Understanding and managing operations

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Understanding and managing operations
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Understanding Operations

• Operations
• All steps of transformation of raw materials
  to product client buys.
• Operations Management
• Design, manage and improve operations
  system.

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Historic development Craft Manufacturing

• Skilled craftspeople produce goods in low volume
  
• Meet customers needs
• Works well for small-scale production with low
  levels of competition

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Historic development Mass production

• Producing goods in high volume with low variety
• Customers expected to buy what is supplied
• Keeping costs/prices down
• Minimize variety
• Aggressive advertising and
• Sales force

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Historic development Mass production

• 'American system of manufacture' introduced
  standard parts to the assembly lines
• 'scientific management' by Frederick Taylor
  introduced one best way of doing a job,
• ...a frequency of tasks
• moving assembly line introduced by Henry Ford

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Historic development Modern period

• Japanese emerged with
• TQM,
• JIT, and
• employee involvement

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Historic development Modern period

• But is still no one single approach for managing
  the operations that replaced mass production-
  Flexible specialization
• Focus on separate parts
• Collaborate in network to build product
• - Lean production
• - from Toyota Production System

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Historic development Modern period

• - Lean production
• - Elimination of all forms of waste
• - Remove inefficiencies
• - Mass customisation
• Adapting products to meet individual
  customer's requirements
• - Agile manufacturing
• Always staying with the market

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The role of the operations manager

• Responsibilities- Human resource management-
  Asset management- Cost management
• Tasks/Decisions- design, manage, and improve
  operations system
• involves the processes, quality,
  quantity/capacity, inventory (stock) and HR.

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The Transformation Model

• A way to look at this is transformation model.
• Inputs -gt Transformation Process -gt Outputs
  -gt Feedback to Inputs
• Inputs include transformed (e.g. materials,
  information, customers) and transforming
  (staff/labour, facilities/capital) resources.
• Outputs can vary widely and be desirable or
  undesirable (i.e., waste). Also includes ethical,
  environmental and social thinking in Ops. Man.

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The transformation process

• The transformation process often transforms
  materials, information and customers at the same
  time.
• Can categorize the different types into-
  manufacture (cars)- transport (taxi service)-
  supply (retailing)- service (hospital wards,
  warehouses)
• Macro transformation process often made up of
  many micro transformation processes.

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Feedback

• Feedback essential for operations manager, both
  from internal and external resources.
• Boundary of operations systems often used to show
  that there is a place where we loose control but
  are influenced by our environment.
• It is becoming increasingly difficult to draw
  neat boundaries around the operations.

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The process perspective

• Process perspective to operations gives managers
  new insights about how performance can be
  improved with help of operations.
• Operational processes are those that bring
  outputs to customers and administrative processes
  are those necessary for running the business but
  have no direct outputs to customers.
• Two processes need linking cos each relies on
  the other.

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Work processes approach

• Draws on principles of
• Quality improvement and
• Re-engineering
• To

• generally enhance operating performance.

• reduce cycle times,
• cut costs,
• improve quality
• and

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Quality improvement and Re-engineering

• Quality improvement
• Incremental, existing processes improved because
  have desirable properties, Everything must be
  documented with control points
• Re-engineering
• Radical change, old processes regarded as
  hopelessly outdated, emphasis on redesign rather
  than control
• Suggest the work processes to be redesigned

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Case management

• Small teams see order through from beginning to
  end.
• Only possible with new technologies.

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What works?

• For managers, work processes approach good
• Simple acknowledgment already helps and
• Managers do not focus on structures or roles but
  on the process itself.
• Many problems come from only redesigning the
  process and not putting good operations and
  management on top of it for the future.
• Sometimes supporting administrative processes are
  neglected.

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Order Management Cycle (OMC) Theory

• Very good theory on work process redesign from
• Benson P. Shapiro,
• V. Kasturi Rangan and
• John J. Sviokla
• in form of order management cycle (OMC).
• Moment of truth occurs at every step of the OMC
  and every employee is affected.

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(Cycle of) Orders...

• 1. Planning sales forecasting capacity
  planning2. Generation3. Cost estimation and
  pricing order based pricing is
  good4. Receipt and entry5. Selection and
  prioritisation Should prioritise based on
  what is good for the business6. Scheduling

Management of the Order Cycle OMC
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Orders...

• 7. Fulfilment
• procurement manufacturing
• assembling testing
• shipping installation
• 8. Billing
• 9. Returns and claims
• 10. After-sales service

Management of the Order Cycle OMC
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Horizontal moves

• Horizontal moves are from department to
  department and are dangerous as things can fall
  through the cracks.
• The management often does not see the entire
  chains clearly and people only see their parts.
• These parts always overlap, though.
• Everybody needs to be aware of where they fit and
  what their role is.

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Customers want orders...

• Customers want their orders handled quickly,
  accurately, and cost-effectively,
• ...Not more people to talk to.
• Firms need to look at the OMC from the customer's
  point of view.
• Being aware of every step and all the problems
  means that managers must walk up and down and
  from side to side, every step of the way.

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To succeed analysise

• 1. Analysis
• Draw your OMC - and chart the gaps
• - from start to finish, -
  detailed
• Successful companies have explicitly stated that
  their goals are satisfied customers, higher
  profits, and sustainable competitive advantage
• - without compromising any of them.

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To succeed focus..

• 2. System Focus
• Put pieces together and move across boundaries
• Fit together horizontal pieces into unified,
  harmonious whole.
• The most powerful tool that managers can use is
  inter-functional or inter-departmental
  investments in projects.

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To succeed focus...

• Firms need to be clear that the basic work of a
  company takes place across boundaries.
• All pieces of the system must fit together to
  meet customer needs in a seamless fashion.

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To succeed strategy...

• 3. Political Strategy
• Staple yourself to an order - follow it
  though.
• In general a good OMC will
• improve customer satisfaction and
• help the company keep their promises to customers
  and
• eventually improve financial performance.

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Managing Operations Performance

• Operations should provide competitive advantage.
• Need to keep in mind strategy hierarchy
• Corporate Strategy (What business
  should we be in?)
• -gt Business Strategy (How should we
  compete?)
• -gt Functional Strategy (How should we
  support this?)

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The Four Stage Model

• Provides framework for how operations contribute
  to competitiveness
• Stage 1 Internally neutral Minimise negative
  impact of operations not provide any
  contribution do not realize/ not appreciate
• Stage 2 Externally neutral Operations help
  business maintain parity with its competitors
  performs as well, still does not provide
  competitive advantage are aware but not start to
  improve.

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The Four Stage Model

• Stage 3 internally supportive Objective for
  operations to provide credible support for
  business strategy provides a competitive edge,
  as good as other operations in its sector but not
  yet being exploited
• Stage 4 externally supportive Objective for
  operations to provide a source for competitive
  advantage source of persistent competitive
  advantage operations functions are world-class

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Operational Performance

• There are several aspects to operational
  performance and they are interlinked and each
  contributes to each other. Do things- right
  the first time Quality- quickly
  Speed- on time Dependability-
  do different things or do things
  differently Flexibility- with fewer resources
  Cost
• Have both internal and external meanings

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The four Es

• One of most important measures is how resources
  (transforming and transformed) are used.
• The four Es
• Economy, Efficiency,
• Effectiveness, Ethics
• are important here.

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Previously and now...

• Earlier companies looked mainly at financial
  performance but the changing business no longer
  has much value for operations management.
• Done mainly cos overheads were minimal but-
  More automation meant these measurements
  would become problematic- Management focused on
  parts, not entire org.- Neglected customer
  satisfaction and quality - Looked at past rather
  than future - Now need continued improvement
  focus

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Competitive advantage

• Cost is one of five sources for competitive
  advantage.
• In 1980s, performance measurements systems
  introduced to provide clear and common-sense
  measurements,
• reflecting trends and long-term improvements,
  support decision-making and direct and motivate
  workers.
• Two of these methods activity-based costing
  (ABC) and balanced scorecard.

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Effective performance management system

• The essence of an effective performance
  management system is measuring the right things
• and the measures must be balanced, dynamic,
  timely, efficient, measure key processes and
  focus on customer satisfaction.
• We need to create a closed loop so that
  performance measures result in corrective action.

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Performance objectives

• Set performance objectives
• -gt Develop performance criteria
• -gt Take action and measure results
• -gt Assess results and decide what to do
• - Emphasis on multiple perspectives
• - Emphasis on the whole system
• - Emphasis on the future

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Lean production

• Came from Toyota and focused on removing waste in
  automobile assembly.
• Waste from

producing defects transportation inventory/stock o
ver-production
waiting time processing motion
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Lean production

• The quality gaps model by Parasuraman is another
  method
• The 5-S model focused on a clean and tidy
  workplace as a good indicator of high performance.

- Proper arrangement and organization -
Orderliness - Clean-up
- Cleanliness - Discipline
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Any Questions?
Not my Words!

• Powerpoint presentation by M C Pratt, Management
  Studies, St Martins College, Lancaster, U.K.
  taken from
• 1.3 Understanding Operations and 1.4 Managing
  Operations Performance from OUBS Blog. Open
  University Webpages
• http//owt.typepad.com/oubs/2003/05/13_understand
  in.htmlmore
• http//owt.typepad.com/oubs/2003/05/14_managing_o
  pe.htmlmore
• If quoting or referring to anything here, please
  check original websites and give due credit to
  all concerned.