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This presentation is related to Operation management
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Operations &
Competitiveness
Operations Management Operations Management
Learnings….
Introduction
Transformation process
Evolution of operations management
Integrated value chain
Operations management and e–business
Globalization and competitiveness
conclusion
Introduction
What is operations?a function or system that transforms inputs
into outputs of greater value
What is a transformation process?a series of activities along a value chain
extending from supplier to customeractivities that do not add value are
superfluous and should be eliminated
What is operations management?Systematic direction, control, and evaluation
of the entire range of processes that transform inputs into finished goods or services.
All operations produce products and services by changing inputs into outputs. They do this by using the ‘input-transformation-‘input-transformation-output' process.output' process.
There are two categories of inputs in any operation's processes:
1) Transformed and
2) Transforming resources
Transformed resources are the resources that are treated, transformed or converted in the process, that include
Materials
Information
Customers
The other set of inputs to any operations process are Transforming Resources. These are the resources which act on or carry out the transformation process. There are two main types of transforming resources:
Facilities Staff
Buildings, Equipment, Plant and
Technology of the operation.
All The People Involved In The
Operations Process.
How is operations relevant to my major?
Accounting
Information Technology
Management
“As an auditor you must understand the fundamentals of operations management.”
“IT is a tool, and there’s no better place to apply it than in operations.”
“We use so many things you learn in an operations class—scheduling, lean production, theory of constraints, and tons of quality tools.”
How is operations relevant to my major?
Economics
Marketing
Finance
“It’s all about processes. It helps in analysis of investment plant.”
“How can you do a good job marketing a product if you’re unsure of its quality or delivery status?”
“Most of our capital budgeting requests are from operations, and most of our cost savings, too.”
Evolution of Operations Management
Craft productionprocess of handcrafting products or
services for individual customers
Division of labordividing a job into a series of small
tasks each performed by a different worker
Interchangeable partsstandardization of parts initially as
replacement parts; enabled mass production
Evolution of Operations Management (cont.)
Scientific managementsystematic analysis of work methods
Mass productionhigh-volume production of a
standardized product for a mass market
Lean productionadaptation of mass production that
prizes quality and flexibility
Industrial revolution Late 1700s Scientific management Early 1900s Hawthorne Effect
1930s Human relations movement 1930s Management science 1940s Computer age 1960s Environmental Issues 1970s JIT & TQM* 1980s
*JIT= Just in Time, TQM= Total Quality Management
Historical developement of OM
Reengineering 1990- Global competition 1980- Flexibility
1990- Time-Based Competition 1990- Supply chain Management 1990- Electronic Commerce
2000- Outsourcing & flattening of world
2000-
Operations Management and E-Business
Categories of E-Commerce
Bu
sin
ess
Bu
sin
ess
Co
nsu
mer
Co
nsu
mer
BusinessBusiness ConsumerConsumer
B2Btradeindia.com
B2Cflipkart.com
C2BPriceline.com
C2CeBay.com
An Integrated Value Chain
The concept comes from business management and was first described and popularized by Michael porter in 1985
A level model of how businesses receive raw materials through various processes, and sell finished products to customers.
Value chain: set of activities that create and deliver products to customer
SupplierCustomer
Flow of information (customer order)Flow of information (customer order)
Flow of product (order fulfillment)Flow of product (order fulfillment)
manufacture
product passes through activities of a chain in order, and each activity the product gain some value.
Chain of activities gives the product more added value than sum of the independent activities values.
The value chain concept has been extended beyond individual firm. It can apply to whole supply chain and distribution network.
Distinct stage in value chain may include
Receiving raw material
Converting raw material into finished product
Identified customer and distributing the product
Providing customer support
Impact of E-Business on Operations Management
Comparison shopping by customers
Direct contact with customers
Business processes conducted online
Customer expectations escalate; quality must be maintained and costs lowered
No more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possible
Transaction costs are lower; customer support costs decrease; e-procurement saves big bucks
Benefits of E-Business Impact on Operations
Impact of E-Business on Operations Management (cont.)
Access to customers worldwide
Middlemen are eliminated
Access to suppliers worldwide
Demand increases; order fulfillment and logistics become major issues; production moves overseas
Logistics change from delivering to a store or distribution center to delivering to individual homes; consumer demand is more erratic and unpredictable than business demand
Outsourcing increases; more alliances and partnerships among firms are formed; supply is less certain; global supply chain issues arise
Benefits of E-Business Impact on Operations
Impact of E-Business on Operations Management (cont.)
Online auctions and e-marketplaces
Better and faster decision making
Competitive bidding lowers cost of materials; supply needs can be found in one location
More timely information is available with immediate access by all stakeholders in decision-making process; customer orders and product designs can be clarified electronically; electronic meetings can be held; collaborative planning is facilitated
Benefits of E-Business Impact on Operations
Globalization and Competitiveness
Favorable cost
Access to international markets
Response to changes in demand
Reliable sources of supply
14 major trade agreements in 1990s
Peak: 26% in 2000
World Trade Compared to World GDPSource: “Real GDP and Trade Growth of OECD Countries, 2001–03,” International Trade Statistics 2003, World Trade Organization, www.wto.org
Globalization and Competitiveness (cont.)
Hourly Wage Rates for Selected CountriesSource: “International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003.
Germany: $26.18Germany: $26.18
USA: $21.33USA: $21.33
Taiwan: $5.41Taiwan: $5.41
Mexico: $2.38Mexico: $2.38
China: $0.50China: $0.50
Globalization and Competitiveness (cont.)
Trade with China: Percent of each country‘s trade Source: “Share of China in Exports and Imports of Major Traders, 2000 and 2002,”
International Trade Statistics 2003, World Trade Organization, www.wto.org
Risks of Globalization
Cultural differences
Supply chain issues
Safety, security, and stability
Quality problems
Corporate image
Loss of capabilities
Competitiveness and Productivity
Competitiveness degree to which a nation can produce goods
and services that meet the test of international markets
Productivity ratio of output to input
Output sales made, products produced, customers
served, meals delivered, or calls answered Input
labor hours, investment in equipment, material usage, or square footage
Measures of Productivity
Competitiveness and Productivity (cont.)
Productivity Increase
Become efficient output increases with little or no increase in
input
Expand both output and input grow with output
growing more rapidly
Achieve breakthroughs output increases while input decreases
Downsize output remains the same and input is
reduced
Retrench both output and input decrease, with input
decreasing at a faster rate
Global Competitiveness Ranking
1.1. FinlandFinland
2.2. United StatesUnited States
3.3. SwedenSweden
4.4. DenmarkDenmark
5.5. TaiwanTaiwan
6.6. SingaporeSingapore
7.7. SwitzerlandSwitzerland
8.8. IcelandIceland
9.9. NorwayNorway
10.10.AustraliaAustralia
conclusion
Gain an appreciation of strategic importance of operations in a global business environment
Understand how operations relates to other business functions
Develop a working knowledge of concepts and methods related to designing and managing operations
Develop a skill set for quality and process improvement