1 MANAGEMENT 516 OPERATIONS MANAGEMENT What is Operations Management (OM) ? –Activities that relate to creation of goods and services through transformation of inputs Pg.5 –Relationship to other functional areas such as Marketing and Accounting Finance –Key areas in OM 13 Product/service design/Process design/Capacity planning/facilities location and design (Layout)/Quality management/HR and job design/Supply chain management/Inventory and materials management/Operations planning and scheduling/Maintenance We will learn principles/methods to handle issues in these areas

2 MANAGEMENT 516 OPERATIONS MANAGEMENT What are the levels of the organization ? –Corporate; Business; Functional. What are the levels of managers/management ? –Top management, middle management, entry- level/first-level/supervisory What is management = what do managers do ? –Achieving Objectives/Goals –Functions of Management (Process) –Efficient Use of Resources

How good is our operations management ?  Effectiveness: Achieving objectives, goals  Efficiency: Managing resources OUTPUT INPUT 3

4 Function of Management Planning Organizing Directing/ Leading Control Process of Management

Operations Management First of all: Strategy or Competitive Priorities Then, planning and organizing activities –Product/service design, process selection, technology, planning workforce, quality, capacity, facilities, supplier network Next, directing/leading operations, (“doing”) –Production planning, managing workforce, improving quality/processes/products-services, material requirements, inventories, scheduling operations And, controlling/monitoring operations –Quality control, production control, inventory control, cost control, customer satisfaction measurement, monitoring workforce, monitoring suppliers

Views of the Organization. 16 Functional View –Traditional functional organization –Finance, marketing, HR, operations, IT Value chain view –In bound logistics, operations, marketing/sales, outbound logistics, service Process View –Customer processes, supplier processes, internal processes

Role of Services Growth of the service sector in the US economy Employment in services: about 40% in 1950; 65% in 1990; 80% in 2010 Reasons: Stages of economic activity, Changing demographics, Information Technology growth, Innovative business strategies, Even manufacturing needs many services –Communications, banking, utilities, transportation, legal, accounting, insurance –Distribution: retailing, wholesaling –After sale services: complaint resolution, repairs, customer service –Product promotion: advertising, market research, websites Public services Personal services: health care, restaurants, hotels Professional services: consulting, auditing, tax, medical B2B services

The new Experience Economy 14 Adding value by engaging and connecting with customer in a personal and memorable way Revealed/sustained over time Consumer as guest Personal touch Design elements: Theme, Positive impressions and cues, Memorabilia, Environmental relationships, Customer participation

FORMULATING STRATEGY 37 Resource based view –What are we good at – core competencies –Internal environment (see later slide) Is there a strategy management process ? –Yes –Strategy formulation, implementation, control Levels of strategy formulation –Corporate level –Business level –Functional level

10 Strategic Management Process Objective: Competitive advantage Strategic Management process –Strategic Intent/Vision/Mission –Environmental Analysis –Revised Vision/Mission and LT objectives –Detailed situation analysis –Formulate strategies –Develop action for implementation: Programs, Policies, Budgets –Plan monitoring

11 ENVIRONMENTAL SCANNING EXTERNAL ENVIRONMENT ECONOMY POLITICAL-LEGAL SOCIO-CULTURAL TECHNOLOGY GLOBAL/INTERNATIONAL COMPETITION CUSTOMERS SUPPLIERS

12 INTERNAL ENVIRONMENT FUNCTIONAL AREA RESOURCES –Finance, Marketing, Operations, HR, MIS, R&D ORGANIZATION STRUCTURE –Dividing work, Authority & Responsibility, Information flow, decision making CORPORATE CULTURE –Social responsibility and ethics, integration and intensity of competitive priorities

13 STRATEGIC MANAGEMENT FORMULATING STRATEGY EXT. ENVT. INT. ENVT. MISSION OBJECTIVES SITUATION ANALYSIS STRATEGY

14 SITUATION ANALYSIS 1.SWOT ANALYSIS. 2.PRODUCT LIFE CYCLE ANALYSIS 3.INDUSTRY/ COMPETITION ANALYSIS

15 STRATEGY CORPORATE LEVEL(GRAND) GROWTHSTABILITYRETIREMENT BUSINESS LEVEL COST LEADERSHIPDIFFERENTIATION FOCUS FUNCTIONAL LEVEL: OPERATIONAL STRATEGY “Competitive Priorities”: Cost/Price Quality Availability Dependability

16 Functional level strategy E.g. Operations Strategy PRODUCTS/SERVICES PROCESS TECHNOLOGY CAPACITY QUALITY WORK FORCE FACILITIES SUPPLIERS/VERTICAL INTEGRATION

Implementing and Monitoring Strategy Implementation = organizing and directing Done by –Developing/revising policies –Procedures –Programs = medium/short term plans –Budgets Control = Monitoring –Balanced approach 47

18 Controlling Operations What ? –quality control, process control, employee evaluations, customer satisfaction surveys, supplier evaluations How ? Steps –Setting standards –Measuring actual performance –Comparison/ analysis – Corrective action/ no action Where ? –Preliminary control –Concurrent control –Post/Feedback control