1. Using Operations to Compete Chapter 1
TRA 3151, FGCU
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01-01

2. Learning Objectives
When you complete this chapter you should be able to:
Define Operations Management
Explain the distinction between Goods and Services
Describe Process view
Describe Supply Chain View
Explain Operations Strategy
Define Trends in OM
Measure Productivity

3. Why Study OM?
OM is one of three major functions of any organization, we want to study how people organize themselves for productive enterprise
We want (and need) to know how goods and services are produced
We want to understand what operations managers do
OM is such a costly part of an organization

4. Options for Increasing Contribution
Sales $100,000 $150,000 $100,000 $100,000
Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin 20,000 30,000 20,000 36,000
Finance Costs – 6,000 – 6,000 – 3,000 – 6,000
Subtotal 14,000 24,000 17,000 30,000
Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500
Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500
Finance/
Marketing Accounting OM
Option Option Option
Increase Reduce Reduce
Sales Finance Production/Operation
Current Revenue 50% Costs 50% Costs 20%

5. What is Operations Management?
The systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external, customers.
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A Process View
Process
Any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers.
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7. Where are the OM Jobs? Technology/methods Facilities/space utilization
Strategic issues
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement

8. Opportunities

9. Certifications
APICS, the American Production and Inventory Control Society
American Society of Quality (ASQ)
Institute for Supply Management (ISM)
Project Management Institute (PMI)
Council of Supply Chain Management Professionals
Charter Institute of Purchasing and Supply (CIPS)

10. The Role of Operations in the Organization
Integration between Different Functional Areas of a Business
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11. Relationship of Operations w/ other functions,
fig_01_02
Operation interacts with other business functions.

12. Service and Manufacturing Processes
Differ Across Nature of Output and Degree of Customer Contact
More like a manufacturing process
More like a service process
Physical, durable output
Output can be inventoried
Low customer contact
Long response time
Capital intensive
Quality easily measured
Intangible, perishable output
Output cannot be inventoried
High customer contact
Short response time
Labor intensive
Quality not easily measured
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13. A CONTINUUM FROM GOODS TO SERVICES
fig_05_03
A CONTINUUM FROM GOODS TO SERVICES
Automobile manufacturing

14. The Hard Rock Cafe First opened in 1971 Rock music memorabilia
Now – 129 restaurants in over 40 countries
Rock music memorabilia
Creates value in the form of good food and entertainment
3,500+ custom meals per day in Orlando
How does an item get on the menu?
Role of the Operations Manager

15. What is Supply Chain Management?
The synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services, and information with customer demand.
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The Supply Chain View
Each activity in a process should add value to the preceding activities; waste and unnecessary cost should be eliminated.
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The Supply Chain View
Support Processes - Processes like Accounting, Human Resources, Engineering, and Information Systems that provides vital resources and inputs to the core processes
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18. CHALLENGES / TRENDS IN OM
From
Local or national focus
In-house
Traditional trade/market
Batch shipments
Mass production
Low bid purchasing
Lengthy product development
Standard products
Job specialization
Environmental concerns To
Global focus
Outsourcing / off-shoring/ Insourcing
E-business
Just-in-time
Lean production
Supply chain partnering
Rapid product development
Mass customization
Empowered employees
Sustainable and Ethical
“From” represent the challenges we faced from the beginning of 1980 to 1995, in some cases until “To” represent what trends we began implementing in the last decade and where we go to.. 30

19. Operations Strategy Corporate Strategy Environmental scanning
Core competencies
Core processes
Global strategies
Market Analysis
Market segmentation
Needs assessment
Competitive Priorities
Cost
Quality
Time
Flexibility
New Service/
Product Development
Design
Analysis
Development
Full launch
Operations Strategy
Decisions
Managing processes
Managing supply chains
Competitive Capabilities
Current
Needed
Planned
Performance Gap? No
Yes
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Examples
COST
Definition
Process Considerations
Example
Low-cost operations
Delivering a service or a product at the lowest possible cost
Processes must be designed and operated to make them efficient
Costco
QUALITY
Top quality
Delivering an outstanding service or product
May require a high level of customer contact and may require superior product features
Rolex
Consistent quality
Producing services or products that meet design specifications on a consistent basis
Processes designed and monitored to reduce errors and prevent defects
McDonald’s
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Examples
TIME
Definition
Process Considerations
Example
Delivery speed
Quickly filling a customer’s order
Design processes to reduce lead time
Dell
On-time delivery
Meeting delivery-time promises
Planning processes to increase percent of customer orders shipped when promised
United Parcel Service (UPS)
Development speed
Quickly introducing a new service or a product
Cross-functional integration and involvement of critical external suppliers
Zara
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Examples
FLEXIBILITY
Definition
Process Considerations
Example
Customization
Satisfying the unique needs of each customer by changing service or products designs
Low volume, close customer contact, and easily reconfigured
Ritz Carlton
Variety
Handling a wide assortment of services or products efficiently
Capable of larger volumes than processes supporting customization
Amazon.com
Volume flexibility
Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand
Processes must be designed for excess capacity
The United States Postal Service (USPS)
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23. Order Winners and Qualifiers
The criterion customers use to differentiate the services or products of one firm from those of another.
Order Qualifiers
The minimum level required from a set of criteria for a firm to do business in a particular market segment.
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24. OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS
Competitive Priority
Measure
Capability
Gap
Action
Low-cost operations
Cost per billing statement
$0.0813
Target is $0.06
Eliminate microfilming and storage of billing statements
Weekly postage
$17,000
Target is $14,000
Develop Web-base process for posting bills
Consistent quality
Percent errors in bill information
0.90%
Acceptable
No action
Percent errors in posting payments
0.74%
Delivery speed
Lead time to process merchant payments
48 hours
Volume flexibility
Utilization
98%
Too high to support rapid increase in volumes
Acquire temporary employees
Improve work methods
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25. Trends in Operations Management
Productivity
The value of outputs (services and products) produced divided by the values of input resources (wages, costs of equipment, etc.)
Productivity = Output
Input
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26. (3 employees)(40 hours/employee)
Example 1.1
Calculate the Labor Productivity:
a. Three employees process 600 insurance policies in a week. They work 8 hours per day, 5 days per week.
Labor productivity =
Policies processed
Employee hours
= = 5 policies/hour
600 policies
(3 employees)(40 hours/employee)
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27. Trends in Operations Management
Global Competition
Advantages:
Increased market penetration
Comparative cost advantages
Disadvantages:
Political risks
Lower skilled workers
Vulnerability to supply chain disruptions
Japanese Earthquake in March 2011
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28. Trends in Operations Management
Ethical, Workforce Diversity, and Environmental Issues
Ethical decision-making in different countries
Environmental concerns
Sustainability initiatives
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