Scope of Operations Management

1
Operations and Project Management
2
Operations in different industrial sectors

• What operations are typical of
• Primary? Secondary? Tertiary sectors?
• What of UK GDP does each produce?
• What has been the shift in P -S -T emphasis
  1970-2004 in UK exports/imports?
• What of visible trade in 2002 was made up of
  manufactures?
• Most services incl. elements of product viz.

3
What do Operations Managers do?

• With your partner, choose "an operation" and list
  the main activities the operations manager must
  manage.

• role demands
• planning
• decisions
• coordination
• systems

4
What is Operations Management?

• Core management activity - operations deliver
• Creating, operating controlling transformation
  systems
• inputs (resources ideas) produce outputs (goods
  and services) for customers (external internal)
• Managing processes methods
• production, productivity, efficiency
• resources staff (80) physical, technical
  systems
• Design for production, delivery, information
  control, value- added, quality
• Concerns design, supply, capacity, scheduling,
  quality

5
Operations as a system
Demanding environment
Transformation (Conversion) Process
Goods Services
Boundary management
Boundary management
Capital
Information
Feedback (information) - control over process
inputs technology
6
Process System (Operation), Variety Volume

• One-off jobbing - specials, design,
  build,deliver. Low volume, low standardisation
• Project Management - large, coordinated, special
  case
• job shop small batch production, disconnected
  flow. Low volume, multiple but similar products
• connected flow line
• one product - high volume,high standardisation
• large batch - high volume,high standardisation
  across
• many product variants
• Continuous flow - high volume,high
  standardisation
• Services

• role demands
• decisions
• information
• coordination
• flexibilities
• supply chain
• customer interface

7
Processes Characteristics Matrix

• Market conditions, competition
• Capital requirements
• Labour supply cost
• Management skills
• Materials supply cost
• State of technology

Source T. Hill
8
Roles of Operations Manager
Strategic change involves re-structuring,
re-engineering
Marketeer - emphasises Quality Dependability Rang
e
Innovator Quality Product/service
performance Speed New prod. devel
Enhanced
Customer service criteria
Strategic change involves enhancing
the operations infrastructure
Reorganiser Quality Product/service
performance Flexibility Speed
Maintainer - emphasises Schedule Dependability
Quality Price/cost
Basic
Traditional
Enhanced
Operations process design
9
Ops Mgt - a complex interfacing role

• thinkers doers decision-takers
• many people to be managed 70 of assets
• largest budget areas/cost centres
• direct costs overheads, process and
  time-oriented
• measurable/controllable measures of progress
  outputs (product, volume, time, , wastage,
  labour).
• work-flow and cash-flow
• short-termism (time constraints dependencies)
• cost of a days lost production vs. long-term
  perspectives
• hard-edged management of product process
  technology
• information sub-systems to control the whole
• logistics and dispersed operations

10
A Broad Field

• market strategic implications
• research, design development (product
  service)
• tactical programmes (product-service mix, variety
  value)
• capacity management scheduling
• facilities layout
• information control systems
• process design engineering, work study
  productivity
• materials planning stock control
• work structuring, motivation rewards
• equipment maintenance servicing
• QA
• health, safety environmental care

11
The Operations Environment
Competitive External Environment
The Economy, the Society
Staff skills
Marketing
Design Engineering
Ops transformation system
Suppliers
Customers
Finance Accounting
Purchasing Logistics
Information Systems
Government
12
Linking operations to business strategy

• strategic alternatives
• product imitator
• product innovator

Marketing fits easily within corporate debate.
Corporate bosses seldom have operations
experience. Assume operations will cope. "We
sell products services NOT market segments"

• How to
• qualify for market entry and
• become order winners in a market.
• Focus on how products/services win orders
• NOW and TOMORROW

13
Operations Strategy

• Contribution to
• competitiveness and market leadership
• Operations functions
• needs clear, consistent, achievable objectives
  implementation
• A move from safe, conservative ops to
  market/fashion leader? requires different
  better
• responsiveness,quality, information, control,
  skills
• production processes, supplier relationships
• uses of technology and design applications

Who what drives ops strategy technological
innovation? Accountants, marketing, sales,
partners, innovators and inventions,
competitors, customers?
14
Beyond the Engineering Ops Mgr.

• Traditionally busy-busy male/macho.
• hard - reactive, fire-fighters
• local, technically focused thinkers (not
  corporate HQ types)
• gut-feel, get the goods out
• lower level focus on things gt concepts, now gt
  tomorrow, trade-offs gt creativity, coping gt
  long-term
• Need to think strategically
• informed, systematic development
• intelligent, visionary implementation
• researched decision-making detailed evaluation
  planning
• balancing constraints
• co-ordinate people/teams, technology IT systems

How does this fit in with services? Failures on
quality price?
15
Operations Strategy Model
16
Policy Areas
Policy Examples Strategic Choices
Process
In or out Automation Process flow Job
specialisation Supervision
Make or buy, automation, routinisation. FMS, JIT
Quality Systems
QMS approach, Training, suppliers
Inspection or zero defects, technical
Managerial skills, costs of quality
Facility size, Location, investment
One big or several small facilities Near markets,
low cost, or foreign Permanent or temporary
Capacity
High or low levels, centralised or
decentralised, tight controls? Warehousing
Stock logistics
Stock levels, Distribution, Control systems
17
From the early 1980s

• Operations gets more attention
• Not just manufacture (declining in terms of GDP)
  but services also.
• Main influences
• Competition Pacific Rim industrial machine
• Privatisation, open markets de-regulation
• Demand for higher quality goods - cheaper
  delivered quicker.
• Market entry and order winners.
• home firms losing market share must improve ops.
  practices
• learn from Japanese experience
• Are ops. managers sufficiently focused
• To influence value added chain as a whole?
• Make more contribution to strategic processes?

18
Michael Porter -- Value-Added Chain Analysis
Technology development
Support Activities
Procurement
Primary Activities
Inbound logistics
Operations
Outbound logistics
Marketing and sales
After sales service
Employee management
Support Activities
Firms infrastructure
19
Value-Added Chain

• Ops. Managers to address every activity on the
  chain. Performance related, value-added
  objectives include
• right, first time. Produce to target quality.
• time compression - customer response, lead times,
  eliminate delays, bottlenecks inventory
• predictability - control events, actions
  relationships for flexibility (new
  products/service range, volume delivery)
• control over costs (staff, facilities/technology,
  materials)
• NB produce in-house or buy-in(out-source).

20
Analyse each value-added stage

• identify elements/content (I-P-O info) of each
  stage design characteristics
• how do we ( how well do we) secure supplies
  /suppliers other inputs?
• how effectively do we
• manufacture components from raw materials?
• assemble components into finished goods
  services?
• distribute finished product to wholesalers,
  retailers end-users?
• provide maintenance after-care?

21
Peters Waterman - In Search of Excellence

• Core business, stick to the knitting, lean
  organisation
• Sept 1996 British Airways consider selling off BA
  Engineering, concentrate on transporting
  passengers cargo. Out-sourcing to save 1
  billion
• baggage handling ticket processing
• aircraft engineering maintenance
• in-flight catering
• computer services
• Profitable market leader anticipating
• deregulation of air travel
• lower fares new competition

• Ops Mgr. involvt in strategic decisions?
• Can vertically integrated firm become too lean?
• Undermining quality/flexibility by zealous
  out-sourcing?

22
Strategy reflected in

• policies, plans/programmes, budgets allocations
• systems, methods, actions, behaviours,
  communications
• Key Facets
• product devel. PLC innovators imitators
• self-sufficiency (vertical integration) or
  out-sourcing
• automation technological exploitation
• adjusting the product-service mix
• delivering quality, price availability
  (qualifiers vs. order winners)
• process choice improvement
• site/branch location
• planning information systems (transaction
  MIS)
• people competencies commitment (competitive
  advantage)

23
Ops Mgt Decision Framework
Source Hill T, Manufacturing Strategy,
Macmillan, 1993
24
Contributions

• Capacity capability
• Can we produce? How well?
• Efficiency
• How well is the process managed controlled?
• The transformation indicators ratios?
• Cost/unit, cost/patient day, profit/employee,
  sales/employee?
• Benchmark comparisons
• efficiencies, processes outputs
• investment - , technical human
• quality, systems, RD

25
Market growth profitability

• increased capacity long term investment
  (irreversible?)
• have we the capacity to make/offer?
• what will be the order rate/demand?
• will customers queue, wait, take part-orders?
• insufficient capacity (lose market share
  difficult to catch up)
• excess capacity ---gt higher costs, low/negative
  ROI
• inadequate capacity, long lead times, quality
  problems, competitors advantage
• Do we lead or follow demand? At end of PLC
  market saturation, over-capacity, price
  competition.
• Divest or diversify?

26
Product-Process Matrix
1. Low vol. standardization, one of a kind
2. Multiple products, low volume
3. Few major products higher volume
4. High vol. and standardization, commodity
products
None
Product Structure
1 Jobbing
Commercial Printer
2 Batch
Heavy Equipment
Process Structure
3 Line flow (assembly)
Refridgerator assembly
None
Refinery
4 Continuous Flow process
27
Mass Customisation Strategic Process Choices
HIGH/LONG
after T Hill
Social Counselling
Make to Order
On-line Internet education
Modular kitchen installation
Volume
Cost/Lead Time
Assemble to Order
Subs
MASS CUSTOMISATION
Dell
Make to Stock
White-goods producer
Customisation
LOW/ SHORT
Degree of customisation
LOW
HIGH
28
Operations the Product Life Cycle
Maturity
Growth
Profit
/volume
Develop or decline
Development launch
Product Life Cycle Implications for Operations
Strategy?
Loss
Time
29
New Product Design Process
Pilot production/testing
30
Design for manufacture (source T. Hill)
revised design
one-piece base elimination of fasteners
Modular design More variety from a set components
(modules) to be assembled. Reduce complexity
costs of product variations
31
MTS and MTO

• Advantages/disadvantages
• Key performance measures
• Information flows

32
Make or Buy Decision

• compare costs
• quantitative qualitative decision
• buy
• Poor internal capacity/facilities?
• Less complex acquisition, less internal
  scheduling mgt
• Specialist, volume supplier, offers expertise
  lower prices
• make
• Cannot buy item/service at price, quality,
  quantity or delivery
• Increase utilisation and capacity (plant
  people)
• Reliability, risk - not being supplied to
  quality on time etc
• Retain autonomy/independence

33
Flows thru manufacturing and supply chains
Source Wild
34
Resource customer flows thru. service systems
Source Wild