Henry Ford's Assembly Line Innovation Quiz

Operations Management Overview

• Operations management is concerned with the design, management, and improvement of the systems that create an organization's goods or services.
• The top manager of an operations department is usually the Director of Operations, who reports to the Chief Operating Officer (COO), who in turn reports to the Chief Executive Officer (CEO).
• The history of operations management dates back to the Industrial Revolution, with significant contributions from Henry Ford's assembly line manufacturing process.

Transformation Processes

• A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients.
• Examples of transformation processes include:
  • Changes in physical characteristics of materials or customers
  • Changes in location of materials, information, or customers
  • Changes in ownership of materials or information
  • Storage or accommodation of materials, information, or customers
  • Changes in purpose or form of information
  • Changes in physiological or psychological state of customers
• Transformation processes can be categorized into four groups:
  • Manufacture (physical creation of products)
  • Service (treatment of customers or storage of products)
  • Supply (change in ownership of goods)
  • Transport (movement of materials or customers)

Operations Function

• Every organization has an operations function, which involves the production of goods and/or services.
• The goal of the operations function is to procure resources, convert them into outputs, and distribute them to intended users.
• The operations function is critical to organizational success and involves the management of all activities required to create and deliver goods or services.

Business Functions

• A typical organization has four distinct basic functional areas:
  • Operations
  • Marketing and Sales
  • Finance
  • Human Resources
• Each function has a distinct role in supporting the operations of the business.

Why Study Operations Management

• Operations management is critical to organizational success.
• The operations function is where the largest share of the firm's dollars are spent.
• Understanding the business's core transformation process is essential for all departments.
• Operational innovation is key to the success of companies like Toyota, Amazon, and Dell.

Development of Operations Management

• Operations management has evolved over time, with three major phases:
  • Craft manufacturing (low volume, high variety, skilled craftspeople)
  • Mass production (high volume, low variety, standardized parts)
  • The modern period (flexible specialization, lean production, mass customization, and agile manufacturing)

Producing Goods and Services

• The production of goods and services are both part of operations management.
• Key differences between the two include:
  • Customer contact: high in services, low in manufacturing
  • Labour content: high in services, low in manufacturing
  • Input variability: high in services, low in manufacturing
  • Quality measurement: subjective in services, objective in manufacturing
  • Productivity measurement: easy in manufacturing, difficult in services
  • Inventory management: feasible in manufacturing, not feasible in services

Competitiveness

• Competitiveness is the ability and performance of a firm to sell and supply goods and services in a given market.
• Competitive advantage is the leverage a business has over its competitors, gained by offering better value to customers.
• Key purchasing criteria include:
  • Price
  • Quality
  • Reliability
  • Performance
  • Delivery
  • Service### Quality
• Customers are willing to spend more for a product with specific characteristics or brand reputation.
• Quality involves a product's design, longevity, and freedom from defects.

Variety

• Some customers value the opportunity to choose from a wide range of products.
• They look for options to change the style, color, dimensions, or technical characteristics.

Timeliness

• Some customers prioritize how long it takes to obtain a product or service.
• Companies in the transportation business must prioritize timeliness to gain new customers.
• Timeliness involves delivering products or services at the promised time.

Order Qualifiers and Order Winners

• Order qualifiers are the non-negotiable requirements of customers.
• Order winners are the characteristics that lead customers to make a decision.
• Order qualifiers and order winners change over time.

Competitive Priorities

• Cost: Firms prioritize cost reduction and waste elimination to keep prices low.
• Quality: Firms focus on creating excellent product and process design to meet customer requirements.
• Flexibility: Firms prioritize the ability to change rapidly to offer a variety of products.
• Delivery (Reliability and Speed): Firms prioritize efficient and quick delivery of products and services.

Trade-Offs

• Each major decision in operations involves a trade-off, as excelling in one competitive priority often means sacrificing others.
• Firms must balance their strategy to prioritize the most important competitive priorities for their customers.