BA 328 TQM & Operations Management Preliminary Notes PDF

**BA 328 -- TQM AND OPERATIONS MANAGEMENT** **PRELIM TOPICS** **INTRODUCTION** **LEARNING OBJECTIVES:** - Define and explain OM - Explain the role of OM in business - Describe the decisions that operations managers make - Describe the differences between service and manufacturing...

**BA 328 -- TQM AND OPERATIONS MANAGEMENT** **PRELIM TOPICS** **INTRODUCTION** **LEARNING OBJECTIVES:** - Define and explain OM - Explain the role of OM in business - Describe the decisions that operations managers make - Describe the differences between service and manufacturing operations - Identify major historical developments in OM - Identify current trends in OM - Describe the flow of information between OM and other business functions. **OPERATIONS MANAGEMENT IS:** The ***business function*** responsible for ***planning***, ***coordinating***, and ***controlling*** their sources needed to produce products and services for a company - A management functions - An organization's core function - In every organization whether Service or Manufacturing, profit or not for profit **WHAT IS THE ROLE OF OM?** - The role of OM in business is to oversee and optimize the processes that transform inputs into goods or services. - OM Transforms inputs to outputs. - Inputs are resources such as People, Material, and Money - Outputs are goods and services. **OM's TRANSFORMATION PROCESS** ***The transformation process in operations management entails a series of activities that convert inputs into outputs.*** **There are several steps involved in the transformation process in operations management:** - Inputs are received from suppliers. - Materials are stored until they are needed. - Production planning determines the order in which materials will be processed. - Materials are moved to production areas. - Workers convert materials into finished products. - Products are inspected and tested to ensure quality. - Finished products are shipped to customers. **OM'S TRANSFORMATION ROLE** - To add value Increase product value at each stage Value added is the net increase between output product value and input material value - Provide an efficient transformation Efficiency -- means performing activities well for least possible cost **MANUFACTURERS VS ORGANIZATIONS** **Services:** - Intangible product - Product cannot be inventoried - High customer contact - Short response time - Labor intensive **Manufacturers:** - Tangible product - Product is inventoried - Low customer contact - Longer response time - Capital intensive **SIMILARITIES FOR SERVICE/MANUFACTURERS** - Both use technology - Both have quality, productivity, & response issues - Both must forecast demand - Both can have capacity, layout, and location issues - Both have customers, suppliers, scheduling and staffing issues - Manufacturing often provides services - Services often provides tangible goods - Some organizations are a blend of service/manufacturing **OM DECISIONS** - All organizations make decisions and follow a similar path - First decisions very broad -- Strategic decisions - Strategic Decisions -- set the direction for the entire company; they are broad in scope and long-term in nature. - Following decisions focus on specifics - Tactical decision - Tactical decisions: focus on specific day-to-day issues like resource needs, schedules, & quantities to produce are frequent - Strategic decisions less frequent - Tactical and Strategic decisions must align **OM's DECISION** **HISTORICAL DEVELOPMENT OF OM** - Industrial revolution Late 1700s - Scientific management Early 1900s - Human relations movement 1930s-60s - Management science 1940s-60s - Computer age 1960s - Environmental Issues 1970s - JIT & TQM\* 1980s - \*JIT= Just in Time, TQM= Total Quality Management - Reengineering 1990s - Global competition 1980s - Flexibility 1990s - Time-Based Competition 1990s - Supply chain Management 1990s - Electronic Commerce 2000s - Outsourcing & flattening of world 2000s For long-run success, companies must place much importance on their operations **TODAY'S OM ENVIRONMENT** - Customers demand better quality, greater speed, and lower costs - Companies implementing lean system concepts -- a total systems approach to efficient operations - Recognized need to better manage information using ERP and CRM systems - Increased cross-functional decision making **ETHICAL ISSUES IN OPERATIONS** **Ethical issues arise in many aspects of operations management:** - Financial statements - Worker safety - Product safety - Quality - The environment - The community - Hiring and firing workers - Closing facilities - Workers' rights **TOPIC 1\_Nature, Scope, Functions & Importance of Production & Operations Management in Business** **What is Operations Management?** Operations management is defined as the design, operation, and improvement of the systems that create and deliver the firms primary products and services. **What is Production Management?** **E.S. Buffa** defines production management as, "**Production Management** deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum cost. **The Objectives of Production Management is to produce goods or services of;** 1\. Right Quality 2\. Right Quantity 3\. Right Time 4\. Right Manufacturing Cost **Scope of Production and Operations Management** Production and Operations Management concern with the conversion of inputs into outputs, using physical resources, so as to provide the desired utilities to the customer while meeting the other organizational objectives of effectiveness, efficiency, and adoptability. It distinguishes itself from other functions such as personnel, marketing, finance etc. by its primary concern for conversion by using physical resources. **Following are the activities which are listed under production and operations management functions:** 1\. Location of facilities 2\. Plant layouts and material handling 3\. Product design 4\. Process design 5\. Production and planning control 6\. Quality control 7\. Material management 8\. Maintenance management **LOCATION OF FACILITIES** - long term commitment about the geographically static factors that affect a business organization. **PLANT LAYOUTS AND MATERIAL HANDLING** - Plant layouts - physical arrangement - Material handling - art and science of moving, packing, storing of products in any form **PRODUCT DESIGN** - conversion of ideas into reality. **PROCESS DESIGN** - overall process route for converting raw materials into finished goods. **PRODUCTION AND PLANNING CONTROL** - planning the production in advance - setting exact route of each time - fixing the starting and finishing dates of each item - to give production orders to shops - to follow up progress of products according to orders **QUALITY CONTROL** - system used to maintain desired level of quality in a product or service. **MATERIALS MANAGEMENT** - concerned with the acquisition, control and use of materials needed and flow of goods and services connected with the production process. **MAINTENANCE MANAGEMENT** - it is very important that the plant machinery should be properly maintained. ***Operations Management (OM) in the Workplace and Processes*** The Processes of Organization and Management  **TOPIC 2\_COMPETITIVENESS** **COMPETITIVENESS -** ability and performance of a firm to sell and supply goods and services in a given market, in relation to the ability and performance of other firms. **UNDERSTANDING CUSTOMER REQUIREMENT -** deep understanding of their customers and what drives their customers to make purchases. **COMPETITIVE ADVANTAGE -** is the leverage a business has over its competitors. **COMPETITIVE BENEFIT PACKAGE -** is a clearly defined set of tangibles (goods-content) and intangible (service-content) features that the customer recognizes, pays for, uses, or experiences. **COMPETITIVE PRIORITIES -** are defined as the dimensions that a firms' production system must possess to support the demands of the markets in which the firm wishes to compete. ***BUSINESSES COMPETE USING OPERATIONS***, ***especially on the following:*** - **Product and Service Design** - the heart of your business. - **Cost** - firms whose customers prioritize price will be very interested in having processes that enable them to keep their costs low. - **Location** - strategic location for the market. - **Quality** - firms whose customers prioritize quality focus on creating both excellent product and process design. - **Quick Response** - quickly bringing new products or services to market; quickly delivering existing product to customers; quickly handling customer complaints. - **Flexibility** - ability to respond to changes. - **Inventory Management** - effectively matching supplies with demand. - **Supply Chain Management** - flow of goods from raw to final product. - **Service** - after-sale activities such as warranty work and technical support. - **Managers and Workers** - Motivated and Competent. **OPERATION STRATEGY -** is typically driven by the overall business strategy of the organization, and is designed to maximize the effectiveness of production and support elements while minimizing costs. **[ELEMENTS OF OPERATIONS STRATEGY]** - ***POSITIONING THE PRODUCTION SYSTEM*** - Select the type of product design - Customized product design - Standard product design - Select the type of production processing system - Product focused - Process focused - Select the type of inventory plan for finished goods - Produce to stock - Produce to order - ***PRODUCT/SERVICE PLANS*** - As a product is designed, all the detailed characteristics of the product are established. - Each product characteristic directly affects how the product can be made. - How the product is made determines the design of the production system. ***Introduction*** - Sales begin, production and marketing are developing, profits are negative. ***Growth*** - Sales grow dramatically, marketing efforts intensify, capacity is expanded, profits begin. ***Maturity*** - Production focuses on high-volume, efficiency, low costs; marketing focuses on competitive sales promotion; profits are at peak. ***Decline*** - Declining sales and profit; product might be dropped or replaced. - ***OUTSOURCING PLANS*** - Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff. - A company might outsource any of the manufacturing related functions. - Some even outsource some service functions. - ***PROCESS AND TECNHNOLOGY PLANS*** - How products/services will be produced - The range of technologies available to produce products/services - ***STRATEGIC ALLOCATION OF RESOURCES*** - The resources must be allocated to products, services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives. - ***FACILITY PLANS*** - Capacity - Location - Layout ***[DEVELOPING OPERATIONS STRATEGY]*** \- provides the ability to improve products, services, and processes to develop the strategy, consider the business or corporate strategy and a market/needs analysis, then consider the competing priorities of cost, quality, time, and flexibility and how you'll handle them ***[CORPORATE MISSION]*** A corporate mission is a set of long-range goals and including statements about: - the kind of business the company wants to be in - who its customers are - its basic beliefs about business - its goals of survival, growth, and profitability ***[BUSINESS STRATEGY]*** A business strategy can be defined as the combination of all decisions taken and actions performed by the business to accomplish business goals and to secure a competitive position in the market. ***Inputs to the business strategy are:*** - Assessment of global business conditions - social, economic, political, technological, competitive - Distinctive competencies or weaknesses - workers, sales force, R&D, technology, management ***[STRATEGY FORMULATION -]*** the process by which organization chooses the most appropriate courses of action to achieve its defined goals***.*** ***[SWOT ANALYSIS]*** - STRENGTHS - THINGS YOUR COMPANY DOES WELL - QUALITIES THAT SEPARATE YOU FROM YOUR COMPETITORS - INTERNAL RESOURCES - TANGIBLE ASSETS - WEAKNESSES - THINGS YOUR COMPANY LACKS - THINGS YOUR COMPETITORS DO BETTER THAN YOU - RESOURCE LIMITATIONS - UNCLEAR UNIQUE SELLING PROPOSOTION - OPPORTUNITIES - FEW COMPETITORS IN YOUR AREA - EMERGING NEED FOR YOUR PRODUCTS AND SERVICES - PRESS/MEDIA COVERAGE OF YOUR COMPANY - THREATS - EMERGING COMPETITORS - CHCANGING REGULATORY ENVIRONMENT - NEGATIVE PRESS/MEDIA COVERAGE - CHANGING CUSTOMER ATTITUDES TOWARDS YOUR COMPANY [***CORE COMPETENCIES -***] the special attributes or abilities that give an organization a competitive edge. ***COMPETITIVE EDGES AND PRIORITIES*** - LOW PRODUCTION COSTS - unit cost (labor, material, and overhead) of each product/service. 1. Redesign of product/service 2. New technology 3. Increase in production rates 4. Reduction of scrap/waste 5. Reduction of Inventory - DELIVERY PERFORMANCE - Fast delivery - Larger finished-goods inventory - Faster production rates - Quicker shipping methods - On-time delivery - More-realistic promises - Better control of production of orders - Better information systems - HIGH-QUALITY PRODUCTS/SERVICES - Customer's perception of degree of excellence exhibited by products/services. 1. Improve products/services 2. Appearance 3. Performance and function 4. Wear, endurance ability 5. After-sale service - CUSTOMER SERVICE AND FLEXIBILITY - Ability to quickly change production to other products/services. Customer responsiveness. ***[FORMING OPERATIONS STRATEGY]*** How to and come up with operations strategy? - Support the product plans and competitive priorities defined in the business strategy. - Adjust to the evolving positioning strategies. - Link to the marketing strategies. - Look at alternative operations strategies. ***[EVOLUTION OF POSITIONING STRATEGY]*** Positioning Strategy What key words come to your mind when you think about companies such as Apple, Walmart and Disney? \*Innovative products, \*Competitive pricing, and \*Excellent service - An important step in developing key operational strategies depends upon how a company positions itself in the marketplace. - Every company can\'t satisfy every customer and also be competitive in areas like quality, cost, flexibility, speed, innovation and service. - A positioning strategy is when a company chooses one or two important key areas to concentrate on and excels in those areas. - It focuses on how it will compete in the market. - It considers the strengths and weaknesses of the organization, the needs of the customers and market and the position of competitors. - It allows a company to spotlight specific areas where they can outshine and beat their competition. **NO SINGLE BEST STRATEGY** Start-up and Small Manufacturers usually prefer positioning strategies with: - Custom products - Process-focused production - Produce-to-order policies These systems are more flexible and require less capital. **[COMPETITIVE ADVANTAGE]** - Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. - These factors allow the productive entity to generate more sales or superior margins compared to its market rivals. ***In what ways are companies considered advantageous to their rivalries?*** 1\. People 2\. Organizational Culture and Structure 3\. Processes and Practices 4\. Products and Intellectual Property 5\. Capital and Natural Resources 6\. Advanced Technology \-\-\-\--End of Prelim Notes\-\-\-\--