Lecture 6 Operations and Logistics PDF

Introduction to Management Session 6: Introduction to Operations & Logistics Dr. Robert Langan Agenda 1 Introduction 2 Fundamentals of Operations – What are Operations? – The Operations Process – Operations Management Activities & Strate...

Introduction to Management Session 6: Introduction to Operations & Logistics Dr. Robert Langan Agenda 1 Introduction 2 Fundamentals of Operations – What are Operations? – The Operations Process – Operations Management Activities & Strategies 3 Fundamentals of Logistics Introduction to Management, Session 8 Slide 2 Objectives of the Lecture After this lecture you should be able to… …define what is operations and its process …define what is logistics …understand the parties involved in operations …understand the parties involved in logistics …understand the activities of operations …understand how to compete through operations …understand how to compete through logistics …understand what is a supply chain …understand the up(-down)stream relationships of a supply chain …understand what sales and operations planning is about and what are the key factors to consider Introduction to Management, Session 8 Slide 3 1 What is operations and it's process 2 Whatis logistics 3 Parties involved inoperations 4 Parties involved in logistics 5 Activities of Operations 6 Competethrough operations 7 Comete through operations 8 What is supply chain 9 Streamrelationship 10 Sales and operation planning Agenda 1 Introduction 2 Fundamentals of Operations – What are Operations? – The Operations Process – Operations Management Activities & Strategies 3 Fundamentals of Logistics Introduction to Management, Session 8 Slide 4 What are Operations? Introduction to Management, Session 8 Slide 5 What are Operations? Introduction to Management, Session 8 Slide 6 Defining Operations “The operations function comprises all the activities necessary for the day-to-day fulfilment of customer requests. This includes sourcing products and services from suppliers and transporting products and services to customers.” – Slack et al. (2010) Introduction to Management, Session 8 Slide 7 Source: Slack et al. (2010) Why are Operations critical for an Organization? The operations function is central to the organization because it produces the goods and services which are the reason for its existence. Any business that produces something, whether tangible or not, must use resources to do so, and so must have an operations activity. As a field of study, operations brings together many disciplines and provides an integrated view of business organizations. Introduction to Management, Session 8 Slide 8 Source: Slack et al. (2010); Russel & Taylor (2011) Operations from the Organizational Perspective Environment Organization Design Design Specifications Orders Finished Finished Supplier Make goods Deliver goods Customer Parts Sales forecast Sales Introduction to Management, Session 8 Slide 9 Source: Greasly (2006) Who is responsible for Operations? Chief OperationsOffice nextCEO Operations managers are the people who have particular responsibility for managing some, or all, of the resources which compose the operations function. Characteristics of operations managers: They deal with people, technology, and deadlines. These managers need good technical, conceptual, and behavioral skills. Their activities are closely intertwined with other functional areas of a firm. Working effectively with the other parts of the organization is one of the most important responsibilities of operations management. Introduction to Management, Session 8 Slide 10 Source: Slack et al. (2010); Russel & Taylor (2011) Logitech’s COO Introduction to Management, Session 8 Slide 11 Source: Logitech (2023) The Operations Process: Definition & Design Introduction to Management, Session 8 Slide 12 The Operations Process Operations are processes that take in a set of input resources which are used to transform something, or are transformed themselves, into outputs of products and services. And although all operations conform to this general input – transformation – output model, they differ in the nature of their specific inputs and outputs. The transformation process model Transformed Resources Materials Information Customers THE TRANSFORMATION Output Products Customers Input Resources PROCESS Services Transforming Resources Facilities Staff Introduction to Management, Session 8 Slide 13 Source: Slack et al. (2010) Operations Process – Sugar Production Introduction to Management, Session 8 Slide 14 Source: Suiker Unie (2015) Forms of Operations Processes The transformation process can be… Physical, – e.g. manufacturing operations Locational, – e.g. transportation operations Exchange, – e.g. retail operations Physiological, – e.g. healthcare Psychological, – e.g. entertainment Informational, universities – e.g. communication Introduction to Management, Session 8 © A. Darouichi Source: Russel & Taylor (2011) Slide 15 Operations Typology based on the 4Vs High repeatability Low repetition Specialization Each staff member Systemization High Volume Low performs more of job Capital intensive Less systemization Low unit costs High unit cost Well defined Flexible Routine Complex High Variety Low Standardized Match customer needs Regular High unit cost Low unit costs Changing capacity Stable Anticipation Routine Flexibility Predictable High Variation in Demand Low In touch with demand High utilization High unit cost Low unit costs Short waiting tolerance Time lag between Satisfaction governed by production-consumption customer perception Standardized Customer contact skills High Visibility Low Low contact skills needed High staff utilization Received variety is high Centralization High unit cost Low unit costs Introduction to Management, Session 8 Slide 16 Source: Slack et al. (2010) Operations Processes Design Process design: the overall configuration of a process that determines the sequence of activities and the flow of transformed resources between them. Process layout: locating similar transforming resources together so that different products or services with different processing needs will take different routes through the operation. Process mapping: describing processes in terms of how the activities within the process relate to each other (may also be called ‘process blueprinting’ or ‘process analysis’). Process mapping symbols: the symbols that are used to classify different types of activity; they usually derive either from scientific management or information-systems flow-charting. Introduction to Management, Session 8 Slide 17 Source: Slack et al. (2010); Russel & Taylor (2011) FedEx’ Processes Maps Process Map of FedEx’ Supply Chain Service Critical Inventory Logistics Process Map Introduction to Management, Session 8 Slide 18 Source: FedEx (2015) Operations Processes Planning & Analysis Process planning determines how a product will be produced or a service provided. It converts designs into workable instructions for manufacture or delivery. Process analysis is the systematic examination of all aspects of a process to improve its operation: to make it faster, more efficient, less costly, or more responsive to the customer. The basic tools of process analysis are process flowcharts, diagrams, and maps. The classic process flowchart looks at the manufacture of a product or delivery of a service from a broad perspective. The chart uses five standard symbols, to describe a process: for operations, for inspections, ⇒ for transportation, D for delay, and for storage Introduction to Management, Session 8 Slide 19 Source: Russel & Taylor (2011) Exemplary Process Flow Chart of an Apple Introduction to Management, Session 8 Slide 20 Source: Russel & Taylor (2011) Sales & Order Process Flow Chart organizatio Introduction to Management, Session 8 Slide 21 Operations Management: Activities & Strategies Introduction to Management, Session 8 Slide 22 Operations Management Activities Some general classes of activities that apply to all types of operations functions whether the organization produces goods or services. Activity 1 Understanding the operation’s strategic performance objectives Activity 2 Developing an operations strategy for the organization Activity 3 Designing the operations’ products, services and processes Activity 4 Planning and controlling the operations Activity 5 Improving the performance of the operations Activity 6 The social responsibilities of operations management Introduction to Management, Session 8 Slide 23 Source: Slack et al. (2010) Competitive Advantages from effective Operations managers thinkaboutthisstuff Top management’s objectives provide a strategic framework, but running operations at an operational day-to-day level requires a more tightly defined set of objectives. These are called the five ‘performance objectives’. Cost Speed Quality Flexibility Dependability Do things cheaply Do things fast Do things right Be able to change Do things on time what you do Produce goods and Minimize the time Satisfy your Be able to change Keep the delivery services at a cost between a customers by far enough and fast promises you have which customer asking for providing error-free enough to meet made enables them to be goods or services goods and services customer priced appropriately and the customer which are requirements for the market while receiving them in ‘fit for their purpose’ still allowing for a full, thus increasing return to the availability the organization of your goods and services Introduction to Management, Session 8 Slide 24 Source: Slack et al. (2010) Competing on Quality & Costs – Lean Production A lean production system provides low costs through disciplined operations aspiring to high quality levels and operations excellence. Introduction to Management, Session 8 Slide 25 Source: Slack et al. (2010); Russel & Taylor (2011) Competing on Speed Customer to customer lead time is, the time it takes from the moment a customer places an order to the moment that customer receives the specified order. Lead times can vary from zero (e.g. immediately available products on a supermarket shelf) to months or years (e.g. construction of a new building). Competing on time is about survival of the fastest! Introduction to Management, Session 8 Slide 26 Source: Slack et al. (2010); Russel & Taylor (2011); Harrison & Van Hoek (2008) Agenda 1 Introduction 2 Fundamentals of Operations 3 Fundamentals of Logistics – What is Logistics? – Competing through Logistics – Operations & Logistics Planning Introduction to Management, Session 8 Slide 27 What is Logistics? Introduction to Management, Session 8 Slide 28 What is Logistics? thewayyouwould organize supply Logistics is the task of managing two key flows: A material flow of the physical goods from suppliers through the distribution centers to stores. An informational flow of demand data from the end-customer back to purchasing and to suppliers, and supply data from suppliers to the retailer, so that material flow can be accurately planned and controlled. The logistics task of managing material flow and information flow is a key part of the overall task of supply chain management. allthe stops it makesfromstartto finish Logistics has both strategic (long-term planning) and managerial (short- and medium-term planning and control) aspects. Introduction to Management, Session 8 Slide 29 Source: Harrison & Van Hoek (2008) Logistics & the Supply Chain A supply chain is a network of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by end-customers, and who manage returns at each stage. Supply chain management encompasses the planning and control of all business processes – from end-customer to raw material suppliers – that link together partners in a supply chain in order to serve the needs of the end-customer. Logistics is a vital enabler for supply chain management. It corresponds to the task of coordinating material flow and information flow across the supply chain. Introduction to Management, Session 8 Slide 30 Source: Harrison & Van Hoek (2008) The Supply Network Supply chain management appears as the ‘end-to-end’ management of the network as a whole, and of the relationships between the various links. Upstream Downstream Second tier First tier First tier Second tier suppliers suppliers customers customers KellogssellstoMigros Migros Ramin company Focal Firm BUY SIDE INSIDE SELL SIDE SUPPLY CHAIN MANAGEMENT Introduction to Management, Session 8 Slide 31 Source: Harrison & Van Hoek (2008); Slack et al. (1997) Logistics Upstream & Downstream Relationships Purchasing and supply deals with a focal firm’s immediate suppliers (upstream). Physical distribution deals with the task of distributing products to tier 1 customers (downstream). suppliers Inbound logistics deals with links between the focal firm and its upstream (‘buy side’) suppliers. customers Outbound logistics refers to the links between the focal firm and its downstream (‘sell side’) customers. Introduction to Management, Session 8 Slide 32 Source: Harrison & Van Hoek (2008) Tesco’s End-to-End Network From Cow to Customer – A Typical Tesco Supply Chain IFtheTittle Distributioncenters Introduction to Management, Session 8 Slide 33 Source: Harrison & Van Hoek (2008) Competing Through Logistics Introduction to Management, Session 8 Slide 34 Logistics Strategy reason IKEA ischeap becausethey are great in logistics Logistics strategy is the set of guiding principles, driving forces and ingrained attitudes that help to communicate goals, plans and policies, and which are reinforced through conscious and subconscious behavior within and between partners across a network. Logistics strategy usually demands systemic strategy setting between network partners. Introduction to Management, Session 8 Slide 35 Source: Harrison & Van Hoek (2008) 5 Principles of Logistics Strategic Positioning A unique value proposition – Determine what makes the product/service different from competition. A tailored supply chain – Design a supply chain governed by consistent order winning and qualifying criteria. Identified trade-offs – Choose not just the priorities but also what not to do. A responsive supply chain may not be compatible with an efficient supply chain. Aligned logistics processes – Design processes in a way so that they are mutually reinforcing. Continuity in improvement – Continually and consistently improve logistics processes over time. Introduction to Management, Session 8 Slide 36 Source: Slack et al. (2010); Harrison & Van Hoek (2008); Fisher (1997) How does Logistics respond to Demand? Purchase Demande The P:D ratio is a ratio that contrasts the total length of time customers have to wait between asking for a product or service and receiving it (D) and the total throughput time to produce the product or service (P). Main types of planning and control strategies Resource-to-order – Operations that buy-in resources and produce only when they are demanded by specific customers. Make-to-order – Operations that produce products only when they are demanded by specific customers. Make-to-stock – Operations that produce products prior to being demanded by specific customers. Introduction to Management, Session 8 Slide 37 Source: Slack et al. (2010) How to reduce P-time when greater than D-time? There are a number of ways to reduce P-time… Control – By optimizing throughput and improving process capability. Simplify – By untangling process flows and reducing product complexity. Compress – By straightening process flows and reducing batch sizes. Integrate – By improving communications and implementing teams. Coordinate engraving – By adding customer-specific parts as late as possible.adding Automate – With robots and IT systems. Introduction to Management, Session 8 Slide 38 Source: Harrison & Van Hoek (2008) References Chopra, S. & Meindl, P. 2013. Supply Chain Management: Strategy, Planning and Operation. New Jersey: Pearson Education. Greasley, A. 2008. Operations Management. London: Sage Publications. Harrison, A. & Van Hoek, R. 2008. Logistics Management and Strategy: Competing Through the Supply Chain. 3rd Edition. Harlow: Pearson Education Limited. Krajewski, L. J., Ritzman, L. P., & Malhorta, M. K. 2013. Operations Management: Processes and Supply Chain. 10th Edition. New Jersey: Pearson Education. Slack, N., Chambers, S., & Johnston, R. 2010. Operations Management. 6th Edition. Harlow: Pearson Education Limited. Russel, R. & Taylor, B. W. 2011. Operations Management: Creating Value Along the Supply Chain. 7th Edition. New Jersey: John Wiley & Sons. Introduction to Management, Session 8 Slide 39