Operations Management
The systematic design, direction, and control of processes that transform inputs into finished goods and services
Operations
... [Show More] as a Transformation Process
Input -> Transformation Process -> Output
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The organization's central function
More than half of the workforce is under operations
more than half of assets belong to operations
Cross-Functional Linkages
Finance
MIS
Human Resources
Marketing
Accounting
Design
One of the three legs of the stool of business
Organization
finance/Accounting,
Production/operations,
Marketing/ Sales
Tradeoffs constantly evaluated like efficiency vs. effectiveness
Characteristics of Operations Managers
Hands on oriented, DIY
Efficiency minded to an extreme, cheap
Binge watch How it's made
Three Eras of Production
Craft Production
Mass Production
Lean Production
Craft Production
•Craftsman. Small company or organization, very skilled workers working from start to finish. Low volumes, customization is very high.
Mass Production
•High volumes, low customization. Parts were interchangeable. Workers specialize on tasks. Competition between suppliers, labor, and management creates sub-optimization.
Lean Production
Get the waste out. Japan, more customized output, labor more flexible. Management is going to cooperate with labor and suppliers. Work as a team. DFM - Design For Manufacturing.
Supply Chains
Networks of manufacturers and service providers that work together to move goods from the raw material stage through to the end user
-Linked through physical, information, and monetary flows
Supply Chain Management
the active management of supply chain activities and relationships to maximize customer value and achieve a sustainable competitive advantage
Material Flows
Upstream: Second Tier Supplier, First Tier Supplier
Downstream: Distributor, retailer, Final Customers
Old View of Operations
Operations is necessary, but NOT a source of strategic advantage
minimize costs
high volume, standard products (Economies of scale)
Strategy
the set of goal-directed actions a firm takes to gain and sustain competitive advantage relative to competitors.
Business Strategy
The strategy that identifies a firm's targeted customers and sets time frames and performance objectives for the business.
Functional Strategy
A strategy that translates a business strategy into specific functional areas.
A Top-Down Model of Strategy
Mission Statement-business strategy-goals
Marketing strategy- R&D Strategy- Operations Strategy- Supply Chain Strategy- Financial Strategy
Operations and Supply Chain Decisions...
Operations Strategy
Translates the business strategy into OPERATIONS terms.
Assures COORDINATION with other areas.
Provides DIRECTION and GUIDANCE for operations decisions
Provides feedback on goal achievement
Examples of Operation Strategies
Low Cost
Scale-based strategies
Customization
Flexible operations
High Quality
Differentiation:
Where must we excel?
Quality
Time
Flexibility
Cost
Quality
Performance, conformance, reliability
Time
Delivery speed and reliability, development speed
Flexibility
Mix, changeover, volume
Cost
labor, material, engineering, quality-related
Priority Trade-Offs
Generally very difficult to excel at all four performance dimensions.
Some common conflicts (tradeoffs)
-low cost versus high quality
-low cost versus customized
-Delivery reliability versus quality
Sand Cone Theory of OM
4. Cost
3. Flexibility
2. Time
1. Quality
Business Process
A set of logically related tasks or activities performed to achieve a defined business outcome
Primary Process
A process that addresses the main value-added activities of an organization.
Development Process
A process that seeks to improve the performance of primary and support processes.
Support Process
A process that performs necessary, albeit not value-added activities
Mapping (Business processes)
The process of developing graphic representations of the organizational relationships and/or activities that make up a business process.
Process Map
A detailed map that identifies the specific activities that make up the informational, physical, and/or monetary flow of a process
Purposes of Mapping
Create a common understanding of the processes, activities, and results
Define the boundary of the process
Provide a baseline to measure the impact of improvement efforts
Process Mapping Guidelines
Identify the entity that will serve as your focal point.
- Customer? Order? Item?
Identify clear boundaries and starting and ending points.
Keep it simple
-Does this detail add any insight?
-Do we need to map every exception condition?
Benefits of Maps
Simplified Process
Higher efficiencies in employee tasks
Greater understanding of processes and procedures
Cost savings from elimination of redundant or unnecessary tasks
"Opportunities" are addressed and corrected faster
Better training programs
Improving Business Processes: Guidelines
Attack each delay
-What causes it?
-How long is it?
-How could we reduce its impact?
Examine each decision point
-Is this a real decision or just a checking activity?
-If the latter, can we automate or eliminate it?
Look for loops
-Why is this loop here?
-Would we need to loop if we didn't have any failures in quality, planning, etc?
-Is it redundant?
Examine each Process step
-What is the value of this activity relative to its cost?
-Is this a unnecessary activity (support or developmental?), or redundant?
-How can we prevent errors in this activity?
Taking it Further...
All activities add costs and time
Not all value-added activities provide netvalue
-"Underperformers"
Not all support and developmental activities are necessary
-Necessary versus "symptomatic"
Symptomatic Activities...
Inspecting or reworking goods
Expediting shipments or "fighting fires"
Overproducing, holding excessive inventories
Standard backorder process
... and Typical Causes
Poor Quality
"Flying Blind," poor planning
Poor Controls, training, etc.
Excessive demand variability
Mismatches between an organization's capabilities and market requirements
Measuring Process Performance
Quality, Cost, Time, Flexibility [Show Less]