Chapter 1 Introduction to Operations Management and Supply Chain Management PDF

Because learning changes everything.® Chapter 1 Introduction to Operations Management and Supply Chain Management © McGraw Hill LLC. All rights reserved. No reprod...

Because learning changes everything.® Chapter 1 Introduction to Operations Management and Supply Chain Management © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 1 of 381 : 4  Operations Management LO 1.1 What is operations? The part of a business organization that is responsible for producing goods or services. How can we define operations management? The management of systems or processes that create goods and/or provide services. © McGraw Hill 3 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 3 of 381 : 4  Good or Service? LO 1.1 Goods are physical items that include raw materials, parts, subassemblies, and final products: Automobile. Computer. Oven. Shampoo. Services are activities that provide some combination of time, location, form or psychological value: Air travel. Education. Haircut. Legal counsel. © McGraw Hill 4 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 4 of 381 : 4  Supply Chain LO 1.1 Supply chain – a sequence of activities and organizations involved in producing and delivering a good or service: Suppliers’ suppliers. Direct suppliers. Producer. Distributor. Final customers. © McGraw Hill 5 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 5 of 381 : 4  The Transformation Process LO 1.1 Feedback = Measurements taken at various points in the transformation process. Control = The comparison of feedback against previously established standards to determine if corrective action is needed. Access the text alternative for slide images. © McGraw Hill 6 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 6 of 381 : 4  Goods-service Continuum LO 1.2 Products are typically neither purely service- or purely goods- based. Access the text alternative for slide images. © McGraw Hill 8 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 7 of 381 : 4  Table 1.2: Illustrations of the LO 1.2 Transformation Process Inputs Processing Output Food Processor Raw vegetables Cleaning Canned vegetables Metal sheets. Making cans. Water. Cutting. Energy. Cooking. Labor. Packing. Building. Labeling. Equipment. Hospital. Doctors, nurses Examination Treated patients Hospital. Surgery. Medical supplies. Monitoring. Equipment. Medication. Laboratories. Therapy. © McGraw Hill 10 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 8 of 381 : 4  Manufacturing v s Service ersu LO 1.2 1. Degree of customer contact. 2. Labor content of jobs. 3. Uniformity of input. 4. Uniformity of output. 5. Measurement of productivity. 6. Production and delivery. 7. Quality assurance. 8. Amount of inventory. 9. Evaluation of work. 10. Ability to patent design. © McGraw Hill 11 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 9 of 381 : 4  Table 1.3: Typical Differences Between Production of Goods and Provision of LO 1.2 Services Characteristic Goods Services Output Tangible Intangible Customer contact Low High Labor content Low High Uniformity of input High Low Measurement of productivity Easy Difficult Opportunity to correct problems before delivery High Low Inventory Much Little Wages Narrow range Wide range Patentable Usually Not usually © McGraw Hill 12 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 10 of 381 : 4  Why Learn about Operations LO 1.3 Management? Every aspect of business affects or is affected by operations. Many service jobs are closely related to operations. Financial services. Marketing services. Accounting services. Information services. Through learning about operations and supply chains you will have a better understanding of: The world you live in. The global dependencies of companies and nations. Reasons that companies succeed or fail. The importance of working with others. © McGraw Hill 13 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 11 of 381 : 4  Basic Functions of the Business LO 1.4 Organization Organization: Marketing. Operations. Finance. © McGraw Hill 14 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 12 of 381 : 4  Function Overlap LO 1.4 Finance & operations: Budgeting. Economic analysis of investment proposals. Provision of funds. Marketing & operations: Demand data. Product and service design. Competitor analysis. Lead time data. © McGraw Hill 15 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 13 of 381 : 4  OM and Supply Chain Career LO 1.4 Opportunities Operations manager. Supply chain manager. Production analyst. Schedule coordinator. Production manager. Industrial engineer. Purchasing manager. Inventory manager. Quality manager. © McGraw Hill 16 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 14 of 381 : 4  OM-Related Professional Societies LO 1.4 APICS - Association for Operations Management. American Society for Quality (ASQ). Institute for Supply Management (ISM). Institute for Operations Research and the Management Science (INFORMS). The Production and Operations Management Society (PO MS). The Project Management Institute (PMI). Council of Supply Chain Management Professionals (CSC MP). © McGraw Hill 17 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 15 of 381 : 4  Process Management LO 1.5 Process - one or more actions that transform inputs into outputs. Three Categories of Business Processes: Upper-management processes These govern the operation of the entire organization. Operational processes These are core processes that make up the value stream. Supporting processes These support the core processes. © McGraw Hill 18 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 16 of 381 : 4  Supply & Demand LO 1.5 Operations & Sales & Marketing Supply Chains Supply > Demand Wasteful Costly Supply < Demand Opportunity Loss Customer Dissatisfaction Supply = Demand Ideal © McGraw Hill 19 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 17 of 381 : 4  Process Variation LO 1.5 Four Sources of Variation: Variety of goods or services The greater the variety of goods and services being offered offered, the greater the variation in production or service requirements. Structural variation in demand These are generally predictable. They are important for capacity planning. Random variation Natural variation that is present in all processes. Generally, it cannot be influenced by managers. Assignable variation Variation that has identifiable sources. This type of variation can be reduced, or eliminated, by analysis and corrective action. Variations can be disruptive to operations and supply chain processes. They may result in additional costs, delays and shortages, poor quality, and inefficient work systems. © McGraw Hill 20 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 18 of 381 : 4  The Scope of Operations LO 1.6 Management The scope of operations management ranges across the organization. The operations function includes many interrelated activities such as: Forecasting. Capacity planning. Locating facilities. Facilities and layout. Scheduling. Managing inventories. Assuring quality. Motivating employees. And more... © McGraw Hill 21 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 19 of 381 : 4  Role of the Operations LO 1.6 Manager The Operations function consists of all activities directly related to producing goods or providing services. A primary function of the operations manager is to guide the system by decision making: System design decisions. System operation decisions. © McGraw Hill 22 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 20 of 381 : 4  System Design Decisions LO 1.6 System design: Capacity. Facility location. Facility layout. Product and service planning. Acquisition and placement of equipment. These are typically strategic decisions that: Usually require long-term commitment of resources. Determine parameters of system operation. © McGraw Hill 23 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 21 of 381 : 4  System Operation Decisions LO 1.6 System operation: These are generally tactical and operational decisions. Management of personnel. Inventory management and control. Scheduling. Project management. Quality assurance. Operations managers spend more time on system operation decision than any other decision area: They still have a vital stake in system design. © McGraw Hill 24 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 22 of 381 : 4  Operations Management and LO 1.7 Decision Making Most operations decisions involve many alternatives that can have quite different impacts on costs or profits. Typical operations decisions include: What: What resources are needed, and in what amounts? When: When will each resource be needed? When should the work be scheduled? When should materials and other supplies be ordered? Where: Where will the work be done? How: How will the product or service be designed? How will the work be done? How will resources be allocated? Who: Who will do the work? © McGraw Hill 25 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 23 of 381 : 4  General Approach to Decision LO 1.7 Making Modeling is a key tool used by all decision makers: Model - an abstraction of reality; a simplification of something. Common features of models: They are simplifications of real-life phenomena. They omit unimportant details of the real-life systems they mimic so that attention can be focused on the most important aspects of the real-life system. Physical Model – miniature airplane. Schematic Model – drawing of a city. Mathematical Model – inventory optimization. © McGraw Hill 26 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 24 of 381 : 4  Understanding Models LO 1.7 Keys to successfully using a model in decision making: What is its purpose? How is it used to generate results? How are the results interpreted and used? What are the model’s assumptions and limitations? © McGraw Hill 27 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 25 of 381 : 4  Benefits of Models LO 1.7 1. Generally easier to use and less expensive than dealing with the real system. 2. Require users to organize and sometimes quantify information. 3. Increase understanding of the problem. 4. Enable managers to analyze what-if questions. 5. Serve as a consistent tool for evaluation and provide a standardized format for analyzing a problem. 6. Enable users to bring the power of mathematics to bear on a problem. © McGraw Hill 28 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 26 of 381 : 4  Model Limitations LO 1.7 Quantitative information may be emphasized at the expense of qualitative information. Models may be incorrectly applied and the results misinterpreted. This is a real risk with the widespread availability of sophisticated, computerized models placed in the hands of uninformed users. The use of models does not guarantee good decisions. © McGraw Hill 29 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 27 of 381 : 4  Quantitative Approaches LO 1.7 A decision-making approach that frequently seeks to obtain a mathematically optimal solution: Supported by computer calculations. Often work together with qualitative approaches. © McGraw Hill 30 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 28 of 381 : 4  Metrics and Trade-Offs LO 1.7 Performance metrics: Analysis of trade-offs: All managers use metrics to A trade-off is giving up one manage and control thing in return for operations. something else. Profits. Carrying more inventory Costs. (an expense) in order to Quality. achieve a greater level of customer service. Productivity. Flexibility. Inventories. Schedules. Forecast accuracy. © McGraw Hill 31 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 29 of 381 : 4  Systems Perspective LO 1.7 System - a set of interrelated parts that must work together: The business organization is a system composed of subsystems. Marketing subsystem. Operations subsystem. Finance subsystem. The systems perspective: Emphasizes interrelationships among subsystems. Main theme is that the whole is greater than the sum of its parts. The output and objectives of the organization take precedence over those of any one subsystem. © McGraw Hill 32 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 30 of 381 : 4  Establishing Priorities LO 1.7 In nearly all cases, certain issues or items are more important than others. Recognizing this allows managers to focus their attention to those efforts that will do the most good. Pareto Phenomenon - a few factors account for a high percentage of occurrence of some event(s). The critical few factors should receive the highest priority. This is a concept that is appropriately applied to all areas and levels of management. © McGraw Hill 33 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 31 of 381 : 4  Operations Today LO 1.9 Technology Management. Global competition. Working with fewer resources. Revenue management. Agility. © McGraw Hill 34 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 32 of 381 : 4  Key Issues for Operations Managers LO 1.10 Today Economic conditions. Innovating. Quality problems. Risk management. Cyber-security. Competing in a global economy. © McGraw Hill 35 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 33 of 381 : 4  Environmental Concerns LO 1.10 Sustainability: Using resources in ways that do not harm ecological systems that support human existence. Sustainability measures often go beyond traditional environmental and economic measures to include measures that incorporate social criteria in decision making. All areas of business will be affected. Product and service design. Consumer education programs. Disaster preparation and response. Supply chain waste management. Outsourcing decisions. © McGraw Hill 36 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 34 of 381 : 4  Ethical Issues in Operations LO 1.10 Ethical issues that may 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. © McGraw Hill 37 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 35 of 381 : 4  The Need for Supply Chain LO 1.11 Management In the past, organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problems. Oscillating inventory levels. Inventory stockouts. Late deliveries. Quality problems. © McGraw Hill 38 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 36 of 381 : 4  Supply Chain Issues LO 1.11 1. The need to improve operations. 2. Increasing levels of outsourcing. 3. Increasing transportation costs. 4. Competitive pressures. 5. Increasing globalization. 6. Increasing importance of e-business. 7. The complexity of supply chains. 8. The need to manage inventories. © McGraw Hill 39 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 37 of 381 : 4  Chapter 2 Competitiveness, Strategy, and Productivity © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. © McGraw Hill https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 38 of 381 : 4  A Cold Hard Fact Better quality, higher productivity, lower costs, and the ability to respond quickly to customer needs are more important than ever, and… the bar is getting higher © McGraw Hill 42 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 40 of 381 : 4  Chapter Focus This chapter focuses on three separate but related ideas that are vitally important to business organizations: 1. Competitiveness. 2. Strategy. 3. Productivity. © McGraw Hill 43 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 41 of 381 : 4  Competitiveness LO 2.1 Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. Organizations compete through some combination of their marketing and operations functions. What do customers want? How can these customer needs best be satisfied? © McGraw Hill 44 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 42 of 381 : 4  Marketing’s Influence LO 2.1 Identifying consumer wants and/or needs. Pricing and quality. Advertising and promotion. © McGraw Hill 45 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 43 of 381 : 4  Businesses Compete Using LO 2.1 Operations 1. Product and service design. 2. Cost. 3. Location. 4. Quality. 5. Quick response. 6. Flexibility. 7. Inventory management. 8. Supply chain management. 9. Service. 10. Managers and workers. © McGraw Hill 46 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 44 of 381 : 4  Why Some Organizations Fail LO 2.2 1. Neglecting operations strategy. 2. Failing to take advantage of strengths and opportunities and/or failing to recognize competitive threats. 3. Too much emphasis on short-term financial performance at the expense of R&D. 4. Too much emphasis on product and service design and not enough on process design and improvement. 5. Neglecting investments in capital and human resources. 6. Failing to establish good internal communications and cooperation. 7. Failing to consider customer wants and needs based on historical and other data. © McGraw Hill 47 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 45 of 381 : 4  Hierarchical Planning LO 2.3 Mission. Goals. Organizational strategies. Functional strategies. Tactics. Operations. Figure 2.1: Planning and decision making are hierarchical in organizations. Access the text alternative for slide images. © McGraw Hill 48 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 46 of 381 : 4  Mission LO 2.3 Mission: The reason for an organization’s existence. Mission statement: States the purpose of the organization. The mission statement should answer the question of “What business are we in?” © McGraw Hill 49 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 47 of 381 : 4  Mission Statement LO 2.3 Table 2.1: Selected portions of company mission statements. Microsoft To help people and businesses throughout the world to realize their full potential. Verizon To help people and businesses communicate with each other Starbucks To inspire and nurture the human spirit—one cup and one neighborhood at a time. US Dept. of Education To promote student achievement and preparation for global competitiveness and fostering educational excellence and ensuring equal access. © McGraw Hill 50 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 48 of 381 : 4  Goals LO 2.3 The mission statement serves as the basis for organizational goals. Goals: Provide detail and the scope of the mission. Goals can be viewed as organizational destinations. Goals serve as the basis for organizational strategies. © McGraw Hill 51 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 49 of 381 : 4  Strategies LO 2.3 Strategy: A plan for achieving organizational goals. Serves as a roadmap for reaching the organizational destinations. Organizations have: Organizational strategies. Overall strategies that relate to the entire organization. Support the achievement of organizational goals and mission. Functional level strategies. Strategies that relate to each of the functional areas and that support achievement of the organizational strategy. © McGraw Hill 52 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 50 of 381 : 4  Tactics and Operations LO 2.3 Tactics: The methods and actions taken to accomplish strategies. The “how to” part of the process. Operations: The actual “doing” part of the process. © McGraw Hill 53 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 51 of 381 : 4  Core Competencies LO 2.3 Core competencies: The special attributes or abilities that give an organization a competitive edge. To be effective, core competencies and strategies need to be aligned. © McGraw Hill 54 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 52 of 381 : 4  Sample Operations Strategies LO 2.4 Organizational Examples of Companies or Strategy Operations Strategy Services Low Price Low cost. U.S first-class postage. Wal-Mart. Responsiveness Short processing times. McDonald’s restaurants. On-time delivery. FedEx. Differentiation: High High-performance design and/or high- Sony TV. Quality quality processing. Coca-Cola. Consistent quality. Differentiation: Innovation. 3M, Apple. Newness Differentiation: Variety Flexibility. Burger King (Have it your way”). Volume. McDonald’s (“Buses Welcome”). Differentiation: Superior customer service. Disneyland. Service IBM. Differentiation: Convenience. Supermarkets; mall stores. Location © McGraw Hill 55 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 53 of 381 : 4  Strategy Formulation 1 LO 2.4 Effective strategy formulation requires taking into account: Core competencies. Environmental scanning. SWOT: Strengths, Weaknesses, Opportunities, and Threats. Successful strategy formulation also requires taking into account: Order qualifiers. Order winners. © McGraw Hill 56 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 54 of 381 : 4  Strategy Formulation 2 LO 2.4 Order qualifiers: Characteristics that customers perceive as minimum standards of acceptability for a product or service to be considered as a potential for purchase. Order winners: Characteristics of an organization’s goods or services that cause it to be perceived as better than the competition. © McGraw Hill 57 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 55 of 381 : 4  Environmental Scanning LO 2.4 Environmental scanning is necessary to identify: Internal factors. Strengths and weaknesses. External factors. Opportunities and threats. © McGraw Hill 58 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 56 of 381 : 4  Key External Factors LO 2.4 1. Economic conditions. 2. Political conditions. 3. Legal environment. 4. Technology. 5. Competition. 6. Customers. 7. Suppliers. 8. Markets. © McGraw Hill 59 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 57 of 381 : 4  Key Internal Factors LO 2.4 1. Human resources. 2. Facilities and equipment. 3. Financial resources. 4. Customers. 5. Products and services. 6. Technology. 7. Other. © McGraw Hill 60 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 58 of 381 : 4  Mission and Strategies LO 2.4 Supply Chain Strategy: How the organization should work with suppliers and policies relating to customer relationships and sustainability. Sustainability Strategy: Work with governmental regulations and interest groups to achieve sustainability goals. Global Strategy: Work with international suppliers/producers and also with countries where the products and services are sold. © McGraw Hill 61 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 59 of 381 : 4  Operations Strategy LO 2.4 Operations strategy: The approach, consistent with organization strategy, that is used to guide the operations function. © McGraw Hill 62 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 60 of 381 : 4  Strategic Operations Management LO 2.4 Decision Areas Decision Area What the Decisions Affect Product and service design Costs, quality, liability, and environmental issues Capacity Cost, structure, flexibility Process selection and layout Costs, flexibility, skill level needed, capacity Work design Quality of work life, employee safety, productivity Location Costs, visibility Quality Ability to meet or exceed customer expectations Inventory Costs, shortages Maintenance Costs, equipment reliability, productivity Scheduling Flexibility, efficiency Supply chains Costs, quality, agility, shortages, vendor relations Projects Costs, new products, services, or operating systems © McGraw Hill 63 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 61 of 381 : 4  Quality-Based Strategies LO 2.4 Quality-based strategy: Strategy that focuses on quality in all phases of an organization. Pursuit of such a strategy is rooted in a number of factors: Trying to overcome a poor quality reputation. Desire to maintain a quality image. A desire to catch up with the competition. A part of a cost reduction strategy. © McGraw Hill 64 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 62 of 381 : 4  Time-Based Strategies 1 LO 2.5 Time-based strategies: Strategies that focus on the reduction of time needed to accomplish tasks. It is believed that by reducing time, costs are lower, quality is higher, productivity is higher, time-to-market is faster, and customer service is improved. © McGraw Hill 65 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 63 of 381 : 4  Time-Based Strategies 2 LO 2.5 Areas where organizations have achieved time reductions: Planning time. Product/service design time. Processing time. Changeover time. Delivery time. Response time for complaints. © McGraw Hill 66 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 64 of 381 : 4  Agile Operations LO 2.5 Agile operations: A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of change. Involves the blending of several core competencies: Cost. Quality. Reliability. Flexibility. © McGraw Hill 67 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 65 of 381 : 4  Productivity LO 2.6 Productivity: A measure of the effective use of resources, usually expressed as the ratio of output to input. Productivity measures are useful for: Tracking an operating unit’s performance over time. Judging the performance of an entire industry or country. © McGraw Hill 68 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 66 of 381 : 4  Why Productivity Matters LO 2.6 High productivity is linked to higher standards of living. As an economy replaces manufacturing jobs with lower productivity service jobs, it is more difficult to maintain high standards of living. Higher productivity relative to the competition leads to competitive advantage in the marketplace. Pricing and profit effects. For an industry, high relative productivity makes it less likely it will be supplanted by foreign industry. © McGraw Hill 69 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 67 of 381 : 4  Productivity Measures LO 2.6 Output Productivity = Input Output Ouput Output Partial Measures ; ; Single Input Labor Capital Output Ouput Output Multifactor Measures ; ; Multiple Inputs Labor+Machine Labor+Capital+Energy Goods or services produced Total Measure All inputs used to produce them © McGraw Hill 70 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 68 of 381 : 4  Table 2.8: Some Examples of Partial LO 2.6 Productivity Measures Labor productivity Units of output per labor hour. Units of output per shift. Value-added per labor hour. Dollar value of output per labor hour. Machine productivity Units of output per machine hour. Dollar value of output per machine hour. Capital productivity Units of output per dollar input. Dollar value of output per dollar input. Energy productivity Units of output per kilowatt-hour. Dollar value of output per kilowatt-hour. © McGraw Hill 71 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 69 of 381 : 4  Computing Productivity Example LO 2.6 Determine the productivity for these cases: a. Four workers installed 720 square yards of carpeting in eight hours. b. A machine produced 70 pieces in two hours. However, two pieces were unusable. © McGraw Hill 72 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 70 of 381 : 4  Solution 1 LO 2.6 Yards of carpet installed 720 square yards a. Productivity = = Labor hours worked 4 workers × 8 hours / worker 720 yards = = 22.5 yards / hour 32 hours b. Productivity = Usable pieces = 70 − 2 = 68 usable pieces = 34 pieces / hour Production time 2 hours © McGraw Hill 73 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 71 of 381 : 4  Computing Multifactor Productivity LO 2.6 Example Determine the multifactor productivity for the combined input of labor and machine time for the following data: Output: 7,040 units Input Labor: $1,000 Materials: $520 Overhead $2,000 : © McGraw Hill 74 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 72 of 381 : 4  Solution 2 LO 2.6 Output Multifactor productivity = Labor + Material + Overhead 7040 units = = 2 units per dollar input $1000 + $520 + $2000 Therefore, the cost for producing 2 units is 1 dollar © McGraw Hill 75 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 73 of 381 : 4  Productivity Growth LO 2.6 Current productivity − Previous productivity Productivity growth = × 100% Previous productivity Example: Productivity increased from 80 to 84. What was the productivity growth rate? 84 − 80 Productivity growth = × 100% = 5% 80 © McGraw Hill 76 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 74 of 381 : 4  Service Sector Productivity LO 2.6 Service sector productivity is difficult to measure and manage because. It involves intellectual activities. It has a high degree of variability. A useful measure related to productivity is process yield. is a way to measure the effectiveness of a process by comparing what is successfully produced (or serviced) to what was initially available or put into the process. Where products are involved. Ratio of output of good product to the quantity of raw material input. Where services are involved, process yield measurement is often dependent on the particular process: Ratio of cars rented to cars available for a given day. Ratio of student acceptances to the total number of students approved for admission. © McGraw Hill 77 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 75 of 381 : 4  Factors Affecting LO 2.4 Productivity Methods Capital Quality Technology Management © McGraw Hill 78 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 76 of 381 : 4  Chapter 3 Forecasting © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. © McGraw Hill https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 77 of 381 : 4  Forecast LO 3.1 Forecast (predictive analytics) – a statement about the future value of a variable of interest. We make forecasts about such things as weather, demand, and resource availability. Forecasts are important to making informed decisions. © McGraw Hill 82 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 80 of 381 : 4  Two Important Aspects of Forecasts LO 3.1 Expected level of demand: The level of demand may be a function of some structural variation such as trend or seasonal variation. Accuracy: Related to the potential size of forecast error. © McGraw Hill 83 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 81 of 381 : 4  Forecasts in Business Organizations LO 3.1 Accounting. New product/process cost estimates, profit projections, cash management. Finance. Equipment/equipment replacement needs, timing and amount of funding/borrowing needs. Human resources. Hiring activities, including recruitment, interviewing, and training; layoff planning, including outplacement counseling. Marketing. Pricing and promotion, e-business strategies, global competition strategies. MIS. New/revised information systems, internet services. Operations. Schedules, capacity planning, work assignments and workloads, inventory planning, make-or-buy decisions, outsourcing, project management. Product/service design. Revision of current features, design of new products or services. © McGraw Hill 84 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 82 of 381 : 4  Forecast Uses LO 3.1 Plan the system: Generally involves long-range plans related to: Types of products and services to offer. Facility and equipment levels. Facility location. Plan the use of the system: Generally involves short- and medium-range plans related to: Inventory management. Workforce levels. Purchasing. Production. Budgeting. Scheduling. © McGraw Hill 85 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 83 of 381 : 4  Features Common to All Forecasts LO 3.1 1. Techniques assume some underlying causal system that existed in the past will persist into the future. 2. Forecasts are not perfect. 3. Forecasts for groups of items are more accurate than those for individual items. 4. Forecast accuracy decreases as the forecasting horizon increases. © McGraw Hill 86 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 84 of 381 : 4  Forecasts Are Not Perfect LO 3.2 Forecasts are not perfect: Actual results usually differ from predicted values and the presence of randomness precludes a perfect forecast. Allowances should be made for forecast errors. © McGraw Hill 87 https://learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5dfa31191e599/13 Amz-Signature=79e145d1865570513e9f58597db5fa3c6ed424e778eb6fc96af8d2eb8a0e0b80 24/09/2024, 3 31 PM Page 85 of 381 : 4  Elements of a Good Forecast LO 3.3 The fo