Value Chain and Operations Management

Kid Value Chain

• Apple's high profit margins result from focusing on the global supply chain and operational excellence.
• Apple's mastery involves integrating physical products with services, creating value for customers.

Learning Objectives

• Explain the concept and importance of operations management.
• Describe what operations managers do.
• Explain the differences between goods and services.
• Define the concept of value and explain how the value of goods and services can be enhanced.
• Describe a customer benefit package.
• Explain the difference between value chains and supply chains and identify three general types of processes in a business
• Summarize the historical development of OM.
• Contrast the three different frameworks for describing value chains.
• Describe key challenges facing OM.

Operational Excellence

• Taking operational excellence to a new height.
• Managers and engineers improve operations at supplier and manufacturer sites.
• Designers collaborate with suppliers to create new tooling equipment.
• Apple employees monitor every part of production, from suppliers to distribution, ensuring quality and accountability.
• Retail stores provide operational advantage, enabling daily tracking of demand and adjusting production forecasts.
• Significant profit margins result from Apple's focus on global supply chain and operational excellence.

Operations Management

• Involves designing goods, services, and processes, day-to-day management, and continuous improvement.
• Apple manages a global network of suppliers and factories, coordinating physical goods, software, and retail sales.
• Effective operations management is vital for creating and delivering goods and services to customers.
• Enables organizations to directly influence value for customers, employees, investors, and society.
• Profitability and long-term success depend on efficiency, cost management, and quality.
• Companies require people who understand and apply OM principles effectively.

Operations Manager Activities

• Forecasting future demand for raw materials, goods, and services.
• Managing the flow of materials, information, and money from suppliers to customers.
• Determining the optimal configuration of machines, storage, offices, and departments.
• Employing technology to boost productivity and customer responsiveness.
• Guaranteeing that goods, services, and processes meet customer expectations.
• Coordinating the acquisition of materials, supplies, and services.
• Resourcing and capacity including labor, equipment, materials, and information.
• Designing efficient processes and selecting equipment, information, and methods.
• Deciding job assignments and responsibilities for employees.
• Service encounter design, to optimize provider-customer interactions.
• Scheduling resources like employees and equipment.
• Sustainability to preserve resources for future generations.

OM in the Workplace

• Titles include chief operating officer, manager, VP of manufacturing, and supply chain manager. -OM methods are used in all business functions to improve value for internal and external customers.
• Applying OM methods can streamline processes, manage inventory, schedule efficiently, and ensure quality.

Goods and Services

• A good is a physical product can be seen, touched, or consumed. Examples of goods are durable and non-durable.
• Services are anything that doesn't directly produce a physical product such as banking and healthcare.
• Operations vary depending on the good or service.

Goods versus Services

• Goods are tangible, services are intangible, goods are consumed but services are experienced
• Goods rely on machines and require skills
• Services use soft hard technology
• Customers can try goods before buying, but services are hard to demonstrate.
• Customers often participate in service processes, influencing uncertainty.
• Service encounters define customer value and perceptions.
• Forecasting service demand is harder than forecasting goods.
• Services can't be stored as inventory. -Service management skills are key for service worker. Service facilities must be close to customers.
• Patents do not protect services.

How Goods and Services shape Management Activities

• Forecasting*
• Goods: are longer and physical inventory is a buffer.
• Services: are short and variable with time-dependent demand.
• Facility Location*
• Goods: can be located close to materials, labor or customers.
• Services: must be located close to customer for convenient service.
• Facility Layout and Design*
• Goods: designed for machine efficiency with no customers.
• Services: be designed for customer interaction
• Technology*
• Goods: use automation to ship physical goods
• Services: rely on information and software
• Quality*
• Goods: need clear quality standards measured physically
• Services: must account for customer perceptions
• Inventory/Capacity*
• Goods: uses inventory to buffer fluctuation in demand
• Services: Equipment subsides physical inventory
• Job/Service Encounter Design*
• Goods: require skill
• Service: require management skill
• Scheduling*
• Goods: focus on materials and efficiently working.
• Services: requires when employees should be assigned efficiently
• Supply Chain Management*
• Goods: focuses on the flow of physical good maximizing satisfaction
• Services: focus on flow of people and information.

How To Increase Value

• To increase value, an organization must
• (a) increase perceived benefits while holding price or cost constant
• (b) increase perceived benefits while reducing price or cost; or
• (c) decrease price or cost while holding perceived benefits constant

The Concept of Value

• consumers want value. The purpose of every organization is to provide value to its customers and stakeholders. value = perception of the benefits/price cost to customers

Customer Benefit Packages

• bundles of goods and services are conceptualized and visualized together
• bundles consist of primary goods or services and/or services with variants.

A CBP Example

• primary good: Vehicle
• Peripheral Goods: anytime was, free gourmet coffee, replacement parts
• Peripheral Services: finance and leasing ,free credit reports
• Note: Each good is an additional process of creating and delivering a CBO.

Value Chains

• Describes the flow of materials, goods services etc. that starts with the inputs, and travels through the facilities, transforms, and delivers to the customer.

Pre and Port Production Services

• Include customer finance, contract negotiations, service guarantees etc.
• Services are critical to the overall operation of a business Include on-site installing loans, claims services

Focus on cost and efficiency.

• Cost minimization Technology can increase value.

Understand operations management, its significance, and the roles of operations managers. Learn to differentiate between goods and services. Explore value enhancement in products, customer benefit packages, value chains, supply chains, and the historical evolution of operations management.