality speed

Consistent Delivery Variety

New service development Development

speed

Customization Top

quality1 19

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Using Competitive PrioritiesAt an airline Order fulfillment Low-cost

operations Top quality Consistent quality On-time delivery Variety

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Using Competitive PrioritiesAt an airline Supplier relationship Low-cost

operations Consistent quality On-time delivery Variety Volume flexibility

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Operations StrategyOPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS Competitive Prior