Todays Topic: Operations The Manufacturing, Logistics and Service functions, and their relationships to technical jobs -or- if you cant produce and deliver

Today’s Topic: Today’s Topic: OperationsOperations

The Manufacturing, The Manufacturing, Logistics and Service Logistics and Service functions, and their functions, and their

relationships to technical relationships to technical jobsjobs-or--or-

““if you can’t produce and if you can’t produce and deliver it, it’s unlikely that deliver it, it’s unlikely that

anyone will pay you any anyone will pay you any money”money”

Course ScheduleCourse Schedule

The Marketing Function (Lenovo)The Marketing Function (Lenovo) Sales & Sales Channels (GolfLogix)Sales & Sales Channels (GolfLogix) Internet-based Marketing (HubSpot)Internet-based Marketing (HubSpot) R&D: Product Development (Guidant)R&D: Product Development (Guidant) Operations (Crocs)Operations (Crocs)

Product Launch (Invisalign)Product Launch (Invisalign) Final Exam on Product Launch (Emotiv)Final Exam on Product Launch (Emotiv)

Last Class & Final ExamLast Class & Final Exam

Product launchProduct launch: decisions upon : decisions upon launching a new product (Invisalign launching a new product (Invisalign case); and summary of key learnings case); and summary of key learnings from the coursefrom the course

Final examFinal exam: : decisions on product decisions on product launchlaunch

(Emotiv case)…..(Emotiv case)…..Dec 20Dec 20thth , 1 – 5pm , 1 – 5pm

OperationsOperations

The function of The function of creating,creating, delivering, delivering, andand servicing servicing a a company’s products and/or company’s products and/or services….. includes all but services….. includes all but

designing, marketing and selling designing, marketing and selling themthem

Learnings: OperationsLearnings: Operations

Operations functions: manufacturing, Operations functions: manufacturing, logistics & servicelogistics & service

Characteristics of world-class Characteristics of world-class operations processesoperations processes

The Operations BalanceThe Operations Balance Impacts on operations: marketing, Impacts on operations: marketing,

sales, R&Dsales, R&D

The Operations BalanceThe Operations Balance

COGS

Inventory CustomerService

The Basic Operations The Basic Operations FlowFlow

Sales forecasts are given by Sales forecasts are given by salessales (or (or marketingmarketing) to manufacturing……) to manufacturing……

ManufacturingManufacturing produces products (“finished produces products (“finished goods”)and spare parts (“spares”) ………goods”)and spare parts (“spares”) ………and/or delivers the service (ops)……and/or delivers the service (ops)……

LogisticsLogistics (or “distribution”) handles physical (or “distribution”) handles physical distribution to end-customers and/or distribution to end-customers and/or channels, and is responsible for delivery of channels, and is responsible for delivery of spare parts and repair services…..spare parts and repair services…..

and everyone blames and everyone blames OpsOps if anything goes if anything goes wrong!wrong!

Operations: Operations: Short Term IssuesShort Term Issues

Cost of Goods/Cost of ServiceCost of Goods/Cost of Service Production schedulingProduction scheduling Manufacturing yield/quality/cycle Manufacturing yield/quality/cycle

timetime Inventory managementInventory management Logistics efficiency/costLogistics efficiency/cost Returns and repairs managementReturns and repairs management Customer service qualityCustomer service quality

Operations: Operations: Longer Term IssuesLonger Term Issues

In-house or outsourced?In-house or outsourced? Capacity planning: building capacity Capacity planning: building capacity

(just) in advance of when it will be (just) in advance of when it will be needed, with minimum capitalneeded, with minimum capital

Investing in process technologyInvesting in process technology Building supporting IT systemsBuilding supporting IT systems Regularizing the new product Regularizing the new product

introduction (NPI) processintroduction (NPI) process

Manufacturing Costs Manufacturing Costs Depend on…….Depend on…….

Capacity utilizationCapacity utilization Capital costs (depreciation on capital)Capital costs (depreciation on capital) Process technology/yieldProcess technology/yield Cycle time, set-up intervals, run Cycle time, set-up intervals, run

volumesvolumes Product designs !!Product designs !! Materials costs (BOM)Materials costs (BOM) NPI process efficiencyNPI process efficiency

Operations’ Challenge is Operations’ Challenge is to to BalanceBalance….….

COGS: COP and COS COGS: COP and COS (cost of product (cost of product manufacture, cost of service, and manufacture, cost of service, and logistics expense)logistics expense)

InventoryInventory (full-stream: materials, work- (full-stream: materials, work-in- process, finished goods, spare parts)in- process, finished goods, spare parts)

Customer serviceCustomer service (delivery/response (delivery/response intervals, and quality of services)intervals, and quality of services)

The Operations BalanceThe Operations BalanceCOGS

(COP,COS)

Inventory CustomerService

Operations is impacted Operations is impacted by “inputs” from…….by “inputs” from…….

MarketingMarketing

SalesSales

R&DR&D

and others (IT, finance, HR, … )and others (IT, finance, HR, … )

Marketing: Marketing: Inputs/ImpactsInputs/Impacts

Product line/model breadthProduct line/model breadth Cost/COGS targetsCost/COGS targets Product quality targetsProduct quality targets New product strategy (big-bang New product strategy (big-bang

or incremental/inch-up)or incremental/inch-up) Customer service requirementsCustomer service requirements Sales promotions/incentivesSales promotions/incentives Sales forecasts (long-run)Sales forecasts (long-run)

Sales: Inputs/ImpactsSales: Inputs/Impacts

Sales forecasts (short-run)Sales forecasts (short-run) Warranty/return managementWarranty/return management Commitments to customers Commitments to customers Quality of Quality of

installation/maintenanceinstallation/maintenance Accuracy of customer ordersAccuracy of customer orders Ability to “level out” sales volumeAbility to “level out” sales volume

R&D: Inputs/ImpactsR&D: Inputs/Impacts

Product designs (for cost and service)Product designs (for cost and service) Design changes/modificationsDesign changes/modifications Product materials/componentsProduct materials/components Quality and timeliness of “hand-offs”Quality and timeliness of “hand-offs” Process engineering efforts (or not)Process engineering efforts (or not) Role in manufacturing engineering Role in manufacturing engineering Support for concurrent engineeringSupport for concurrent engineering

Readings Readings

Can Marketing and Manufacturing Can Marketing and Manufacturing Coexist?Coexist? -- read to understand the 8 issues -- read to understand the 8 issues listed in the article’s Exhibitlisted in the article’s Exhibit

Crocs: Revolutionizing an Industry’s Crocs: Revolutionizing an Industry’s Supply Chain Supply Chain -- an example of the -- an example of the importance of Operations in the success of a importance of Operations in the success of a businessbusiness

AssignmentAssignment

In what ways can technical people (R&D, technical In what ways can technical people (R&D, technical sales, etc) sales, etc) assist with the resolution assist with the resolution and/or and/or minimizationminimization of the marketing-manufacturing issues of the marketing-manufacturing issues cited in the first reading? Provide one cited in the first reading? Provide one thought/example for each of the 8 issues in the thought/example for each of the 8 issues in the exhibit in the “Coexist” reading.exhibit in the “Coexist” reading.

What are Crocs’ competitive advantages? Which of What are Crocs’ competitive advantages? Which of these are related to its operations function?these are related to its operations function?

To what extent do each of these growth strategies To what extent do each of these growth strategies leverage Crocs’ competitive advantages: (a) internal leverage Crocs’ competitive advantages: (a) internal manufacturing of raw materials used in compounding, manufacturing of raw materials used in compounding, (b) internal development of new products, (c) (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new products, and (d) acquiring companies to get new customers?acquiring companies to get new customers?

Assignment: Assignment: R&D Impacts on…?R&D Impacts on…?

Capacity planningCapacity planning Production schedulingProduction scheduling Logistics/distributionLogistics/distribution Quality assuranceQuality assurance Breadth of product lineBreadth of product line Costs (COGS: COP and COS)Costs (COGS: COP and COS) New Product IntroductionNew Product Introduction Customer service Customer service

Can Marketing and Can Marketing and Manufacturing Coexist?Manufacturing Coexist?

Problem AreaProblem Area Typical Typical marketing marketing commentcomment

Typical Typical manufacturinmanufacturing commentg comment

Capacity Capacity planning and planning and long-range long-range sales sales forecastingforecasting

““Why don’t Why don’t we have we have enough enough capacity?”capacity?”

““Why didn’t Why didn’t we have we have accurate accurate sales sales forecasts?”forecasts?”


Problem Problem AreaArea

Typical Typical marketing marketing commentcomment

Typical Typical manufacturing manufacturing commentcomment

Production Production scheduling scheduling and short-and short-range sales range sales forecastingforecasting

““We need We need faster faster response. response. Our lead Our lead times are times are ridiculous.”ridiculous.”

““We need We need realistic realistic customer customer commitments commitments and sales and sales forecasts that forecasts that don’t change like don’t change like wind direction”wind direction”




Delivery and Delivery and physical physical distributiondistribution

““Why don’t Why don’t we ever have we ever have the right the right merchandise merchandise in inventory?”in inventory?”

““We can’t We can’t keep keep everything in everything in inventory”inventory”





Quality Quality assuranceassurance

““Why can’t Why can’t we have we have reasonable reasonable quality at quality at reasonable reasonable cost?”cost?”

““Why must we Why must we always offer always offer options that are options that are too hard to too hard to manufacture and manufacture and that offer little that offer little customer utility?”customer utility?”




Breadth of Breadth of product lineproduct line

““Our Our customers customers demand demand variety”variety”

““The product The product line is too line is too broad – all we broad – all we get are short, get are short, uneconomical uneconomical runs.”runs.”





Cost controlCost control ““Our costs Our costs are so high are so high that we are that we are not not competitive competitive in the in the marketplacemarketplace””

““We can’t We can’t provide fast provide fast delivery, broad delivery, broad variety, rapid variety, rapid response to response to change, and high change, and high quality at low quality at low cost.”cost.”




New product New product introductionintroduction

““New New products are products are our our lifeblood”lifeblood”

““Unnecessary Unnecessary design changes design changes are are prohibitively prohibitively expensive.”expensive.”




Adjunct Adjunct services such services such as spare parts as spare parts inventory inventory support, support, installation, installation, and repairand repair

““Field Field service costs service costs are too are too high.”high.”

““Products are Products are being used in being used in ways for ways for which they which they weren’t weren’t designed.”designed.”

Crocs case: questionsCrocs case: questions

What are Crocs’ competitive advantages? What are Crocs’ competitive advantages? Which of these are related to its Which of these are related to its operations function?operations function?

To what extent do each of these growth To what extent do each of these growth strategies leverage Crocs’ competitive strategies leverage Crocs’ competitive advantages: (a) internal manufacturing of advantages: (a) internal manufacturing of raw materials used in compounding, (b) raw materials used in compounding, (b) internal development of new products, (c) internal development of new products, (c) acquiring companies to get new products, acquiring companies to get new products, and (d) acquiring companies to get new and (d) acquiring companies to get new customers?customers?

Core CompetenciesCore Competenciesvs.vs.

Competitive AdvantagesCompetitive Advantages

CoreCompetencies

CompetitiveAdvantages - capability - process - skill - position

Crocs Supply Chain Crocs Supply Chain CharacteristicsCharacteristics

Global manufacturingGlobal manufacturing Vertical integrationVertical integration ““Postponement” (JIT production)Postponement” (JIT production) Warehouses at production facilitiesWarehouses at production facilities ““Excess” capacity and inventoryExcess” capacity and inventory Simple products (initially)Simple products (initially) Short lead timesShort lead times Production throughout selling seasonProduction throughout selling season

Growth AlternativesGrowth Alternatives

internal manufacturing of raw materials internal manufacturing of raw materials used in compoundingused in compounding

internal development of new productsinternal development of new products

acquiring companies to get new productsacquiring companies to get new products

acquiring companies to get new acquiring companies to get new customerscustomers

Identifying Competitive Identifying Competitive OptionsOptions

Products

Customers

Current

Position

Currentproducts

Current target customers

Competitive OptionsCompetitive Options

Protect & defend current customer/product Protect & defend current customer/product segmentsegment

Increase market share in current segmentIncrease market share in current segment

Selectively extend (whole) product offeringsSelectively extend (whole) product offerings

Selectively extend target customer setSelectively extend target customer set

Become a broad-line supplierBecome a broad-line supplier

Our Last Assignment:Our Last Assignment:Product LaunchProduct Launch

InvisalignInvisalign

A new technology ( ~ 2000)A new technology ( ~ 2000)

for aligning teethfor aligning teeth

Product Launch Product Launch Assignment:Assignment:

Align Technology in 2001Align Technology in 2001 Invisalign straightens teeth via a series of clear Invisalign straightens teeth via a series of clear

plastic retainers designed and made plastic retainers designed and made specifically for each patientspecifically for each patient

Higher price and higher COGS than traditional Higher price and higher COGS than traditional metal braces, but “better”metal braces, but “better”

Product available for about 2 yearsProduct available for about 2 years Annual revenues ~$50M but OI ~($100M)Annual revenues ~$50M but OI ~($100M) Adoption rate by orthodontists is insufficient to Adoption rate by orthodontists is insufficient to

support future growthsupport future growth Arguably, the product needs to be “re-Arguably, the product needs to be “re-

launched”launched”

Assignment for Next Assignment for Next WeekWeek

Which of the three end-customer (patient) segments Which of the three end-customer (patient) segments identified should be Align’s target? Why?identified should be Align’s target? Why?

Which of the promotion and sales tasks (promotion, Which of the promotion and sales tasks (promotion, selling, fulfillment, service) should be done by Align? selling, fulfillment, service) should be done by Align? By the dentists? By the orthodontists?By the dentists? By the orthodontists?

What are the orthodontist’s “channel economics” for What are the orthodontist’s “channel economics” for Invisalign vs. standard braces?Invisalign vs. standard braces?

What barriers are preventing increased adoption of What barriers are preventing increased adoption of Invisalign by orthodontists?Invisalign by orthodontists?

How should Invisalign be positioned with How should Invisalign be positioned with orthodontists? (write a positioning statement)orthodontists? (write a positioning statement)

By what methods should Invisalign be promoted to By what methods should Invisalign be promoted to dentists? To orthodontists?dentists? To orthodontists?

Documents

Todays Topic: Operations The Manufacturing, Logistics and Service functions, and their relationships to technical jobs -or- if you cant produce and deliver