1. Transformation from inputs to outputs
Operations Function
Transformation from inputs to outputs
Inputs
Labour
Materials
Capital
Operations
Outputs
Products
Services

2. Operations Function Interfaces Personnel Purchasing Operations
Marketing
Finance

3. Operations Strategy
Operations strategy is the means by which operations implements the firm’s corporate strategy and helps to build a customer-driven firm.
It links long-term and short-term operations decisions to corporate strategy.
It is the core of managing processes and value chains.

4. Customer-Driven Operations Strategy
Corporate strategy views the organization as a system of interconnected parts, each working with the others to achieve desired goals.
Operations Strategy supports the corporate strategy and requires continuous cross-functional interaction.
The operations strategy should be customer driven.

5. Competitive Priorities
Cost 1. Low-cost operations
Quality 2. Top quality
3. Consistent quality
Time 4. Delivery speed
5. On-time delivery
6. Development speed
Flexibility 7. Customization
8. Variety
9. Volume flexibility

6. Competitive Capabilities
The Competitive Capabilities are the cost, quality, time and flexibility dimensions of competitive priorities that a process or value chain actually possesses and is able to deliver.
Low Cost means delivering a service or product at the lowest possible cost to the satisfaction of the customer.

7. Quality as a Competitive Capability
Top Quality: Delivering an outstanding service or product.
Considerable interaction with the customers may be required to determine what that means.
Consistent Quality: Producing services or products that meet design specifications on a consistent basis.

8. Time as a Competitive Capability
Delivery Speed is quickly filling a customer’s order.
Lead Time is the time between receipt of an order and filling the order.
On-Time Delivery means meeting the delivery time promises.
Development Speed is quickly introducing a new service or product.
Time-Based Competition is a strategy that focuses on development speed and delivery speed.

9. Flexibility as a Competitive Capability
Customization means satisfying the unique needs of each customer by changing the service or product designs.
Variety involves handling a wide assortment of services or products efficiently.
Volume Flexibility requires accelerating or decelerating the rate of production quickly to handle large fluctuations in demand.

10. Corporate Strategy and Key Operations Management Decisions
Operations strategy
Decisions
Managing Processes
Managing Value Chains
Market analysis
Competitive priorities
New Service/
Product Development
Capabilities
Performance
Gap? No
Yes

11. Measuring Productivity
Productivity is a measure of how efficiently inputs are converted to outputs
Productivity = output/input
Total Productivity Measure:
Total Productivity = (total output)/(total of all inputs)
Partial Productivity Measure:
Partial Productivity = (total output)/(single input)
Multifactor Productivity Measure:
Multi-factor Productivity = (total output)/(several inputs)
© Wiley 2010

12. Total Productivity: example
Bluegill Furniture makes kitchen chairs. The weekly dollar value of its output, including finished goods and work-in-progress, is $14,280. The value of inputs (labor, materials, capital) is approximately $16,528. What is the total productivity measure for Bluegill?
Total productivity = output/input
= $14,280/$16,528 = .864 or 86.4%
© Wiley 2010

13. Partial Productivity: example
Bluegill Furniture has hired 2 new workers to paint chairs. Together they have painted 10 chairs in 4 hours. What is labor productivity for the pair?
Labor productivity = output/labor
= (10 chairs)/(2 x 4 hr)
= (10 chairs)/(8 hr) or 1.25 chairs/hr
© Wiley 2010

14. Multifactor Productivity: example
Bluegill Furniture averages 35 chairs/day. Labor costs average $480, material costs are typically $200, and overhead cost is $250. Bluegill sells the chairs to a retailer for $70/unit. Find multifactor productivity.
Multifactor productivity =
(value of output)/(labor + material + overhead costs)
= ($70/chair x 35 chairs)/( )
= ($2450)/($930) or 2.63
© Wiley 2010

15. Service Sector and Manufacturing-Key Differences
Intangibility: They can’t be touched, tasted, felt as in case of manufacturing
Heterogeneity : No two services are exactly alike. The difference is due to the difference in service receivers, service providers and other service delivery system
Simultaneous production and consumption: Most often services are produced on demand or the customer is involved at the time of service production
© Wiley 2010

16. Productivity and the Service Sector
Measuring service sector productivity is a unique challenge
Traditional measures focus on tangible outcomes
Service industries primarily produce intangible outcomes
Measuring intangibles is challenging
© Wiley 2010

17. Factors affecting Operations Management today
Global Competition
Quality, customer service and cost challenges
Rapid expansion of advanced technologies
Continued growth of service sector(70-80% of business now is service oriented)
Scarcity of operations resources
Social responsibility issues