OM 1-6 PDF - Operations Management

Chapter 1: Operations Management (Lecture 1) Definitions of an Operation the fact of operating or being active. an activity that is planned to achieve something. an occasion when a doctor cuts a body for medical reasons in order to repair, remove, or replace an unhealthy or damaged part....

Chapter 1: Operations Management (Lecture 1) Definitions of an Operation the fact of operating or being active. an activity that is planned to achieve something. an occasion when a doctor cuts a body for medical reasons in order to repair, remove, or replace an unhealthy or damaged part. a mathematical process, such as addition, in which one set of numbers is produced from another. the activities involved in a company producing goods or delivering services. Operations management: Operations management uses resources to appropriately create outputs that fulfill defined market requirements ‘Operations’ as a function, meaning the part of the organization which creates and delivers services and products for the organization’s external customers; ‘Operations’ as an activity, meaning the management of the processes within any of the organization's functions. Remember ‘Operational’ is not the same as ‘Operations’ ‘Operational’ is the opposite of ‘strategic’, that is: daily and detailed Operations management in smaller orgs. - Large companies have resources and people dedicated to individual tasks. - Small orgs have an informal structure due to individuals having overlapping tasks, hindering decision making but allow company to react quickly to opportunities or problems Operations management in Not-for-profit orgs. - Focus on how to create and deliver service and products, invest in technology, contract out some of their activities, devise performance measures, improve their operations performance, - However, the strategic objectives of not-for-profit organizations may be more complex and involve a mixture of political, economic, social or environmental objectives. Changes to Operations Management Many (although not all) industries have experienced increased cost-based competition while simultaneously their customers’ expectations of quality and variety have increased. Adjustments to management: New technologies: process technologies rapidly changing both in the manufacturing and service industries. Different Supply arrangements: as an outcome of globalization, there is a demand for a higher variety or customization of products and services. Supply markets are now globalized, opening new options for sourcing input goods and services.  → bigger supply market results in long supply chain, supply vulnerability and reputational risk. Increased concern on social/environmental issues: operations have had to adjust the way they create outputs and be more transparent about it. Greater expectation of stakeholder treatment Goods VS Service Characteristics of a good/product Characteristics of a service - Tangible - Intangible - Production proceeds consumption - Production at same time as consumption - Can be stored (customer must be present) - Cannot be stored Broad scope of operations management’s responsibilities Core Functions objective- work collaboratively with Operations and align operation management with broader business needs. Support Function objective- understand what is needed and help operations satisfy needs Operations principle: The economic sector of an operation is less important in determining how it should be managed than its intrinsic characteristics’. Product-Service Continuum Classifies whether the output of an operation is a good/service or a mix. Operation Principle: all orgs have operations that produce some mix of services and products. Pure Good: Pure Service: - Tangible - Intangible - Can be stored - Cannot be stored - Production proceeds consumption - Production and consumption - Low customer contact simultaneously - Can be transported - High customer contact - Quality is evident - Cannot be transported - Quality difficult to judge Servitization: involves firms developing the capabilities to provide services and solutions that supplement their traditional product offerings. Implication for a subscription service: such services move from ‘one off’ supply to ongoing supply, similar to how utilities (electricity, gas, water, etc.) are delivered. B2B: operations that provide their products or services to other businesses. B2C: operations that provide their products or services direct to the consumers who (generally) are the ultimate users of the outputs from the operation. Input-Transformation-Output Model Transformed resources: resources that are treated, transformed or converted in the process. Transformed resource inputs to a process are materials, information or customers: Materials: transforming a resource by changing their physical properties, changing their location, the possession or store materials Information: resources that transform their informational properties (purpose or form of info), change in possession (eg. market research companies selling info), or location. Customers: operations that change the physical properties of the resource (eg. hairdresser), store (accommodate) customers or the location (air lines). Resources that change the psychological state (hospitals, music, radio…) → Co-production: when the customers play a role in the provision of the product/offering (eg. customers in a restaurant create atmosphere) involved in production of pre-designed good. → Co-Creation: implies customer involvement in design of offering These emphasize the importance of customers shaping how an offering can create value &  establishes importance of two-way interaction between operation and its customers. Transforming resources: These are the resources which act upon the transformed resources. There are two types which form the ‘building blocks’ of all operations: facilities – the buildings, equipment, plant and process technology of the operation; staff – the people who operate, maintain, plan and manage the operation. (Note we use the term ‘staff’ to describe all the people in the operation, at any level.) Transformation process: arrangement of resources and activities that transform inputs into outputs that satisfy (internal or external) customer needs. They are the ‘building blocks’ of all operations, and they form an ‘internal network’ within an operation. There are 2 distinct transformation processes: → Also linked with Visibility. 1. Front-Office: Processes that interact (transform) with customers. 2. Back-office: Processes that have little to no direct contact with the customers, but perform the activities that support the front office in some way. Outputs of Process: On a general level, the difference between a good and a service can be simplified to whether or not it is tangible. Although Resources used to carry out a service are tangible but not the service itself. Characteristics used to define a service (IHIP) Intangibility: in that they are not physical items Heterogeneity: they are difficult to standardize because each time a service is delivered, it will be different because the needs of customers will to some extent vary. Inseparability: their production and consumption are simultaneous. The service provider is often physically present when its consumption by a customer takes place. Perishability: They cannot be stored because they have a very short “shelf-life”. May even perish the moment they are created. → Although not always work – tech has a significant effect → development of info and communication tech. SIPOC Analysis SIPOC stands for: Suppliers Inputs Process Outputs Customers. - Method used to formalize a process at a relatively general level rather than detailed. - ADV: it helps all those involved in the process to understand and agree with what it involves and where it fits the business. - ADV: it can prompt important questions that may be overlooked. Process/Operations Hierarchy Each process can be seen as an internal supplier and an internal customer for another process. 3 levels: 1. Supply Network (highest level) 2. Operation 3. Process 4V Model - Defines how operations and processes differ Low Implications 4 Vs High Implications (High Implication) Volume (Low Implication) - High repeatability - Low repetition - Specialization - People perform a wider - Capital intensive range of tasks - Low unit costs - Less systemisation - High unit costs - Well defined Variety - Flexible - Routine - Complex - Standardized - Match customer - Regular demands - Low unit costs - High unit costs - Stable Variation in Demand - Changing capacity - Routine - Anticipation - Predictable - Flexibility - High utilization of - In touch with demand resources - High unit costs - Low unit costs - Time lag between Visibility - Short waiting production and tolerance consumption - Satisfaction governed - Standardization by customer - Low contact skills perception needed - Customer contact - High staff utilization skills needed - Centralization - Received variety is - Low unit costs high  - High unit costs Operations Principle: Operations and processes can (other things being equal) reduce their costs by increasing volume, reducing variety, reducing variation and reducing visibility. What do Operating Managers do? Direct: direct overall strategy of the operation. Design: design operation’s services, products and processes. Designing physical form, shape, composition of operation and services. Deliver: plan and control the delivery process, from suppliers through the total operation to customers. Develop: develop process performance. Develop capabilities of their process to improve process performance. → Operations management activities can be grouped into four broad categories: directing the overall strategy of the operation, designing the operation’s products, services and processes, planning and controlling delivery, and developing performance. Operations management impact on environmental sustainability Environmental sustainability means (according to the Brundtland Report from the United Nations) ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’. Characteristics of a great operations manager: - Enjoys getting things done - Understands customer needs - Communicates and motivates - Learns all the time - Committed to innovation - Knows their contribution - Capable of analysis - Keeps cool under pressure Chapter 2: Operations Performance (Lecture 2) skip p.63-64 Operations performance: Operations management has a focus on making things better, from this continuous learning, difficult to imitate capabilities can be built that have significant strategic impact. →Good operations management is the best way to produce good products and services. Main stakeholders Top management Suppliers → Staff → Customers Staff representative bodies (Shareholders , Society, Lobby groups , Government , Regulatory bodies) CSR: how business takes account of its economic, social and environmental impacts in the way it operates, maximizing the benefits and minimizing the downsides... Specifically, we see CSR as the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society’ Carroll Pyramid - pyramid of social responsibility - towards moral management. has 3 levels 1. societal: (operations sustainability) triple bottom line A sustainable business is more likely to remain successful in the long term than one which focuses on economic goals alone. ESG: Environmental, Social, Governance. Idea that any potential investor in an enterprise should focus on all ethical social and environmental factors rather than just profit. - Planet - the environmental account, measured by environmental impact on its operations (ensuring that the overall productivity of accumulated human and physical capital resulting from development actions more than compensates for the direct or indirect loss or degradation of the environment’) Some ways that operations can impact the environmental bottom line performance: ▶ Recyclability of materials, energy consumption, waste material generation ▶ Reducing transport-related energy ▶ Noise pollution, fume and emission pollution ▶ Obsolescence and wastage ▶ Environmental impact of process failures ▶ Recovery to minimize impact of failures. - People - the social account, measured by the impact of the operation on the quality of people’s lives Some ways that operations can impact the social bottom line performance: ▶ Customer safety from products and services ▶ Employment impact of an operation’s location ▶ Employment implications of outsourcing ▶ Repetitive or alienating work ▶ Staff safety and workplace stress ▶ Non-exploitation of developing country suppliers. - Profit -economic account, measured by profitability, return on assets, etc.. of an operation. Some ways that operations can impact the financial bottom line performance include: ▶ Cost of producing products and services ▶ Revenue from the effects of quality, speed, dependability and flexibility ▶ Effectiveness of investment in operations resources ▶ Risk and resilience of supply ▶ Building capabilities for the future. Green washing: when a company appears to be environmentally conscious but are not. 2. Strategic level (operations strategic impact) - Risk: they are more likely to operate at a predictable and acceptable rate without either letting customers down or incurring excess costs. →less failure, reduced errors, better resilience → lower risk of operations failure - Cost: the efficiency with which an operation purchases its transformed and transforming resources, and the efficiency with which it converts its transformed resources, will determine the cost of its products and services. → High efficiency, less waste → lower operating costs → higher profits - Revenue: Enhanced service for customers → higher revenue → higher profits Net Promoter Score (NPS): method of measuring the levels of customer satisfaction (important factor in determining revenue). Score found by surveying customers and asking how likely they are to recommend their company, product or service on a scale from 1-10) → from 1-6 = “Detractors” → from 7-8 = “Passive” → from 9-10= “promoters” We ignore passives and compute promoters - detractors. (good score = n>0) NPS is a simple metric that is quick and easy to calculate, but some see that as its main weakness. It is without any sophisticated scientific basis, nor does it provide an accurate picture of customer behavior. - Investment: Producing more output with the same resources (or sometimes producing the same output with fewer resources) affects the required level of investment. →Higher utilization of operations capacity → less capital required to provide capacity - Learning: opportunities for process learning and improvement → Operations build the capabilities that enable future innovation 3. Operational level (operations performance objectives) day to day activities  - Quality —> how right: no mistakes, error-free goods which are fit for purpose. - Speed —> how fast: minimize time tra order and receiving product, increasing availability. - Dependability —> being on time, keep delivery promises - Flexibility —> ability to change, vary or adapt operations to cope with unexpected circumstances or individual treatment. - Cost —>being productive: produce goods and services at a price that enables products to be fairly priced. In non-profits, give good value to who is funding operation Two common meanings of quality - Quality as the specification (precise requirement) of product or service - Quality as the conformance to specification (“being right”) of a product or service being produced - OM view of quality: “conformance to customer’s specification” has both an external impact, which influences customer satisfaction, and an internal impact, which leads to stable and efficient processes. External benefits of Quality It improves the product or service in the market, or at least avoids customer complaints Internal benefits of quality It reduces cost: by reducing errors that potentially cause wasted time and effort It increases speed: by reducing errors that might slow down throughput speed It increases dependability: by reducing errors that cause internal unreliability External benefits of Dependability: Avoids customer complaints and increases the likelihood of customers returning Internal benefits of Dependability: It reduces cost: by preventing delays that cause disruptions and wasted time and effort It increases speed: by preventing late delivery to subsequent processes External benefits of speed Shorter delivery lead time increases customer satisfaction, which may increases customers’ willingness to buy or pay more Internal benefits of Speed It reduces cost: by reducing inventory or increasing productivity It increases dependability: by decreasing the throughput time of processes which decreases risk. Flexibility an operation’s ability to change their processes. Product/service flexibility → ability to introduce New products or adaptations Mix flexibility →operation’s ability to produce a wide range or mix of products and services Volume flexibility → Level of output Delivery flexibility → Timing of delivery External benefits of Flexibility  Ability to serve a wide range of customer segments, avoid customer complaints or lost sales due unavailability Internal benefits of Flexibility It reduces cost: by preventing delays that cause disruptions and wasted time and effort It increases speed & dependability: by preventing delays from e.g. adapting capacity levels Mass Customization Some companies have developed their flexibility in such a way that products and services are customized for each customer, yet produce them in high-volume. Eg. choosing components to their liking. Flexibility inside the operation Advantages to internal customers within operation: - Flexibility speeds up response: such as responding to market fluctuations in demand. - Saves time: eg. having employees do a range of tasks or have sufficiently flexible facilities and equipment - Maintains dependability: Internal flexibility can also help to keep the operation on schedule when unexpected events disrupt the operation’s plans. Agility Agility is essentially a combination of all 5 performance objectives but particularly flexibility and speed. Implies that operations and supply chain can respond to market uncertainties or requirements by producing new and existing products fast and flexible. Cost Cost is bought-in materials and services, staff costs and Technology and facilities costs. - Cost is always an important objective for operations management, even if the organization does not compete directly on price. The measure used to indicate how efficiently are costs being used is Productivity Productivity: Productivity is the ratio of what is produced by an operation (its output) to what is required to produce it (its input): 𝑂𝑢𝑡𝑝𝑢𝑡 𝑓𝑟𝑜𝑚 𝑎𝑛 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 𝐼𝑛𝑝𝑢𝑡 𝑡𝑜 𝑡ℎ𝑒 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 Or Single factor productivity: partial measures of input or output. Often done with output produced per year per employee. This allows different operations to be compared excluding the effects of input costs. 𝑂𝑢𝑡𝑝𝑢𝑡 𝑓𝑟𝑜𝑚 𝑡ℎ𝑒 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝑆𝑖𝑛𝑔𝑙𝑒 𝐹𝑎𝑐𝑡𝑜𝑟 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 𝑂𝑛𝑒 𝐼𝑛𝑝𝑢𝑡 𝑡𝑜 𝑡ℎ𝑒 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 The difference between the two measures is explained in terms of the distinction between: - the cost of the inputs to the operation - the way the operation is managed to convert inputs into outputs. → Input costs may be high, but the operation itself is good at converting them to goods and services. → Single-factor productivity can include the effects of input costs if the single input factor is expressed in cost terms, such as ‘labour costs’ Total factor (multi) productivity: the measure that includes all input factors.  𝑂𝑢𝑡𝑝𝑢𝑡 𝑓𝑟𝑜𝑚 𝑡ℎ𝑒 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 𝑀𝑢𝑙𝑡𝑖𝑓𝑎𝑐𝑡𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 = 𝐴𝑙𝑙 𝐼𝑛𝑝𝑢𝑡𝑠 𝑡𝑜 𝑡ℎ𝑒 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛 Improving Productivity 1. reduce the cost of its inputs while maintaining the level of its outputs. This means reducing the costs of some or all of its transformed and transforming resource inputs. 2. making better use of the inputs to the operation. For example, garment manufacturers attempt to cut out the various pieces of material that make up the garment by positioning each part on the strip of cloth so that material wastage is minimized. Cost Reduction through internal Effectiveness Each of the various performance objectives has several internal effects, but all of them affect cost, so one important way to improve cost performance is to improve the performance of the other operations objectives ▶ High-quality operations do not waste time or effort having to redo things, nor are their internal customers inconvenienced by flawed service. ▶ Fast operations reduce the level of in-process inventory between micro operations, as well as reducing administrative overheads. ▶ Dependable operations do not spring any unwelcome surprises on their internal customers. They can be relied on to deliver exactly as planned. This eliminates wasteful disruption and allows the other micro operations to operate efficiently. ▶ Flexible operations adapt to changing circumstances quickly and without disrupting the rest of the operation. Flexible micro operations can also change over between tasks quickly and without wasting time and capacity. Quality Speed Dependability Flexibility Cost Internal Error-free Fast Reliable Ability to change High processes throughput Processes productivity External On-specificatio Short Dependable Frequent new Low price, n delivery delivery products, Wide high margin products/servic lead time product/service mix e Volume and delivery adjustments Polar Diagrams Polar diagrams is a useful way to indicate the relative importance performance objectives of a product or service The closer the line is to the common origin, the less important is the performance objective to the operation. They can also be used to compare between alternative products and services delivered by an operation Performance Measurements: the process of quantifying action. Measurement: means the process of quantification and the performance of the operation is assumed to derive from actions taken by its management. Without performance measurement, it is impossible to exert any control over an operation on an ongoing basis, or to judge whether any improvement is being made. Most businesses will use measures from all 3 levels. Strategy has to be well defined in order to decide the most important measures. Breaking down operational measures into the various components of cost for example will help firm identify root cause of possible inefficiency. Performance measurement, as we are treating it here, concerns three generic issues: ▶ What factors should be included as performance measures? ▶ Which are the most important performance measures? ▶ What detailed measures should be use? Composite measures: performance measures that combine several measures. → eg. customer satisfaction, overall service level & operations agility. Benefit: help present an overall picture of performance of business. Sometimes include influences outside the operations function (eg. marketing) Balanced scorecard Approach Devised by Kaplan and Norton Traditional financial measures but differentiated for the changing industries from industrial age companies to information age firms to fit increasing value given to factors other than financial Value created through investment in customers, suppliers, employees, processes, technology, and innovation. Mix of strategic and operational levels. Broader indication of performance. Reflects business’s strategic position but limits focus on essential measures only Addresses: ▶ How do we look to our shareholders (financial perspective)? ▶ What must we excel at (internal process perspective)? ▶ How do our customers see us (the customer perspective)? ▶ How can we continue to improve and build capabilities (the learning and growth perspective)? Advantages: presents an overall picture of the organization’s performance in a single report, encourages companies to take decisions in the interests of the whole organization rather than sub-optimizing around narrow measures.  Chapter 3: Operations Strategy (Lecture 2) Long-term objective = form a strategic advantage →operations must be in line with company strategy, maintaining alignment while still adapting to external influences. Main attributes of business strategy Setting broad objectives that direct an enterprise towards its overall goal Planning the path in general terms that will achieve these goals Stressing long-term objectives rather than short-term objectives Dealing with the total picture rather than individual activities Being detached from, and standing above the distractions and confusion of day-to-day activities Operations strategy is the pattern of decisions and actions that shape the long-term vision, objectives and capabilities of the operation and its contribution to the overall strategy of the business The content of operations strategy is the specific decisions and actions that set the operations role, objectives and activities. The process of operations strategy is the method that is used to make the specific ‘content’ decisions. The ‘vision’ of an operation is a clear statement of how operations intend to contribute value for the business. It is not a statement of what the operation wants to achieve (those are its objectives), but rather an idea of what it must become and what contribution it should make. Different roles of the operations function Implementer of strategy: Strategy → operations Supporter of strategy: Strategy ← operations Driver of strategy: operations → strategy 4 stage model of operations contribution (Hayes and Weelwright) Model traces the progression of the operations function from what is the largely negative role in ‘stage 1’ operations to a position where it is the central element of competitive strategy in ‘stage 4’ Stage 1 Poor contribution, operations function harms org ability to compete effectively Inward looking, reactive, little positive contribution Vision: be internally neutral, achieved by avoiding making mistakes Stage 2 Compare own operations with similar companies. Measuring itself against competition Try to implement best practice Vision: become externally neutral Stage 3 Reached ‘first division’ of their market. Vision: to be the best in the market → by understanding company competitive/strategic goals and developing appropriate operations resources Internally supportive ‘Limit’ of operations contribution Stage 4 A stage 4 operations function is one that is providing the foundation for an organization’s competitive success. Forecasting changes in markets and supply & develop capabilities to cope Innovative, creative and proactive Drive org. Strategy by being ‘one step ahead’ of competitors Externally supportive Criticism The idea that operations can have a leading role in determining a company’s strategic direction is not universally accepted. →argue stage 4 and ‘driving’ strategy are unnecessary Traditional stance: operations focus should be on understanding market requirements & production of offering. → focus on marketing mix (price, promotion, product, place, people) operations management acts as a supporting role. 4 perspectives on operations strategy Inside-out: Develop resources and processes so that their capabilities can be exploited in their chosen markets Outside-in: Translate intended market position so as to provide the required objectives for operations decisions Top-down: Reflect what the whole group or business wants to do Bottom-up: Learn from day-to-day activities so as to cumulatively build strategic capabilities Reconciling Top-down and Bottom-up perspectives Top-Down- hierarchy of strategies. The role of operations is largely one of implementing or ‘operationalizing’ higher-level strategies. in order to understand strategy at any level, one has to place it in the context of what it is trying to do (the level above) and how it is trying to do it (the level below). At any level, a good top-down perspective should provide clarity and connection. It should clarify what an operations strategy should be prioritizing, and give some guidance on the strategy to be achieved. Corporate strategy to position org in its global ,political, economic and social environment. - Type of business - Where it operates - allocation of cash - How to manage relationships between diff. businesses Business strategy for each unit within corp, setting individual mission and objectives taking into account: - Customers - Markets - Competitors Eg. growth targets, return on investment, profitability targets, cash generation Functional strategies to best organize operations, marketing and offering development to support objectives The role of the function Translating Business objectives into functional objectives  Allocation of resources so as to achieve functional objectives Performance improvement priorities Bottom-Up alignment with operational experience The ‘top-down’ perspective provides an orthodox view of how functional strategies should be formulated. However, while it is a convenient way of thinking about strategy, it does not represent the way strategies are formulated in most cases. The bottom-up perspective accounts for the fact that in many cases organizations move in a particular strategic direction because their on-going experience at an operational level convinces them that it is the right thing to do. Emergent strategies: ‘high level’ strategic decision making, if it occurs at all, may simply confirm the general consensus around a given strategic direction and provide the resources to make it happen effectively. - sees strategy making, at least partly, as a relatively unstructured and fragmented process to reflect the fact that the future is at least partially unknown and unpredictable. The reinforcing effect of top-down and bottom-up perspectives on operations strategy Correspondence and Coherence Correspondence: there should be a clear, explicit and logical connection between each functional strategy and the business strategy & a clear, explicit and logical connection between a functional strategy and the decisions taken within the function. →Operations strategy must also be coherent, with other functional strategies and within itself. Coherence means that the choices that are made across or within functions should not pull it in different directions. All decisions should complement and reinforce each other in the promotion of the business’s and the operation’s objectives. Business Model: the plan that is implemented by a company to generate revenue and make a profit (or fulfil its social objectives if a not-for-profit enterprise) →what a company does and how it makes money from doing it. emphasis on how to achieve an intended strategy as well as exactly what that strategy should be. Includes: value proposition of what is offered to the market, the target customer segments addressed by the value proposition the distribution channels to reach customers the core capabilities needed to make the business model possible the revenue streams generated by the business model. Operating model: high-level design of the organization that defines the structure and style which enables it to meet its business objectives →should provide a clear, ‘big picture’ description of what the organization does and how it does it. how the critical work of an organization is carried out. provide a way to examine the business in terms of the key relationships between business functions, processes and structures that are required for the organization to fulfil its mission. Includes: key performance indicators (KPIs), with an indication of the relative importance of performance objectives, new investments and intended cash flows who is responsible for products, geographies, assets, specific processes, systems and technologies etc the structure of the organization. All managers are operations managers and all functions can be considered as operations because they comprise processes that deliver some kind of service. An operating model is like an operations strategy, but applied across all functions and domains of the organization. Clear overlaps between the ‘business model’ and the ‘operating model’, but the operating model focuses more on how an overall business strategy is to be achieved. The Outside-in (market requirements) perspective Diff. market demands require a diff focus on operational objectives. Competitive factors (if customer Performance objectives (then, values…) operations will need to exceed in…) Low price → Cost High Quality → Quality Fast delivery → Speed Reliable delivery → Dependability Innovative products and services → Product/service flexibility Wide range → Mix flexibility The ability to change the timing of → Volume/Delivery Flexibility quantity of products and services A particularly useful way of determining the relative importance of competitive factors is to distinguish between ‘order winning’, ‘order qualifying’ and ‘less important’ factors. Order winner: contributes directly and significantly to winning customers. The key reasons customers buy the offering. → Raising performance in an order-winning factor will either result in more business or at least improve the chances of gaining more business. Order qualifier: factors where the operation’s performance has to be above a particular level just to be considered by the customer. Performance below this ‘qualifying’ level of performance often disqualifies the organization from being considered by many customers. → further improvement above the qualifying level is unlikely to gain the company much competitive benefit. Less Important Factors: neither order winning nor qualifying. They do not influence customers in any significant way. They are worth including in any analysis only because they may be of importance in other parts of the operation’s activities. Product/service life cycle Intro - needs of customers are unlikely to be well understood, so operations management needs to develop the flexibility to cope with any changes and be able to give the quality to maintain product/service performance. Growth  - Keeping up with demand could prove to be the main operations preoccupation. - Rapid and dependable response to demand will help to keep demand buoyant, while maintaining quality levels can ensure that the company keeps its share of the market as competition starts to increase. Maturity - operations will be expected to get the costs down in order to maintain profits or to allow price cutting. - Because of this, cost and productivity issues, together with dependable supply, are likely to be the operation’s main concerns. Decline - There might be a residual market, but unless a shortage of capacity develops, the market will continue to be dominated by price competition. - So, operations objectives continue to be dominated by cost. The Inside-out (operations Resource) Perspective Its fundamental idea is that long-term competitive advantage can come from the capabilities of the operation’s resources and processes, and these should be developed over the long term to provide the business with a set of capabilities or competencies. Resource-Based View: organizations with ‘above-average’ strategic performance are likely to have gained their sustainable competitive advantage because of their core competences (or capabilities). To do so, Operations must create: Barriers to entry - eg. product differentiation , controlling access to distributors Barriers to imitation - To protect competitive advantage According to the Operations Resource perspective, an operation is not just the sum of its processes; it also has intangible resources. Intangible resources include such things as: ▶ its relationship with suppliers and the reputation it has with its customers; ▶ its knowledge of and experience in handling its process technologies; ▶ the way its staff can work together in new product and service development; ▶ the way it integrates all its processes into a mutually supporting whole. Resource-based thinking requires identification of both operations capabilities and constraints. Operations resources and capabilities can provide long-term competitive advantage if.. They are Scarce – unequal access to resources (eg. got it for cheaper) They are not Mobile – resources are difficult to move out of firm (eg. process developed on site by employees) They are difficult to imitate or substitute for – how easily competitive advantage can be sustained over time. The less tangible the resources are and the more connected with the tacit knowledge embedded within the organization, the more difficult they are for competitors to understand and to copy. Structural and Infrastructural decisions A distinction is often drawn between the strategic decisions which determine an operation’s structure and those which determine its infrastructure. Structural Decisions: those classed as primarily influencing design activities. (Hardware) Infrastructural decisions: those which influence the workforce org and the planning and control & improvement activities. (software) The best and most costly facilities and technology will only be effective if the operation also has an appropriate infrastructure which governs the way it will work on a day-to-day basis. Operations strategy An operations strategy is the starting point for operations improvement. It sets the direction in which the operation will change over time. Unless an operations strategy gives some idea as to how improvement will happen, it is not fulfilling its main purpose. → Process: concerned with the method that is used to determine what an operations strategy should be and how it should be implemented. Process is iterative: → Formulation → Implementation → Monitoring → Control → Challenges in Operations strategy Formulation: clarifying the various objectives and decisions that make up the strategy, and the links between them. Identification of Critical Issues (Opportunities) – identification of which issues are critical Comprehensiveness – does it include all issues Coherence – direct firm towards same common strategic direction Correspondence – does it correspond to true priority of performance objectives Implementation The way that strategies are operationalized or executed. The way one implements any strategy will very much depend on the specific nature of the changes implied by that strategy and the organizational and environmental conditions that apply during its implementation. Clarity of Strategy - Crucial attribute – strong relationship between strategy and implementation, easy to define the intent behind the strategy. Motivational Leadership – Leadership that motivates, encourages and provides support, needed to bring a sense of meaning and maintain purpose. Project Management – breaking plans into a set of relatively distinct activities. Monitoring & Control Monitoring involves tracking on-going performance and diagnosing data to make sure that the changes are proceeding as planned and providing early indications of any deviation from plan. Control involves the evaluation of the results from monitoring so that activities, plans and performance can be assessed with the intention of correcting future action if required. Chapter 4: Managing Product and Service Innovation (Diego) Innovation activity is about successfully delivering change in its many different forms, whether it is small, incremental, or more radical adaptations to existing methods. → No matter how well a product or service is designed, it will fail if it is not properly implemented or introduced into the market. What is Product & Service Innovation? Creativity: Ability to move beyond conventional ideas, rules or assumptions, in order to create significant new ideas. Innovation: Something new that creates a new type of performance. Transforming ideas into something that has the potential to be both practical and provide commercial value. Design: Process that transforms innovative ideas into something more concrete. Innovation is the idea, Creativity is where the innovation comes from, and Design is what allows for Innovation to happen Innovation S Curve The growth of the impact in innovation isn't uniform, as it develops in an S-shaped curve 1. Early stages of innovation require more time, effort, and resources while showing the least results. 2. Performance increases as experience and knowledge grows 3. As the idea becomes more established, it is harder to extend its performance 4. When the idea reaches its “mature stage” the progress declines even more, giving a start to improvements and innovations within that original idea. Incremental or Radical Innovation Different industries = different rate & scale of innovations (phones see changes often, while construction practices almost never change) Radical innovations: - is the least common (5-10% of innovations) - Generates the most challenges for players in the market - Innovator’s Dilemma: organizations tend to be unwilling to disrupt current practices but if they don’t it might be too late - Benefits newcomers Incremental innovation: - Less technological changes - Builds upon existing knowledge/resources - Benefits corporations New market entrants have no established position or processes, therefore they don’t lose anything when trying radical innovations. Innovation is Influenced by later stages in the Value Chain Each of these stages is NOT independent from each other Design for production/creation: Design for Production(DFP) or Design for Manufacture(DFM) is how a product is CREATED. In the case of services, how are they executed (how is a queue at a place organized)? Design for distribution: Develops how the product or service will reach the customer. What is the strategic role of product and service innovation? Product and service innovation adds value by: - Driving and operationalizing innovation, increasing market share, and opening up new markets - Differentiating products and services, increasing consistency in the company’s range and ensuring successful product launches - Strengthening branding - Reducing overall costs associated with innovation, through more efficient use of resources, reduced project failure rate, and faster time to market. Process of design Innovation activity is a process that involves many of the same design issues common to other operations processes. Because of this it can be managed using the same principle as other processes (input-transformation-output model) Performance objectives for the product and service innovation process Innovation processes can be judged in terms of their quality, speed, dependability, flexibility, and cost. Quality: based on the ability of the project to meet market requirements Speed: allows for early market launch, frequent market simulation, and late design start (you are faster and therefore can start closer to the deadline) Dependability: lack of dependability increases uncertainty surrounding the innovation process. Dependability prevents missed deadlines, process bottlenecks, and resource shortages. Flexibility: Ability to cope with external or internal change. Cost: often divided into the categories: cost for inputs, cost of providing the labor, & other general overhead costs. Whereas during in-house innovations, the latter two generate the most costs. Sustainability: the extent to which it benefits the ESG aspects (Environmental, Social, Governmental or People, Planet, Profit) What are the stages of product and service innovation? All innovation processes have clearly defined stages of progress which take the project from a vaguely defined idea to an actual product, service, or process. The Design Funnel Decisions taken along the way, reduce the number of options to be considered, making the path clearer and clearer as it is developed further. But fsfafter a decision has been made, it is harder to change your mind to reconsider for other options, because of this the cost of change is higher as you are deeper into the development stages. Concept Generation: where innovative ideas become the inspiration for new service or product concepts. Innovation may come from inside or outside the company: - Ideas from R&D → develop new knowledge and ideas in order to solver particular problems or grasp an opportunity - Ideas from staff → day-to-day operations gives them experience and clear vision of the problems that may need to be solved. - Ideas from suppliers → suppliers tend to be experts on their field and can provide knowledge of new technologies in the market as well as issues along the supply chain - Ideas from competitor activity → Ideas followed through by competitors may be worth following. Taking appart competitors products to explore for potential is called “reverse engineering - Ideas from customers → Ideas may come from customers from day-to-day interactions such as complaints or transactions. Open Sourcing: open-source software is code created by a community of developers who come together to develop. Update, and maintain it while making it available for any user or corporation to use free of charge. Crowd-sourcing: Closely related to open sourcing, crowd sourcing is the processes of getting work or funding, or ideas from a crowd of people (usually online). Lead users: are those users who are ahead of the majority of the market on a major market trend, who also have high incentive to innovate. Harbingers of Failure: Consumers that keep buying products subsequently taken from the shelves Ideas Management: Idea management software systems help collect, organize, and assess ideas from customers and employees for company usage. Concept Screening Stage where potential innovators are considered for further development against key criteria. Here u evaluate feasibility, acceptability, and vulnerability of the potential projects, processes, products, or services. Preliminary Design The main task of this is to define what will go into the service or product such as components, job instructions/processes to be followed, and other requirements. By analyzing this stage, costs can be reduced through design/sourcing simplification. Standardization Standardizing processes, products, or services, allows to overcome cost penalties. This is, the application of commonalities by using an agreed set of standard, which will allow the individual components of the product or service to be created. Allowing this way to create the individual components to be created separately yet work or fit together. Main benefits: - Predictability of the design process - Allows for clear communication - Reduces costs Commonalities Using common elements within a service or product can simplify design complexity. The more products/services/processes that can be completed by using the same resources, the cheaper and easier it will be to make them. Modularization Involves designing standardized sub-components which can be switched in and out from input/output to make a new product. This can be applied to products (computers with different graphic card or driver options) and services (education that allows you to select different courses). Design evaluation and improvement Many techniques to evaluate and improve preliminary design, but best known is quality function deployment (QFD) Quality function deployment (QFD) Key purpose is to ensure eventual innovation actually meets customer needs.It focuses on the prioritization of customer needs and how this can be achieved. It specifies: - Customer requirements (what) - Performance indicators of the product performance - Design characteristics (how) - Central matrix which represents the interrelationships between whats and hows - Bottom box including a Technical assessment of product - “Roof” capturing team information about correlations between design characteristics Prototyping and Final Design Improved design is turned into a “prototype” to be tested and improved further through a series of trials. A prototype can include either a physical model to a computer simulation.Virtual simulations allow for virtual workers to interact and test further with the prototype. Alpha and Beta testing Alpha testing: an internal process where the developers or manufacturers examine the product for errors Beta testing: when product is released to selected customers before commercialization for try-out and feedback. Also called “field testing” How should product and service innovation be sourced? Understanding Capacity requirement of Innovation Activities Capacity management involves deciding on the appropriate level of capacity and how it can be adjusted as demand changes. - In innovation processes, demand is the amount of new designs needed. Main issue: rate of new innovations is not constant. Because of this many companies have issues determining the amount of resources (including workforce) they should direct towards innovations. Understanding whether innovation activities should be Outsourced Companies can adopt many positions, from developing the whole project fully in-house to completely outsourcing the innovation process. Between these two options there are degrees of internal and external capabilities. When kept in-house, resources are more easily controlled but may provide issues in the work between highly familiar employees,, while outsourcing will provide higher control related to the penalty clauses that come from contracts. The main issue with outsourcing is knowledge leaking, which relates to the experience and knowledge acquired by 3rd parties. But at the same time, it is this “leakage” that builds the experience that makes suppliers reliable, as they have learned from multiple industries and customers in the past. Understanding what technologies to use in the innovation process Tech becomes increasingluy important in the innovation process, these dont only facilitate/allow for the creation of new products/services, but also reduce the uncertainty surrounding said innovation. Generative Design: technology which is used as an approach to exploring alternative designs generated from the required goals, parameters, and performance. It can be described as “exploiting machine learning’ to mimic an evolutionary approach to design. Computer Aided Design (CAD): stores and categorizes component information and allows designs to be built up on screen, while performing basic engineering calculations to allow or design testing. Design created through CAD can be further observed through 3D printing or virtual reality. Digital Twins: The combination of data and intelligence that represents the structure, context and behavior of any physical system of any type, offering an interface that allows one to understand past, and present operations to make predictions. Knowledge Management Technologies: Allows to put experience and information into a common pool of knowledge for employees and other stakeholders to use in their decisionmaking. Understanding what organizational structure to use in innovation Functional Organization: the innovation project is divided into segments and assigned to relevant functional areas within functional areas. Coordination is divided between functional and senior management. Functional Matrix (Lightweight Project Manager): A person is responsible for overseeing the project over different functional areas. This person serves primarily to manage the project, but functional managers still remain in charge of the staff and their respective segments of the project. Balanced Matrix: A person is assigned to oversee the project and interaction equal basis with functional managers. Project Matrix (Heavyweight Project Manager): Person assigned to oversee the project and is responsible for its completion. Limited involvement from functional managers (assign personell and provide feedback) Project Team: manager is responsible for a team composed by a core group of staff from several functional areas. Functional managers have no involvement. - Matrix structures are appropriate for both simple and complex projects - Functional structures help the development of technical knowledge - Dedicated project teams are better for projects of both low and high degree of uncertainty, where flexibility is more valuable Understanding how to compress the innovation process Eventually the design of the innovative product/service will have to be combined with the design of processes behind these. This process is called simultaneous design. Integrating the design of the offering and the design of the process In the end, both designs will have to be combined, so it is better to design both together. This must be done regardless of the organizational structure, but this can become a factor of difference. Different timescales, update frequency, cost rate, etc. Because of this, stakeholders connected to the design of such processes should have ways of communicating, and organizational mechanisms of collaboration. Simultaneous Development - Effective simultaneous development reduces time to market - Reduced time to market leads to competitive advantage The design innovation process is a set of individual stages, each with a clear starting point, which makes it easy to manage and control. The main issue with this is that if a problem arises in one stage, it will generate a bottleneck, halting or slowing down the whole process. Bottleneck: step within a sequential process that makes the whole process slow down. Moreover, certain aspects of the following steps may become clear at some point through the previous stages, so these could be started from this point rather than waiting for the previous stage to end. Early resolution of design conflict and uncertainty - The design process requires strategic attention early, when there is most potential to affect design decisions - Early decisions are the most important and difficult to make due to the increased uncertainty surrounding the project. - It is better to take these decisions early on, rather than pushing them to a later time, even if the process of decision making will delay the whole project. Chapter 5 lecture+book - The structure and scope of supply Operations performance concerns the whole supply chain A supply network is an interconnected set of operations. The structure of a supply network relates to its shape and form. The scope of an operation’s supply network relates to the extent to which an operation decides to do the activities performed by the network itself, as opposed to requesting a supplier to do them. x Supply networks The supply network includes the chains of suppliers providing inputs to the operation, the chains of customers who receive outputs from the operation, and sometimes other operations that may at times compete and at other times cooperate. Advantages of looking at the whole supply chain: - Puts the operation into its competitive context - Sometimes they need to look beyond immediate customers and immediate suppliers, to understand why customers and suppliers act as they do. - Helps identify the key players/ significant links – Not everyone in a supply network has the same degree of influence on the overall performance of the network; some contribute more than others. - Shifts emphasis to the long term – A long-term supply network view would involve constantly examining technology and market changes to see how each operation in the supply network might be affected. Structure and scope Structure and scope are strongly related, decisions relating to structure and scope are often interrelated, and both structure and scope decisions actually comprise a number of other ‘constituent’ decisions. These are shown in Figure 5.4. The structure of an operations supply network is determined by three sets of decisions: ▶ How should the network be configured? ▶ What physical capacity should each part of the network have? (long-term capacity decision.) ▶ Where should each part of the network be located? (The location decision.) The scope of an operation’s activities within the network is determined by two decisions: ▶ The extent and nature of the operation’s vertical integration. ▶ The nature and degree of outsourcing it engages in How much capacity should operations have Balancing capacity and demand Now it concerns long-terms decisions( previously about level capacity and chase demand was medium-term/short-term), and the amount of capacity an organisation will have depends on its view of current and future demand. - Capacity can either lead or lag demand - Inventory can be used to smooth out the peaks - Spare capacity can be used for other operations, but this may reduce the original service level The optimal capacity level Most organisations need to decide on the size (in terms of capacity) of each of their facilities. The effective cost of running each centre will depend on the average service bay occupancy. Low occupancy because of few customers will result in a high cost per customer served because the fixed costs of the operation are being shared between few customers. As demand, and therefore service bay occupancy, increases, the cost per customer will reduce. Operations principle: Most operations exhibit economy of scale effects where operating costs reduce as the scale of capacity increases. Operations principle: Diseconomies of scale increase operating costs above a certain level of capacity, resulting in a minimum cost level of capacity. Timing changes in capacity Operations principle: Capacity-leading strategies increase opportunities to meet demand. Capacity lagging strategies increase capacity utilisation In deciding when new capacity is to be introduced the company can mix the three strategies: ▶ Capacity is introduced to generally lead demand – timing the introduction of capacity in such a way that there is always sufficient capacity to meet forecast demand. ▶ Capacity is introduced to generally lag demand – timing the introduction of capacity so that demand is always equal to or greater than capacity. ▶ Capacity is introduced to sometimes lead and sometimes lag demand, but inventory built up during the ‘lead’ times is used to help meet demand during the ‘lag’ times. This is called ‘smoothing with inventory’. Capacity leads demand Timing the introduction of capacity in such a way that there is always sufficient capacity to meet forecast demand. Advantages: - Always sufficient capacity to meet demand - Capacity cushion can absorb extra demand - Start-up problems w/ new plant less likely to affect supply Disadvantages - Low utilization of plants - Risk of overcapacity if forecast is not realized - Capital spending on plant early Capacity lags demand Timing the introduction of capacity so that demand is always greater than or equal to capacity. Advantages: - Always sufficient demand to keep plants working at full - Minimal overcapacity when demand drops below forecast - Capital spending on plants is delayed Disadvantages: - Insufficient capacity to meet demand - No ability to exploit short-term increases in demand - Start-up problems with new plants cause even worse undersupply Smoothing with inventory Inventories can be used to obtain the advantage of both leading and capacity lagging- demand is met by a combinations of production and inventory Inventories created from over capacity act as buffers Advantages: - All demand is satisfied, customers are satisfied and revenue is maximized - Utilisation of capacity is high, therefore costs are low - Very short-time peaks in demand can be met from inventories Disadvantages: - The cost of inventories can be high - Risk of product deterioration and obsolescence Operations Principle: Using inventories to overcome demand capacity imbalance tends to increase working capital requirements. Drum Buffer Rope Control: focus on the bottleneck Production speed is determined by the bottleneck (“drum”) Buffer in front of bottleneck to make sure that the bottleneck never needs to stopAlign the speed of the other activities with the speed of the bottleneck( do this via a “rope” to the first activity) Eliyahu M.Goldratt The Goal: novel that explains the Theory of Constraints(TOC) - System: number of activities that depend on each other - Every system has: One goal( measurable) Set of limiting constraints - Important principles: Drum buffer rope Five focusing steps(POOGI- Process Of On Going Improvement) Improving system=improving the bottleneck Chapter 6: Design What is a process design? ➔ Design: conceive the looks, arrangement and workings, before something is created ➔ Conceptual exercise, that must deliver a solution that will work in practice ➔ Can be approached at different levels of details. ➔ At the start: important to understand the design objectives, especially while deciding the overall shape and nature of the process. ➔ Most common way: positioning according to its volume and variety characteristics. ➔ Details will be analyzed to ensure that fulfills the objectives effectively. ➔ Some aspects concerning the objectives/broad positioning will need to be modified after analysis. Process design and product /service design are interrelated Often we treat design and design of the process that make them as separated activities, when they are INTERRELATED. You cannot commit to detailed design without considering how it will be produced. Design can constrain freedom to operate as they will wish. The overlap between both of them is greater in services, since it involves the customer as part of the process. Product designers have to make use of the things to concentrate of whats important. When manufacturing products, it is useful to have an overlap between product and process design. In most service activities, the overlap between service and process design is implicit in the nature of the service. What should be the objectives of process design? Whole point: make sure the performance is appropriate for what they are trying to achieve. Ex: If an operation competes for low price → low cost related objectives. Logic should link what operation is attempting to achieve and the performance objectives of its individual processes. Micro process objectives: more detail concerned with flow through the process. Whatever is being processed enters the process it will progress through a series of activities where it is transformed. Examples: throughput rate (rate items emerge from process), cycle time, process inventory (number of items in process). Standardization of process: Doing things the same way, adopting a common sequence of activities methods and use of equipment. Standardization is an important objective in the design of some services and products. Practical dilemma is how to draw the line between processes that are required to be standardized and allowed to be different. Environmentally sensitive process design: The input sources for a product or service Amounts and sources of energy consumed during the production and/or delivery process The amount and type of waste material generated during production processes The lifespan of the product itself The repairability, reusability or recyclability of the product at the end of its life-span How do volume and variety affect process design? ➔ Dimensions of volume and variety go together but in reversed ways. ➔ Low-volume processes often produce a high variety and high volume processes often produce a narrow variety of products and services. ➔ Continuum from low volume-high variety through to high volume-low variety, which we can position on this volume variety spectrum.  ➔ No one type of process design is best for all types of requirements. In all circumstances different products or services with different volume-variety require different processes. Process types: Position of a process volume-variety shapes overall design and the managing its activities. General approaches, designing and managing processes are called process types. Project processes: Discrete, highly customized products with a long time scale between completion of each item, well defined start and finish. Low volume and high variety. This process might be complex bc it involves significant discretion and professional judgment. Ex: software design, construction. Jobbing process: high variety and low volumes, however each product has to share operations resources with many others. Process a series of items that require a similar attention, differ there exact needs, there are fewer unpredictable circumstances. Ex: toolmarkers, furniture restorers → work made to measure. Batch process: each part of the process has periods when it's repeating itself especially in Batch. They can be found over a wide range of volume and variety levels. Ex: machine tool manufacturing, production of gourmet frozen food, catering. Mass processes: high volume and relatively narrow variety. Activities of mass processes are usually repetitive and largely predictable. Ex: include frozen, food production, automatic packing lines. Continuous process: higher volume and usually lower variety than mass process. Literally continuous and products are inseparable, being produced is an endless flow. Inflexible and highly predictable flow. Ex: continuous process, processing, petrochemical refineries. Professional services: high contact process spend considerable time in service process. Tend to be people based rather than equipment based. Ex: doctors surgeries, lawyers practices, auditors. Service shops: levels of volume and variety, between extremes of professional and mass services. Mixes of front and back office activities. Ex: Service shops, banks, high street, holidays tours. Mass services: customer transactions, limited contact time and little customization. Include supermarkets, national rail, network, airport. Most common use mostly by all companies. Product process matrix (info regarding graph down) ➔ Most common method: process volume variety position. ➔ Idea: more imp elements of process design are strongly influenced by volume-variety. ➔ Process: should lie close to the diagonal of the matrix that represents fit between volume variety positions. This is called: natural diagonal/line of fit. ➔ Moving off the natural diagonal: lower operating costs than volume variety position. Diagonal represents the most appropriate process design for any volume-variety position. ➔ Processes on the right of the natural diagonal would normally have LOWER volumes and higher variety. → more flexible. Their costs are usually higher. Process mapping: describing processes in terms of how activities in the process can relate to each other. Different techniques all identify the different types of activity that take place during the process and show the flow of materials/people/info through the process. Process mapping symbols: These symbols can be arranged in order, parallel to describe any process. Different levels of process mapping: At a more aggregated level, high level processes mapping. Supply and install lighting. At the highest libel process can be drawn simply as an input transformation output process. ➔ Process with a high level process mapping: processes are often mapped at more aggregate level. ➔ Highest level the process can be drawn as an input-transformation-output process. Simple and not details are included. ➔ Lowe and detailed level: outline process map that identifies the sequence of activities in general detail. (example of this image below) the detail one is install and test Mapping visibility in process design: Processes with a high level of customer visibility cannot be designed the same way as processes that deal with inanimate materials. Materials and info are processed but customers experience the process. In a process where customers see it's useful to use a map, to make a degree of visibility. Allows high visibility to be designed so I can enhance customer perception of the process. Example (down) collect and check process: that is mapped to show visibility of each activity to the customer. ➔ 4 levels of visibility, the boundary between categories is called line of visibility. ➔ Line of interaction: involve direct interaction between lighting company staff and the customer. ➔ Other activities that take place at the customer site involve less or no interaction. How does customer experience affect emotions? High customer contact projects create an experience for the customer. They affect customer satisfaction and has potential to produce customer loyalty, expectations and create emotional bond. Service org. SEE → How customers experience their process at the core of process design. Throughput time, cycle time and work in progress: ➔ First stage: understand the nature of, and relationship between throughput time, cycle time and work in progress. ➔ Throughput time (TH): time elapsed between an item entering the process and leaving it. ◆ The elapsed time for 1 unit(/job/customer) to move through a process, including waiting. ➔ Cycle time (CT): average time between items being processed and work in progress ◆ The average time between units of output emerging from a process (e.g.: every 2 minutes); the inverse of ‘speed’ (in this example: 60/2 = 30 units per hour) ➔ Work in progress (WIP): # of items within the process at any point in time. ➔ Work content:The total amount of work (measured as time) required to produce 1 unit of output ➔ Utilization of process resources: The proportion of available time that the resources within the process are performing useful work. Little’s law: ➔ Mathematical relationship → Throughput time = work in progress x cycle time  ➔ Works for any stable process, states that the average number of things in the system is the product of the average rate at which things leave the system and average time each one spends in the system. ➔ Or: average number of objects in a queue is the product of the entry rate and the average holding time. ➔ (Just to understand) Ex: new sandwich assembly and sales process, the average number of customers in the process should be limited to around ten and the maximum time a customer is in the process should be limited to around ten and the max time a customer is in the process should be on average 4 min. If the time to assemble and sell a sandwich in the new process has been reduced to 1.2 minutes how staff should be serving. Throughput efficiency: Idea: throughput time of a process is different from the work content processing has important implications. Significant amounts of time no useful work is being done to the materials, information or customers that are progressing through the process. In this case: Throughput process is high, bc the items being processed are customers who react badly to waiting. In most material and info transforming processes, efficiency is far lower than single % figures. Value added throughput efficiency: restricts the concept of work content to only those tasks that are literally adding value to whatever is being processed. Eliminates activities such as movement, delays and some inspections. Process Bottlenecks: A bottleneck in a process occurs when one stage is overloaded and unable to handle its workload, limiting the entire process's capacity. It dictates the rate at which the process operates. For example:  When work is evenly distributed across all stages, each stage takes an equal amount of time, allowing items to flow smoothly. In such a case, the cycle time is equal to the time at any one stage. When work is unevenly allocated, one stage (the bottleneck) slows down the entire process. This inefficiency results in underloaded stages and wasted time. For instance: Equal allocation: 4 stages × 2.5 minutes per stage = 10 minutes total. Unequal allocation: 4 stages × 3 minutes (bottleneck stage) = 12 minutes total, with 2 minutes wasted (16.67% balancing loss). Balancing the workload across stages minimizes balancing loss and improves process efficiency Balancing Work Time Allocation Balancing work across process stages requires respecting task precedence, often visualized using precedence diagrams. These diagrams illustrate the sequence of tasks, helping allocate work efficiently. Arranging Stages: Long Thin vs. Short Fat Processes can be arranged as: 1. Long Thin: Sequential stages with small tasks. 2. Short Fat: Parallel stages performing larger tasks or the entire process. Advantages of Long Thin: Easier flow management and simpler handling, especially for heavy or large items. Lower capital investment (specialized equipment needed only once). Higher efficiency due to fewer non-productive activities at each stage. Advantages of Short Fat: Greater flexibility in handling different types or volumes of work. More robust; failure in one stage doesn’t halt the process. Less monotonous work, as tasks are repeated less frequently. Choosing between these arrangements depends on technical constraints and process needs. Low Volume High Variety Processes Processes with low volume and high variety often require flexible approaches, as traditional methods used for high volume–low variety processes may not apply directly. Key challenges include: Difficulty in balancing work between stages due to the variety and unpredictability of tasks. Complexity in mapping processes, as they may involve multiple alternative routes or rely on judgment for decisions. Process mining is a technique that combines process analysis with data mining to understand how processes are performed in practice, particularly useful for high variety–low volume processes. Purpose: To identify actual process flows and behaviors, as opposed to theoretical models. Method: ○ Uses event logs (audit trails) from information systems to capture real-time data about events, their sequence, and timing. ○ Applies tools and algorithms to clean, analyze, and visualize processes in detail. Applications: Identifying inefficiencies, bottlenecks, or deviations from intended processes. Example: Analyzing logs from an insurance help line to map how claims are handled in practice, revealing variations or delays in the process. Process mining bridges the gap between theoretical models and actual operational behaviors, enabling more accurate process improvements. Effects of Process Variability Variability in processes arises from factors such as irregular arrivals of materials or customers, breakdowns, reprocessing, or differing requirements. This variability impacts process performance, particularly in two areas: 1. Variability in arrival times: Fluctuations in when items arrive for processing. 2. Variability in activity times: Differences in how long tasks take to complete. Key Impacts: When arrival and activity times are constant, a process performs predictably. For example: ○ Low utilization results in no waiting (e.g., arrival every 30 minutes for a 10-minute task). ○ Full utilization also results in no waiting (e.g., arrival every 10 minutes). ○ Overutilization leads to indefinite queues (e.g., arrival faster than 10 minutes). With variability, waiting times increase, even at moderate utilization levels. As utilization approaches 100%, waiting times grow exponentially. Process Design Implications: Designers must choose between: 1. High utilization with long waiting times (Point X). 2. Low utilization with short waiting times (Point Y).  3. Reducing variability to achieve both high utilization and short waiting times (Point Z). Addressing variability often requires using queuing analysis to evaluate and balance utilization and waiting times effectively, a decision with potential strategic implications for process efficiency.