Introduction to Operations Management

Introduction to Operations Management

• Operations Management (OM) is the design, operation, and improvement of systems that create and deliver goods and services.
• OM is a functional field of business with clear lines of management responsibilities.
• OM is concerned with the management of the entire production process.
• "Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs." (Chase et al.)

Competitive Dimensions

• Cost: Aim to make the product or deliver the service cheap.
• Quality: Aim to make a great product or deliver a great service.
• Delivery Speed: Aim to make the product or deliver the service quickly.
• Delivery Reliability: Deliver the product or service on time as promised.
• Coping with Changes in Demand: Adjust the volume of production based on demand changes.
• Flexibility and New-Product Introduction Speed: Ability to adapt the product or service to new requirements.

Other Product-Specific Criteria: "Support It"

• Technical liaison and support: Suppliers may be expected to provide technical assistance during product development.
• Meeting launch date: A firm may need to coordinate with other firms on complex projects.
• Supplier after-sale support: The ability to provide product support after the sale is an important competitive dimension.
• Environmental impact: This dimension is related to environmental/green criteria.
• Other dimensions: These typically include factors like colors available, size, weight, and location of the fabrication site.

Strategic Initiatives at Tesla to Address Major Obstacles for Battery-Powered Cars

• Tesla has built thousands of "supercharging" stations to address range anxiety.
• Tesla is building a giant battery plant to ensure a stable supply.
• Tesla uses quality reports to track guest room preventive maintenance cycles, check-in waiting times, and clean room appearance.
• Tesla records Guest Preference Reports in a database.

Competitive Priorities: Flexibility

• Example 1: Amazon
  • Amazon offers a wide selection of over 12 million products, including books, media, wine, services, and more.
  • With Amazon Marketplace sellers, the selection expands to over 350 million products.
• Example 2: Custom Foot Shoe Store
  • Customer's feet are scanned electronically to capture measurements for custom shoes.
  • Custom shoes are mailed to the customer's home.
  • Prices are comparable to off-the-shelf shoes.

Competitive Priorities: Speed

• Citicorp advertises a 10-minute mortgage approval.
• Wal-Mart replenishes its stock twice a week for quick turnaround.
• Hewlett-Packard produces electronic testing equipment in five days.
• General Electric reduced the time to manufacture circuit-breaker boxes to three days and dishwashers to 18 hours.
• Dell ships custom-built computers in two days.

Strategic Decisions in Operations

• Product: What products or services to offer.
• Service: What services to offer, and how to deliver them.
• Process and Technology: The production process and technology to be used.
• Human Resources: The skills and abilities of the workforce.
• Quality: The standards of quality for products and services.
• Capacity: The resources needed for production.
• Facilities: Location and design of production facilities.
• Sourcing: The acquisition of raw materials and components.
• Operating Systems: The systems used to manage production.

5.1 Operations' Role in Corporate Strategy

• Operations can support a differentiated strategy by offering unique products and services that set a company apart from its competitors.
• Operations can serve as a firm's distinctive competence by executing similar strategies better than competitors.

Wal-Mart Operations Strategy

• Mission: Provide value for customers.
• Competitive Priority: Low prices, everyday.
• Operations Strategy: Low inventory levels, short flow times.
• Operations Structure: Linked communications between stores, fast transportation systems.
• Enabling Processes and Technologies: EDI/satellites, cross-docking, focused locations.

5.2 Operations Strategy: Products and Services

• Make-to-Order: Products and services are made to customer specifications after an order has been received.
• Make-to-Stock: Products and services are made in anticipation of demand.
• Assemble-to-Order: Products are made with base components that are assembled according to customer specifications.

5.3 Production Strategy: Processes and Technology

• Projects: One-at-a-time production of a product to customer order.
• Batch Production: Many different jobs are processed simultaneously in groups (or batches).
• Mass Production: Large volumes of a standard product are made for a mass market.
• Continuous Production: Used for very high-volume commodity products.

5.4 Product-Process Matrix

• Projects: Low volume and low standardization.
• Batch Production: Moderate volume and moderate standardization.
• Mass Production: High volume and moderate standardization.
• Continuous Production: High volume and high standardization.

5.5 Service Strategy: Processes and Technology

• Professional Services: Highly customized and labor intensive.
• Service Shop: Customized and labor intensive.
• Mass Service: Less customized and less labor intensive.
• Service Factory: Least customized and least labor intensive.

5.6 Operations Strategy: Capacity and Facility

• Capacity strategic decisions: Include when, how much, and in what form to alter capacity.
• Facility strategic decisions: Whether facilities should focus on certain geographic regions, product lines, or customers.
• Facility location can also be a strategic decision for companies.

5.7 Operations Strategy: Human Resources

• Skills and autonomy: Skill levels and degree of autonomy required to operate the production system.

Changing Corporation...continued

• Organization: Moved from pyramid structures to digital, flexible, and constantly changing.
• Focus: Has shifted from internal to external, emphasizing customer needs.
• Style: Evolved from structured to flexible and adaptative to changes.
• Source of strength: Based on stability in the past, now depends on interdependencies and information sharing.
• Structure: Switched from self-sufficiency to reliance on information.
• Resources: Dependent on physical assets in the past, now relies on intangible assets like information.
• Operations: Transitioned from vertical integration to virtual integration, working with partners.
• Products: Shifted from mass production to mass customization, allowing for personalized options.
• Reach: Expanded from domestic to global, operating internationally.
• Financials: Changed from quarterly reporting to real-time, hour-by-hour monitoring.
• Inventories: Reduced from months of supply to focusing on bottom-up inventory management.
• Strategy: Shifted from top-down planning to a more dynamic approach.

9. Value-Stream Mapping

• Step 1: Start with symbols for customers, suppliers, and production.
• Step 2: Enter customer order requirements.
• Step 3: Calculate daily production requirements.
• Step 4: Enter outbound shipping requirements and delivery frequency.
• Step 5: Determine inbound shipping method and delivery frequency.
• Step 6: Add process steps in sequence (left to right).
• Step 7: Add communication methods, frequency, and direction with arrows.
• Step 8: Add inventory quantities between each step of the flow.
• Step 9: Determine total working time and delay time.

10. Developing New Products

• Understanding the customer: Identifying customer needs and preferences.
• Economic change: Analyzing economic trends.
• Sociological and demographic change: Understanding population shifts and cultural changes.
• Technological change: Keeping up with technological advancements.
• Political and legal change: Monitoring changes in regulations and legislation.

10.1 Product Development

• Concept: Generating ideas for new products.
• Feasibility: Assessing the viability ideas.
• Customer Requirements: Defining customer needs and expectations.
• Functional Specifications: Detailing the functions and features of the new product.
• Product Specifications: Specifying the physical characteristics of the product.
• Design Review: Assessing the design of the product.
• Test Market: Evaluating the product and its marketability.
• Introduction: Launching the new product into the market.
• Evaluation: Reviewing the performance of the product.

10.1 Quality Function Deployment

• Step 1: Identify customer wants.
• Step 2: Identify how the good/service will satisfy customer wants.
• Step 3: Relate customer wants to product hows.
• Step 4: Identify relationships between the firm's hows.
• Step 5: Develop importance ratings.
• Step 6: Evaluate competing products.
• Step 7: Compare performance to desirable technical attributes.

10.2 Organizing for Product Development

• Traditionally - distinct departments: Duties and responsibilities are defined, but it can be difficult to foster forward thinking.
• A Champion: A "product manager" drives the product through the product development system and related organizations.
• Team approach: Cross functional teams are used.
• Japanese "whole organization" approach: No organizational divisions.
• Product development teams: Cross-functional teams often involving vendors, creating an open and participative environment.
• Concurrent engineering: Simultaneous performance of product development stages, focusing on "Time factor".

10.3 Manufacturability and Value Engineering

• Value engineering: An organized effort to analyze a designed product to achieve essential functions at the lowest life cycle cost.

• Advantages of Value Engineering*

• Reduced complexity of the product.

• Reduction of environmental impact.

• Additional standardization of components.

• Improvement of functional aspects of the product.

• Improved job design and job safety.

• Improved maintainability (serviceability) of the product .

10.5 Concurrent Engineering

• Concurrent engineering: Uses technology to connect and communicate product data across globally distributed engineering teams using design tools.

• The approach fosters collaboration for successful engineering organizations.

• Example: The development of the Boeing 777 commercial aircraft.

"Normal" Engineering vs. Concurrent Engineering

• "Normal" Engineering: Sequential with steps for Requirements, Design, Implementation, Verification, and Production.
• Concurrent Engineering: Design steps happen simultaneously for increased efficiency.

Explore the fundamentals of Operations Management, focusing on the design, operation, and improvement of systems that deliver goods and services. This quiz covers key competitive dimensions such as cost, quality, and flexibility, offering insights into how businesses can enhance their production processes.