1. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Chapter 1 Competing with Operations

2. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-2 What Is a Process? Process –Activities that transform inputs, add value and generate output(s) Example: Furniture Manufacturing –Primary Process Cutting or staining wood –Non-Manufacturing Process Controlling Inventory

3. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Outputs Services Goods Internal and external customers Processes and operations 5 1 2 3 4 Inputs Workers Managers Equipment Facilities Materials Services Land Energy Information on performance Figure 1.1 Processes & Operations 1-3

4. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Figure 1.2 BANKOperationsRetailProductsWholesale Maintain cards Research problems Site analysis Others Process deposits Cash checks Safe deposit boxes Others Loan documentation Review credit standing Obtain manager approval Others Prepare reports Attend meetings Input funds deals Others ATM support Customer transactions Service quality Others Teller line transactions Track branch sales ATM hotline Others Credit applications Manage retail products Originate lease portfolio Others Fund management Market making spot Dealer support Others Cash Management Loan operations Trading operations Others Distribution Compliance Finance Human resources Auto Finance Cards Mortgages Others Trading Loan administration Leasing Others Nested Processes at a Large Bank 1-4

5. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-5 What Is Operations Management? processes inputs outputsEfficiently using processes to transform inputs into valuable outputs Successful operations management results from careful allocation of: –Human Resources –Capital –Information –Materials

6. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Operations Management as a Function Figure 1.3 1-6

7. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Operations Management As a Function Skill Areas Quantitative methods Organizational behavior General management Information systems Economics International business Business ethics and law Figure 1.3 1-7

8. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-8 Trends & New Challenges in Operations Management Growth of the Service Sector Intense Productivity pressures Global Competition Firms can no longer hide behind borders Ethics, Diversity & Environmental Issues Conflicting business protocol Cultural dilemmas

9. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-9 Strategic Considerations Business Environment –Continuous Environmental Scanning is necessary Flexibility –Capacity to meet ever-changing client demands Core Competencies –Using the firm’s unique strengths to seize opportunities

10. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-10 The Importance of Market Analysis Market Segmentation –identify groups or sub-groups of clients Needs Assessment –identify the requirements of each group Product or service needs Delivery system needs Volume needs

11. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Selecting Competitive Priorities Market analysis segmentation needs assessment Corporate strategy goals core competencies environmental responses new products/services global strategies Figure 1.5 Competitive Priorities Cost1.Low-cost operations Quality2.High-performance design 3.Consistent quality Time4.Fast delivery 5.On-time delivery 6.Development speed Flexibility7.Customization 8.Volume flexibility 1-11

12. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Corporate strategy goals core competencies environmental responses new products/services global strategies Market analysis segmentation needs assessment Competitive priorities OperationsMarketing cost qualityFinance time flexibilityOthers Capabilities current needed plans Functional area strategies finance marketing operations others Figure 1.5 Selecting Competitive Priorities 1-12

13. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Strategy and Decisions Operations strategy Market analysis Competitive priorities Corporate strategy Figure 1.8 ServicesManufacturing Standardized services Assemble-to-order Customized services Make-to-stock Assemble-to-order Make-to-order 1-13

14. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-14 Examples of Service Strategies Standardized services –Canada Post Assemble-to-order –C able companies (pre-arranged packages) Customized services –Health clinics

15. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Figure 1.6 Health Clinic Process 1-15

16. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Physical exam D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Physical exam Figure 1.6 Health Clinic Process 1-16

17. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Physical exam Broken arm D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Broken arm Physical exam Figure 1.6 Health Clinic Process 1-17

18. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Health Clinic Process Physical exam Broken arm Flu D T R P B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Broken arm Flu Physical exam Figure 1.6 1-18

19. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-19 Examples of Manufacturing Strategies Make-to-stock –Mass-produced automobiles Assemble-to-order – Upscale Unique Furniture Make-to-order – High-end homes

20. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Strategy and Decisions Operations strategy Process decisions Quality decisions Capacity, location, and layout decisions Operating decisions Market analysis Competitive priorities Corporate strategy ServicesManufacturing Standardized services Assemble-to-order Customized services Make-to-stock Assemble-to-order Make-to-order Capabilities Figure 1.8 1-20

21. Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-21 Cross-Functional Coordination Removing barriers between departments Moving from sequential decision-making to coordination leads to: –Improved communication –More accurate market information –More timely internal feedback