Operations and Productivity

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Operations Management
Chapter 1 Operations and
Productivity
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Outline

• Global Company Profile Hard Rock Cafe

• What Is Operations Management?
• Organizing To Produce Goods And Services
• Why Study OM?
• What Operations Managers Do

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Outline - Continued

• The Heritage Of Operations Management
• Operations In The Service Sector
• Differences Between Goods And Services
• Exciting New Trends In Operations
• Ethics And Social Responsibility Management

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What Is Operations Management?

• Production is the creation of goods and services

Operations management (OM) is the set of
activities that creates value in the form of
goods and services by transforming inputs into
outputs
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Organizing to Produce Goods and Services

• Essential functions
• Marketing generates demand
• Production/operations creates the product
• Finance/accounting tracks how well the
  organization is doing, pays bills, collects the
  money

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Commercial Bank
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Airline
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Manufacturing
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Why Study OM?

• OM is one of three major functions (marketing,
  finance, and operations) of any organization

• We want 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

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Options for Increasing Contribution

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What Operations Managers Do
Basic Management Functions

• Planning
• Organizing
• Staffing
• Leading
• Controlling

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Ten Critical Decisions
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Where are the OM Jobs?
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Where are the OM Jobs?

• Technology/methods
• Facilities/space utilization
• Strategic issues
• Response time
• People/team development
• Customer service
• Quality
• Cost reduction
• Inventory reduction
• Productivity improvement

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Significant Events in OM
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Characteristics of Goods

• Tangible product
• Consistent product definition
• Production usually separate from consumption
• Can be inventoried
• Low customer interaction

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Characteristics of Service

• Intangible product
• Produced and consumed at same time
• Often unique
• High customer interaction
• Inconsistent product definition
• Often knowledge-based
• Frequently dispersed

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Goods and Services
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New Trends in OM
Local or national focus Low-cost, reliable worldwide communication and transportation networks Global focus
Batch (large) shipments Short product life cycles and cost of capital put pressure on reducing inventory Just-in-time shipments
Low-bid purchasing Quality emphasis requires that suppliers be engaged in product improvement Supply-chain partners, Enterprise Resource Planning, e-commerce
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New Trends in OM
Lengthy product development Shorter life cycles, Internet, rapid international communication, computer-aided design, and international collaboration Rapid product development, alliances, collaborative designs
Standardized products Affluence and worldwide markets increasingly flexible production processes Mass customization with added emphasis on quality
Job specialization Changing socioculture milieu increasingly a knowledge and information society Empowered employees, teams, and lean production
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New Trends in OM
Low-cost focus Environmental issues, ISO 14000, increasing disposal costs Environmentally sensitive production, green manufacturing, recycled materials, remanufacturing
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Ethics and Social Responsibility
Challenges facing operations managers

• Developing safe quality products
• Maintaining a clean environment
• Providing a safe workplace
• Honouring community commitments

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Operations Management
Chapter 1 Operations and Productivity11
Chapter 2 Operations Strategy in
a Global Environment
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Outline

• Global Company Profile Boeing
• A Global View of Operations
• Cultural and Ethical Issues
• Developing Missions And Strategies
• Mission
• Strategy

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Outline Continued

• Achieving Competitive Advantage Through
  Operations
• Competing On Differentiation
• Competing On Cost
• Competing On Response
• Ten Strategic OM Decisions
• Global Operations Strategy Options

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Global Strategies

• Boeing sales and production are worldwide
• Benetton moves inventory to stores around the
  world faster than its competition by building
  flexibility into design, production, and
  distribution
• Sony purchases components from suppliers in
  Thailand, Malaysia, and around the world

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Global Strategies

• Volvo considered a Swedish company but it is
  controlled by an American company, Ford. The
  current Volvo S40 is built in Belgium and shares
  its platform with the Mazda 3 built in Japan and
  the Ford Focus built in Europe.
• Haier A Chinese company, produces compact
  refrigerators (it has one-third of the US market)
  and wine cabinets (it has half of the US market)
  in South Carolina

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Reasons to Globalize
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Reduce Costs

• Foreign locations with lower wage rates can lower
  direct and indirect costs
• World Trade Organization (WTC)
• North American Free Trade Agreement (NAFTA)
• APEC, SEATO, MERCOSUR
• European Union (EU)

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Improve the Supply Chain

• Locating facilities closer to unique resources
• Auto design to California
• Athletic shoe production to China
• Perfume manufacturing in France

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Provide Better Goods and Services

• Objective and subjective characteristics of goods
  and services
• On-time deliveries
• Cultural variables
• Improved customer service

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Understand Markets

• Interacting with foreign customer and suppliers
  can lead to new opportunities

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Learn to Improve Operations

• Remain open to the free flow of ideas
• General Motors partnered with a Japanese auto
  manufacturer to learn

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Attract and Retain Global Talent

• Offer better employment opportunities
• Better growth opportunities and insulation
  against unemployment
• Relocate unneeded personnel to more prosperous
  locations
• Incentives for people who like to travel

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Developing Missions and Strategies
Mission statements tell an organization where it
is going
The Strategy tells the organization how to get
there
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Mission

• Mission - where are you going?
• Organizations purpose for being
• Answers What do we provide society?
• Provides boundaries and focus

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Hard Rock Café

• Our Mission To spread the spirit of Rock n
  Roll by delivering an exceptional entertainment
  and dining experience. We are committed to being
  an important, contributing member of our
  community and offering the Hard Rock family a
  fun, healthy, and nurturing work environment
  while ensuring our long-term success.

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Factors Affecting Mission
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Strategic Process
Organizations Mission
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Strategy

• Action plan to achieve mission
• Functional areas have strategies
• Strategies exploit opportunities and strengths,
  neutralize threats, and avoid weaknesses

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Strategies for Competitive Advantage

• Differentiation better, or at least different
• Cost leadership cheaper
• Quick response more responsive

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Competing on Differentiation

• Uniqueness can go beyond both the physical
  characteristics and service attributes to
  encompass everything that impacts customers
  perception of value

• Safeskin gloves leading edge products
• Walt Disney Magic Kingdom experience
  differentiation
• Hard Rock Cafe theme experience

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Competing on Cost

• Provide the maximum value as perceived by
  customer. Does not imply low quality.

• Southwest Airlines secondary airports, no
  frills service, efficient utilization of
  equipment
• Wal-Mart small overheads, shrinkage,
  distribution costs
• Franz Colruyt no bags, low light, no music,
  doors on freezers

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Competing on Response

• Flexibility is matching market changes in design
  innovation and volumes
• Institutionalization at Hewlett-Packard
• Reliability is meeting schedules
• German machine industry
• Timeliness is quickness in design, production,
  and delivery
• Johnson Electric, Bennigans, Motorola

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OMs Contribution to Strategy
Operations Specific Competitive Decisions Examp
les Strategy Used Advantage
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Strategy Development Process
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Four International Operations Strategies
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Four International Operations Strategies
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Four International Operations Strategies
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Four International Operations Strategies
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Four International Operations Strategies
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Four International Operations Strategies
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Four International Operations Strategies
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Four International Operations Strategies