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S. Chopra/Operations/Strategy1 Operations Management: Introduction & Strategy Module u Introduction & Administrative u Key Principles of Course »Strategic.

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Presentation on theme: "S. Chopra/Operations/Strategy1 Operations Management: Introduction & Strategy Module u Introduction & Administrative u Key Principles of Course »Strategic."— Presentation transcript:

1 S. Chopra/Operations/Strategy1 Operations Management: Introduction & Strategy Module u Introduction & Administrative u Key Principles of Course »Strategic role of Ops »Process view of Ops u Strategies, Capabilities and Operations »Strategic Framework »Wal-Mart u Aligning strategy and operations: »Shouldice Hospital »Focus »Wriston Manufacturing

2 S. Chopra/Operations/Strategy2 Key Principle of course: 1. The Strategic Role of Ops “A company’s operations function is either a competitive weapon or a corporate millstone. It is seldom neutral.” [Skinner ‘69]

3 S. Chopra/Operations/Strategy3 Key Principle of Course: 2. The Process View of Ops u By rethinking the IBM Austin assembly plant and introducing cells, –distance traveled by a card was cut from 1.5 miles to 200 yards –floor space was reduced to half –production tripled with about the same number of workers. [Chicago Tribune, July 1992]

4 S. Chopra/Operations/Strategy4 Operations & the Process View: What is a Process? Inputs Outputs Goods Services Labor & Capital Information structure Network of Activities and Buffers Flow units (customers, data, material, cash, etc.) Resources Process Management

5 S. Chopra/Operations/Strategy5 What defines a “good process”? Performance: Financial Measures u Absolute measures: –revenues, costs, operating income, net income –Net Present Value (NPV) = u Relative measures: –ROI, ROE –ROA = u Survival measure: –cash flow

6 S. Chopra/Operations/Strategy6 Firms compete on product attributes. This requires process competencies. Product Attribute (External)Process Competency (Internal) Cost Response timeFlow time VarietyFlexibility Quality

7 S. Chopra/Operations/Strategy7 Process Competencies are affected by Process Structure and Management u Process structure or architecture: –(1) inputs and outputs –(2) flow unit (“jobs”) –(3) network of activities & buffers »quantity & location »precedence relationships –(4) resource allocation »capacity & throughput u Operations Planning & Control u Organization

8 S. Chopra/Operations/Strategy8 What defines a good operation? Achieving alignment at FedEx Revenues32,29429,36324,710 Income3,0142,4711,440

9 S. Chopra/Operations/Strategy9 A Strategic Framework for Operations Business Strategy Desired Capabilities Processes Resources Operations Structure

10 S. Chopra/Operations/Strategy10 What defines a good operation? Achieving alignment at IKEA

11 S. Chopra/Operations/Strategy11 Shouldice Hospital

12 S. Chopra/Operations/Strategy12 Wriston Manufacturing

13 S. Chopra/Operations/Strategy13 Wriston Manufacturing Burden Rates (total overhead cost / direct labor cost) SanduskiDetroitLimaLebanonSaginawEssexTiffinFreemontMaysville Free capacity and Throughput SanduskiDetroitLimaLebanonSaginawEssexTiffinFreemontMaysville

14 S. Chopra/Operations/Strategy14 Focus and the Frontier I n the health-care sector Cost efficiency Responsiveness World-class Emergency Room World-class (non-emergency) Hospital One general facility operations frontier

15 S. Chopra/Operations/Strategy15 Learning Objectives Operations & Strategy u An operation as a transformation process u Product Attributes / Operational Capabilities u Process Drivers / Operations structure u Link between business strategy, operations strategy, and operations structure –Strategy vs. Operational Effectiveness –Operational Focus


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