1
COMPETING WITH
OPERATIONS
Instructor: David Weltman
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E-mail:
[email protected]Office: 517
Homework: 4, 7
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
For Operations Management, 9e by
Krajewski/Ritzman/Malhotra
2010 Pearson Education
11
Operations Management
The systematic design, direction, and
control of processes that transform inputs
into services and products for internals, as
well as external, customers
Processes can be linked together to form a
supply chain interrelated processes
within a firms and across different firms
that produce a service or product to the
satisfaction of the customers
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A Process View
External environment
Internal and external
customers
Inputs
Workers
Managers
Equipment
Facilities
Materials
Land
Energy
Outputs
Goods
Services
Processes and
operations
1
3
5
Information on
performance
Figure 1.2
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The Supply Chain View
New
service/
product
development
Supplier
relationship
process
Customer
relationship
management
Order
fulfillment
process
External customers
External suppliers
Support Processes
Figure 1.4
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The Supply Chain View
Core processes are sets of activities that
deliver value to external customers
1.
Supplier relationship process
2.
New service/product development process
3.
Order fulfillment process
4.
Customer relationship process
Support processes provide vital
resources and inputs to the core
processes
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Support Processes
TABLE 1.1
EXAMPLES OF SUPPORT PROCESSES
Capital acquisition
The provision of financial resources for the
organization to do its work and to execute
its strategy
Budgeting
The process of deciding how funds will be
allocated over a period of time
Recruitment and hiring
The acquisition of people to do the work of
the organization
Evaluation and compensation
The assessment and payment of people for
the work and value they provide to the
company
Human resource support and development
The preparation of people for their current
jobs and future skills and knowledge needs
Regulatory compliance
The processes that ensure that the company
is meeting all laws and legal obligations
Information systems
The movement and processing of data and
information to expedite business operations
and decisions
Enterprise and functional management
The systems and activities that provide
strategic direction and ensure effective
execution of the work of the business
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Career Opportunities
Operations Analyst
Inventory Management
Forecasting
Purchasing
Quality
Industrial Engineering
Logistics
Distribution
Project Management
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Operations Strategy
Specifies the means by which operations
implements corporate strategy and helps
build a customer-driven firm
Corporate strategy provides an overall
direction that serves as the framework for
carrying out all the organization's functions
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18
Competitive Priorities
TABLE 1.2
DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE
PRIORITIES
COST
Definition
Process Considerations
Example
1. 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
2. Top quality
Delivering an outstanding
service or product
May require a high level of
customer contact and may require
superior product features
Ferrari
3. Consistent
quality
Producing services or
products that meet design
specifications on a
consistent basis
Processes designed and
monitored to reduce errors and
prevent defects
McDonalds
4. Delivery speed
Quickly filling a
customers order
Design processes to reduce lead
time
Dell
5. On-time
delivery
Meeting delivery-time
promises
Planning processes to increase
percent of customer orders
shipped when promised
United Parcel
Service (UPS)
6. Development
speed
Quickly introducing a new
science or a product
Cross-functional integration and
involvement of critical external
suppliers
Li & Fung
QUALITY
TIME
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19
Competitive Priorities
TABLE 1.2
DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE
PRIORITIES
FLEXIBILITY
Definition
Process Considerations
Example
7. Customization
Satisfying the unique
needs of each customer
by changing service or
products designs
Low volume, close customer
contact, and easily reconfigured
Ritz Carlton
8. Variety
Handling a wide
assortment of services or
products efficiently
Capable of larger volumes than
processes supporting
customization
Amazon.com
9. 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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Operations Strategy
TABLE 1.3
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
Percent
errors in
bill
information
0.90%
Acceptable
No action
Percent
errors in
posting
payments
0.74%
Acceptable
No action
Delivery speed
Lead time
to process
merchant
payments
48 hours
Acceptable
No action
Volume flexibility
Utilization
98%
Too high to
support
rapid
increase in
volumes
Acquire temporary employees
Consistent quality
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Improve work methods
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Trends in Operations Management
Productivity improvement
Global competition
Ethical, workforce, and environmental
issues
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Country Productivity
England
France
Japan
United States
Productivity
Output per hour
250
200
150
100
50
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2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
1958
1954
1950
Year
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Employment by Sector (source bls.gov)
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Productivity Indicies
P
Labor P
Something
Typically
(output or dollars) per hour
units / hr or $ / hr
MFP
Output
(value $) divided by several resources in
a process
Labor,
Materials, OH ($)
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1 15
Productivity Improvement
EXAMPLE 1.1
Calculate the productivity for the following operations:
a. Three employees process 600 insurance policies in a week.
They work 8 hours per day, 5 days per week.
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Productivity Improvement
EXAMPLE 1.1
Calculate the productivity for the following operations:
b. A team of workers makes 400 units of a product, which is
sold in the market for $10 each. The accounting department
reports that for this job the actual costs are $400 for labor,
$1,000 for materials, and $300 for overhead.
SOLUTION
a. Multifactor productivity =
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
Value of output
Labor cost + Materials cost
+ Overhead cost
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Solved Problem 2
Natalie Attire makes fashionable garments. During a particular
week employees worked 360 hours to produce a batch of 132
garments, of which 52 were seconds (meaning that they were
flawed). Seconds are sold for $90 each at Attires Factory Outlet
Store. The remaining 80 garments are sold to retail distribution
at $200 each. What is the labor productivity ratio of this
manufacturing process (in dollars per hour)?
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
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PFSWeb
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Our Philosophy
PFSweb is an outsourcing solutions design firm with an extensive offering of world-class
logistics, fulfillment, customer care and technology infrastructure that can be leveraged to
create unique, client-specific business solutions. Our philosophy is not to fit your
business model into our pre-existing infrastructure, but rather to develop our
infrastructure around your unique needs. We are flexible, scalable, and adaptable so
we can keep pace with your ever-changing needs, whether you are adding new sales
channels, marketing initiatives, vendor managed inventory (VMI) programs or special
projects. We realize that no two clients face the exact same challenges, and for that
reason, we are always extending our technology and operations capabilities based directly
on client needs. Our philosophy is that there is absolutely no favorable argument for you
to consider outsourcing with PFSweb unless we can execute at a greater performance
level than what you could achieve in-house or through an alternative partner.
Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.
1 20
Our Philosophy
PFSweb is an outsourcing solutions design firm with an extensive offering of world-class
logistics, fulfillment, customer care and technology infrastructure that can be leveraged to
create unique, client-specific business solutions. Our philosophy is not to fit your
business model into our pre-existing infrastructure, but rather to develop our
infrastructure around your unique needs. We are flexible, scalable, and adaptable so
we can keep pace with your ever-changing needs, whether you are adding new sales
channels, marketing initiatives, vendor managed inventory (VMI) programs or special
projects. We realize that no two clients face the exact same challenges, and for that
reason, we are always extending our technology and operations capabilities based directly
on client needs. Our philosophy is that there is absolutely no favorable argument for you
to consider outsourcing with PFSweb unless we can execute at a greater performance
level than what you could achieve in-house or through an alternative partner.
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2-25
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Competitiveness
How effectively an organization meets the wants and needs of customers
relative to others that offer similar goods or services.
Competing Using Operations
Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service and service quality
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Strategy
Mission
The reason for existence for an organization
Mission Statement
States the purpose of an organization
Goals
Provide detail and scope of mission
Strategies
Plans for achieving organizational goals
Tactics
The methods and actions taken to accomplish strategies
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Operations strategy The approach,
consistent with organization strategy,
that is used to guide the operations
function.
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