Presentation on theme: "OPERATIONS MANAGEMENT 430 Professor Canan Savaskan-Ebert"— Presentation transcript:
1 OPERATIONS MANAGEMENT 430 Professor Canan Savaskan-Ebert
2 Class Material & Grading Course Pack 1 (Cases & Readings)Course Pack 2 (Slides)The GoalManaging Business Process Flows (MBPF)The Course Web-PageGroup Assignments 20%, Midterm 30%, Final 40%, Class Participation 10%
3 Student Liaison Responsibilities The objective of having Student Liaisons is to facilitate greater two-way communication between the faculty and studentsProfessors will ask for a voluntary Student Liaison at the beginning of the first class of the termResponsibilities include:Be a sounding board for the faculty member on student related issuesCommunicating any scheduling conflicts regarding assignments, classes, or exams to professorsOrganizing dates for lunches with professors and studentsCollecting TCE’s and turning them in to Student Affairs during the last classResponsibilities will be very similar to Academic Rep responsibilities in 1st quarter core classesTime commitment for the student should be no more than an aggregate of 2 hours of the term
4 As a courtesy to those around you Please turn off your cell phones Close your computers, except in the last row (computer use only for note taking purpose) Be on time (1:30) No in-out traffic during class
5 Objective of this Course familiarize you with the problems and issues confronting operations managers.provide you with language, concepts, insights and tools to deal with these issues in order to gain competitive advantage through operations.at the end of this course, you will be able to identify, evaluate and make improvements.
6 A Road Map Module 1 : Operations Strategy (Wriston / Shouldice) Module 2 : Process Analysis (CRU / Pizza Pazza / NCC)Module 3 : Lean Operations (Toyota)Module 4 : Supply Chain Management (Shape up ship out)Module 5 : Services (The BAT Case)Module 6 : Quality (FlyRock)
8 Key Principle of the Course 1. Strategic View of Operations“A company’s operations function iseither a competitive weaponora corporate millstone.It is seldom neutral.” [Skinner ‘69]
9 An Example of Strategic Fit between Operations and Business Strategy 6 million shipments /day3.2 million /day2.8 million /dayHow are these two companies positioned in the competitive market space?What operational capabilities are critical for their success? On the operational front, how are they structured?
10 Operations as a Strategic Weapon versus“Bitter rivals Airbus and Boeing Co. don't agree on much, but these days their production gurus chant a common mantra: Let's copy Toyota, the company that reinvented car making. The giant jet makers and their suppliers are going back to school to learn about efficient production from companies that churn out vehicles that are just a fraction of a plane's size and complexity. Cutting production costs and speeding assembly is a vital step in the Airbus Boeing duel to stay competitive..”-- WSJ April 1, 2005.
11 Competing Through Services What are the service positioning of these companies?What are the service positioning of these companies?What do they do differently on the operations front to sustain the competitive position?
12 Key Principle of the Course 2. Process View of OperationsKey Principle of the CourseBy rethinking the IBM Austin assembly plant and introducing cells,distance traveled by a card was cut from 1.5 miles to 200 yardsfloor space was reduced to halfproduction tripled with about the same number of workers.
13 Operations & The Process View What is a Process?ProcessManagementInformationStructureNetwork ofActivities and BuffersInputsOutputsGoodsServicesFlow units(customers, data,material, cash, etc.)Labor & CapitalResources
14 What defines a “good process performance”? Financial MeasuresAbsolute measures:revenues, costs, operating income, net incomeNet Present Value (NPV) =Relative measures:ROI, ROEROA =Survival measure:cash flow
15 Define Operations Management as … Management of business processesHow to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs.What is appropriate?
16 Firms compete on Product Attributes This requires process capabilitiesPrice (Cost) PQuality QCustomer serviceProduct qualityTime TRapid, reliable deliveryNew product developmentVariety VDegree of customization“order winners”To deliver we need “capabilities”
17 Activities and Buffers Process Capability Affected by : Inputs, Structure, Resources, Information ManagementProcessManagementInformationStructureNetwork ofActivities and BuffersInputsOutputsGoodsServicesFlow units(customers, data,material, cash, etc.)Labor & Capital
18 Linking the Strategic role & Process view: Strategic Operational AuditExistingDesiredMeasuresProduct AttributesP, T, Q, VFeasibleBusiness StrategiesDesiredBusiness StrategyStrategy Gap?ExistingCapabilitiesCapability Gap?DesiredCapabilitiesMarketing, …,Financial StrategyOperations StrategyProcess AttributesC, T, Q, FlexOperational Structure:Processes & InfrastructureDesired Oper’l Structure:Processes & InfrastructureProcess Gap?
19 Operations Capability Wal-Mart“Focused” RetailingCorporate Strategy(Gain competitive advantage by) providing customers access to quality goods, when and where needed, at competitive pricesOperations StructureCross docking * (Video)EDI *Fast transportation systemFocused locationsCommunication between retail stores *RFIDOperations CapabilityShort flow timesLow inventory levels
20 (Benefits of Focused Strategy) Wal-Mart(Benefits of Focused Strategy)Inventory at retail stores turned over twice a week (Industry averages once every two weeks)Improved targeting of products to markets, better forecasting.Sales per square foot increased to $455 in 2002 (Industry average were $224 in 2002)In 2002, Wal-Mart has the biggest single day sales in history: $1.43 billion on the day after Thanksgiving.
23 Assembly Line of Simple Hernias Process Structure:Assembly Line of Simple HerniasQuestionaireDiagnosisWaiting ListWaiting Room30 days max. wait20 minExaminations5/10 minutesBillingLess than 10 min.ROOMOrientationDinnerTea & cookieSocializationPotential PatientsREJECTS
24 In the health-care sector Focus and the FrontierIn the health-care sectorResponsivenessShouldicehighoperations frontierOne generalfacilityWorld-classGeneralHospitallowLowHighVariety
25 WRISTON MANUFACTURING (to be distributed in class)
26 Classification of Processes by Process Architecture ProjectJob ShopBatchLine FlowContinuous FlowJob ShopFlow Shop
27 Characteristics of Processes: Job Shop vs. Batch vs. Flow Shop
28 Product-Process Matrix FlexibilityJumbled Flow.Process segmentsloosely linked.Disconnected LineFlow/Jumbled Flowbut a dominant flowexists.JOB SHOP(Commercial Printer,Architecture firm)BATCH(Heavy Equipment,Auto Repari)LINE FLOWS(Auto Assembly,Car lubrication shop)CONTINUOUSFLOW(Oil Refinery)ProductVarietyLowLow StandardizationOne of a kindLow VolumeMany ProductsFewMajor ProductsHigh volumeHigh StandardizationCommodity ProductsConnected LineFlow (assembly line)Continuous, automated,rigid line flow.Process segments tightlylinked.OpportunityCostsOut-of-pocketHigh
29 Wriston Manufacturing Corp. using Product-Process Matrix VolumeLow volumeLow StandardizationOne of a kindLow volumeMany ProductsHigher volumeFew Major ProductsHigh volumeHigh StandardizationCommodity ProductsProcessFlexibility(Designed Dollar) Volume per family1.010.0100.0100Jumbled Flow.Process segmentsloosely linked.Job ShopDetroitDisconnected LineFlow/Jumbled Flowbut a dominant flowexists.BatchFremont# routes (product families)10SaginawTiffinConnected LineFlow (assembly line)Line FlowSanduskyEssexLimaLebanonMaysvilleContinuous, automated,rigid line flow.Process segments tightlylinked.Continuous Flow1
30 Classification of Processes: by Customer InterfaceMake to StockProduct /ServiceDelivery ProcessMake to Order
31 US Furniture Market A $23 billion market with very low concentration. Top 3 players (Furniture Brands, Life Style Furnishings, La-Z-Boy) account for 20% of the market.Big 3 automakers have over 50% of market.Over 1000 other players.Very low barriers to entry.Not capital intensive.Furniture Brands spends only 2.2% of sales on capital spending.Ford spends about 6.6%.
32 A Typical Player Century Furniture Industries (Hickory, NC). $200 million in annual sales.Offers 3,500 different frames for sofas and chairs.With options for fabric, springs etc leads to 1.7 billion variants.What are implications for the bundle of attributes they can offer customers on process capabilities?Within Century’s factory parts can travel 14 miles within the factory.
33 A Different Way to Compete Mitchell Gold (Taylorsville, N.C)$70 million in sales.Lower price than goods of comparable quality but limited selection.Selling through Pottery Barn, Crate & Barrel, Restoration Hardware.Production takes place in one large modern factory (400,000 sq ft including warehouse space).97% of shipments are on time.Productivity at Gold at $168,000 per employee, compared with an industry average of $105,000.
34 Another Player England, Inc. of New Tazewell, TN. A division of La-Z-Boy.“Make to order in 30 days or we pay you.”Offers more than 40,000 variants.85 frames and 550 fabrics.Sofas are priced from $500 to $1,500.Production spread over several older buildings.Schedule production weekly to gain efficiencies in cutting fabric and wood.Have own trucking fleet and search for backhaul business.Have trimmed fabric suppliers to four to have some power over them.
35 Take-Aways Focused Operations & Strategic Fit Process View :Process ViewWe need to see operations as a transformation process of inputs into outputs.Strategic ViewAlign operational decisions with the overall company goals.Develop Operational Capabilities that support the positioning of a company.Identify what you should be good at. Link between business strategy, operations strategy, and operations structure.Capabilities defined by operational structure.Apply strategic operational audit to evaluate fit and areas for improvementLook for operational performance measures (time, inventory, throughput, flexibility) which are leading indicators of financial performance..