Introduction & Strategy Module Introduction & Administrative www.kellogg.northwestern.edu/course/opns430/emp/vanmieghem/ What is operations Process view of Ops What is a good operation? A Strategic Framework for Ops Aligning strategy and operations: Focus Relationship between process choice and strategy Shouldice Hospital Wriston Manufacturing J.A. Van Mieghem/Operations/Strategy

Course: Goals and Overview Operations as a managerial integration function Evaluation and Improvement Course is structured to answer: What is an improvement?  Strategic role of ops Where target improvements?  Identify metrics by linking process flows with financial flows How improve?  Improve each metric © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

“The planning and execution of work” (JVM 2008) What is Operations? “The planning and execution of work” (JVM 2008) “Creation and delivery of products and services to customers” (JVM 2008) J.A. Van Mieghem/Operations/Strategy

3 Views of Operations Competencies Operations Strategy Resources Processes Max NPV Operations strategy is a plan for developing resources and configuring processes such that the resulting competencies maximize NPV © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

A process is a well-structured transformation of inputs into outputs Goods Services Inputs Flow units/Entities (customers, data, material, cash, etc.) Network of Activities and Buffers Labor & Capital Resources © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

The three ‘colors’ of operational excellence “The formal structures, processes and systems through which resources are managed in support of the operating system” “The way assets and resources are configured and optimised to create value and minimise losses” Management Infrastructure Operating System Mindsets, Capabilities & Behaviors “The way people think, feel and conduct themselves in the workplace, individually and collectively” Source: John Drew J.A. Van Mieghem/Operations/Strategy

What defines a “good process”? Delivered value / Supply chain surplus Delivered value of process = benefit to process customers – total process cost Benefit driven by customer value Variety V (flexibility) Quality Q: of product or outcome of service Time T: Rapid, reliable delivery New product development Price p (Cost) J.A. Van Mieghem/Operations/Strategy

A question I am looking for a small batch of printed books Copyright 2007 J. A. Van Mieghem. All rights reserved. For permissions, contact permissions@vanmieghem.us A question 4/6/2017 I am looking for a small batch of printed books Which location seems better: a printer in the US or in China? © J. A. Van Mieghem Do no copy nor poste on the Internet.

A question… Competitive analysis: cost v. quantity Copyright 2007 J. A. Van Mieghem. All rights reserved. For permissions, contact permissions@vanmieghem.us A question… Competitive analysis: cost v. quantity 4/6/2017 $25 Caxton Printers (Caldwell, Idaho) $20 BioPrint (Minneapolis, MN) Imaging Hawaii (Honolulu) $15 Jostens (Topeka, KS) Cost/book AsianPrinting (middleman in L.A., CA) $10 BookMasters (Grand Rapids, MI) $5 Aomeiya (Shandong, China) Lithopak (Shenzhen, China) $ - 1,000 2,000 3,000 4,000 5,000 Lotsize © J. A. Van Mieghem Do no copy nor poste on the Internet.

A question… Competitive analysis: cost v. responsiveness Copyright 2007 J. A. Van Mieghem. All rights reserved. For permissions, contact permissions@vanmieghem.us 4/6/2017 Responsiveness (weeks) Caxton Printers (Caldwell, Idaho) BookMasters (Grand Rapids) 2 BioPrint (Minneapolis, MN) 3 Imaging Hawaii (Honolulu + Hong Kong) Jostens (Topeka, KS) AsianPrinting (middleman in L.A., CA) BookMasters (Grand Rapids, MI) Aomeiya (Shandong) 7 Aomeiya (Shandong, China) 8 Lithopak (Shenzhen, China) $25 $20 $15 $10 $5 Cost efficiency ($/book) © J. A. Van Mieghem Do no copy nor poste on the Internet.

What defines a good operation? structures the processes and resources to align and adapt the operational competencies with the needs of the customer(s) © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

A Framework for designing an Operations Strategy and Structure What is our strategic position: how do we compete & provide value in the market? What is the value proposition to our customers? Rank (p, T, Q, V) Given our strategic position, what must operations do particularly well? Which competencies must ops develop? Rank (c, T, Q, Flex) Given needed competencies, how should operations processes be structured to develop competencies that support strategy? Process choice (structure) and management competitive strategy operational competencies Resources & Processes J.A. Van Mieghem/Operations/Strategy

What defines a good operation What defines a good operation? Achieving alignment at Shouldice Hospital © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

Wriston Manufacturing Handouts to be distributed in class © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

Wriston’s HED Division Plant Network Exhibit 2A Total Burden Rates (total overhead cost / direct labor cost) 1 2 3 4 5 6 7 Free capacity and Throughput $0 $50 $100 $150 $200 Sandusky, OH Essex, Canada Detroit, MI Saginaw, Lima, Lebanon, PA Tiffin, Fremont, Maysville, KY © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

The Fundamentals: Competitive Advantage through Tailored Operations Copyright 2007 J. A. Van Mieghem. All rights reserved. For permissions, contact permissions@vanmieghem.us 4/6/2017 Recall the two fundamental strategies: Doing the same things as rivals but better Doing different things Focused, tailored operations are more competitive than generics What is your plan to get to or push out the frontier? efficient frontier Customization A Cost efficiency © J. A. Van Mieghem Do no copy nor poste on the Internet.

The Concept of Operational Focus Cost efficiency Flexibility (responsiveness) World-class Emergency Room specialty non-emergency Shouldice Hospital One general hospital efficient frontier = current state of best practice A focused process attempts to deliver one specific and narrow customer value proposition (i.e., its priority ranking is clear and constant for all patients) It is optimized to deliver the needed competencies for one narrow patient segment Focus does not imply standardization: ER is focused on providing timeliness and flexibility to patient needing emergency care © J. A. Van Mieghem J.A. Van Mieghem/Operations/Strategy

Summary: Introduction & Strategy Module Operations is the process of bringing goods and services to customers Process view = viewing an organization as a transformation of inputs into outputs through a network of activities and buffers, utilizing resources, IT and mgt A good operation maximizes value or supply chain surplus A strategic framework for operations for increasing the value of operations by aligning the competencies of the operations structure (resources & processes) with corporate strategy Aligning strategy and operations can be achieved through: Focus Process choice Cases: Shouldice Hospital Wriston Manufacturing J.A. Van Mieghem/Operations/Strategy