Operations Management PDF

UNIT-1-INTRO-TO-OPERATIONS-MANAGEMENT Operations Management (TQM) Importance of Operations Strategy (Section 1) Operations strategy is crucial for creating effective corporate, business, and functional level strategies within an organization. The value chain plays a key role in form...

UNIT-1-INTRO-TO-OPERATIONS-MANAGEMENT Operations Management (TQM) Importance of Operations Strategy (Section 1) Operations strategy is crucial for creating effective corporate, business, and functional level strategies within an organization. The value chain plays a key role in formulating operations strategy. Operational competencies can contribute significantly to an organization's competitive advantage. Role of the Operations Manager (Sections 3-4) Operations managers are responsible for managing activities involved in the production of goods and services. Their direct responsibilities include managing the operations process, encompassing design, planning, control, performance improvement, and operations strategy. Operations managers also have indirect responsibilities, such as interacting with managers in other functional areas (e.g., marketing, finance, HR) whose roles impact operations. Key decision-making areas for operations managers include: Processes for producing goods and services Quality of goods and services Capacity and quantity of goods/services Inventory management Human resource management The Systems View of Operations Management (Sections 5-10) Transformation Model Operations management is the process of transforming inputs into outputs. Inputs are classified as: Transformed resources: Those that are transformed in some way to produce outputs. Transforming resources: Those used to perform the transformation process.  Transformed resources include materials, information, and customers. Materials: Physical inputs to the process (e.g., limestone and sand for glass). Information: Data being processed or used in the process (e.g., consultancy firms, accountants). Customers: People who are transformed in some way (e.g., hairdressing, hospitals). Transforming resources include staff (people involved in/supporting the transformation) and facilities (land, buildings, machines, equipment). Transformation Processes Transformation processes can include: Changes in physical characteristics of materials or customers Changes in location of materials, information, or customers Changes in ownership of materials or information Storage or accommodation of materials, information, or customers Changes in purpose or form of information Changes in physiological or psychological state of customers Transformation processes can be categorised into: Manufacture: Physical creation of products (e.g., cars) Transport: Movement of materials or customers (e.g., taxi service) Supply: Change in ownership of goods (e.g., retailing) Service: Treatment of customers or storage of materials (e.g., hospital wards, warehouses) Feedback Feedback information is used to control the operations system by adjusting inputs and transformation processes to achieve desired outputs. For example, a chef may change inputs (e.g., buy better potatoes) or transformation processes (e.g., change recipe, cooking method) based on customer feedback. Quiz - Unit 1: Introduction to Operations Management 1. False - If any step of the process is disrupted, the whole process can stall or fall apart. 2. True - The majority of most organizations' financial and human resources are invested in the activities involved in making products or delivering services. 3. True - Operations managers are responsible for managing activities that are part of the production of goods and services. 4. True - Operations managers' direct responsibilities include managing the operations process, embracing design, planning, control, performance improvement, and operations strategy. 5. True - Coordinating and supervising the work of employees is an important responsibility of operations managers. 6. False - The transformation process can include more than three micro operations. 7. C. Supply - It is the change in ownership of goods (for example in retailing). 8. D. Service - It is the treatment of customers or the storage of materials (for example hospital wards, warehouses). 9. Staff and Facility - The two types of transforming resources. Table: Key Concepts in Operations Management Concept Description Operations Strategy Crucial for creating effective corporate, business, and functional level strategies Value Chain Plays a key role in formulating operations strategy Operational Can contribute to an organization's competitive Competencies advantage Operations Manager Direct: Managing operations process; Indirect: Responsibilities Interacting with other functional areas Transformation Model Inputs (transformed and transforming resources) are transformed into outputs Transformation Can include changes in physical characteristics, Processes location, ownership, storage, information, and customer state Feedback Used to control the operations system by adjusting inputs and processes Reviewer Note for Quality Management Lesson (UNIT 2) Key Concepts: 1. Total Quality Management (TQM): A company-wide approach focused on continuous improvement in quality. Involves all employees in the quality effort to enhance customer satisfaction. 2. Role of Operations Manager: Critical in implementing and maintaining TQM. Responsibilities include setting quality standards, optimizing processes, and fostering continuous improvement. 3. Defining Quality: Quality is the totality of features and characteristics of a product or service that satisfy stated and implied needs. Key components include performance, reliability, durability, and support. 4. Dimensions of Quality: Performance: How well a product functions. Features: Additional characteristics that enhance appeal. Reliability: Consistency in performance over time. Conformance: Adherence to specifications. Durability: Lifespan and resistance to wear. Serviceability: Ease of maintenance and repair. Aesthetics: Visual and sensory appeal. Perceived Quality: Customer perception influenced by branding. Value: Balance between quality and price. 5. Cost of Quality: Prevention Costs: Investments to prevent defects. Appraisal Costs: Costs of evaluating products for quality. Internal Failure Costs: Costs from defects found before delivery. External Failure Costs: Costs from defects found after delivery.  6. High-Performance Design: Focuses on exceeding customer expectations through exceptional functionality and support. Enhances customer satisfaction and brand loyalty. 7. Quality System Approach: Customer-centric design and production alignment. Continuous improvement and holistic integration of quality management. 8. Impact on Profitability: Improved quality leads to increased productivity, lower rework and warranty costs, and ultimately higher profits. Sales gains through improved response, flexible pricing, and enhanced reputation. Study Tips: Understand the relationship between quality management and customer satisfaction. Familiarize yourself with the dimensions of quality and how they apply to different products and services. Review the cost of quality categories and their implications for business operations. Consider real-world examples of companies that successfully implement TQM principles. Conclusion: Quality management is essential for operational success and customer loyalty. By focusing on continuous improvement and aligning processes with customer needs, organizations can enhance their competitiveness and profitability. Reviewer Note for Quality Management Lesson (UNIT 3) Customer Satisfaction is the result of delivering a product or a service that meets customer requirements. Customer Engagement is the customers' investment in or commitment to a brand and product offerings CHARACTERISTICS OF CUSTOMER ENGAGEMENT: 1. customer retention and loyalty 2. customers’ willingness to make an effort to do business with the organisation 3. customers’ willingness to actively advocate for and recommend the brand and product offerings DIFFERENTIATE CUSTOMER SATISFACTION AND CUSTOMER ENGAGEMENT THE AMERICAN CUSTOMER SATISFACTION INDEX (ACSI) — An economic indicator that measures customer satisfaction at the national level. — It was the first cross-industry benchmark in the United States to measure customer satisfaction. — It quantifies customers' value on products, thus driving quality improvement. IDENTIFYING CUSTOMERS- understand who your customers are Recognizing who the end-users of a product or service are, including both external (customers) and internal (departments or employees) customers. CUSTOMER SEGMENTATION- grouping customers for better business Dividing customers into distinct groups based on shared characteristics, allowing for targeted marketing, product development, and customer service efforts.  TYPES OF CUSTOMER SEGMENTATION MODEL DEMOGRAPHIC SEGMENTATION PSYCHOGRAPHIC SEGMENTATION BEHAVIORAL SEGMENTATION GEOGRAPHIC SEGMENTATION NEEDS-BASED SEGMENTATION VALUE-BASED SEGMENTATION FIRMOGRAPHIC SEGMENTATION TECHNOGRAPHIC SEGMENTATION QUALITY DIMENSIONS OF GOODS AND SERVICES GOODS: Tangible products that can be seen, touched, and owned. They are physical objects that satisfy human needs and wants. SERVICES: Intangible actions or activities performed for a customer. Services are experiences that provide value through their performance. DAVID GARVIN'S EIGHT DIMENSIONS OF QUALITY: PERFORMANCE- The product's primary operating characteristics and how well it fulfills its intended function. FEATURES- Additional characteristics that enhance the product's appeal and functionality beyond its basic performance. RELIABILITY- The product's consistency and dependability in performing its intended function over time. CONFORMANCE- Measures how closely the product meets its design specifications and standards. DURABILITY- The product's lifespan and resistance to wear and tear. It measures how long the product can be used before it needs to be replaced or repaired. SERVICEABILITY- Encompasses the ease of obtaining repair or maintenance services for the product.  AESTHETICS- The product's visual appeal and sensory characteristics, including its design, color, texture, and overall appearance. PERCEIVED QUALITY- The overall impression of quality that consumers form based on indirect measures, such as brand reputation, price, or packaging. QUALITY DIMENSIONS OF SERVICES TANGIBLES- The physical aspects of the service, such as the appearance of the service provider's facilities, equipment, and personnel. RELIABILITY- Focuses on the service provider's ability to consistently deliver the promised service accurately and dependably. RESPONSIVENESS- The willingness and ability of the service provider to provide prompt and helpful service. ASSURANCE- Reflects the knowledge, competence, and trustworthiness of the service provider. It involves conveying confidence and credibility to customers. EMPHATY- The service provider's ability to understand and care about the customer's needs and individual circumstances. The Kano Model of Customer Dissatisfiers ("Must Haves"): Basic features that customers expect but do not explicitly demand. If absent, customers are dissatisfied. Satisfiers ("Wants"): Requirements that customers openly desire, providing satisfaction when fulfilled. Exciters/Delighters ("Never Thought Of"): Unexpected innovations that excite and delight customers, providing a competitive edge. Gathering the Voice of the Customer: METHODS: Comment Cards and Formal Surveys Focus Groups Analyzing Voice of the Customer Data - A tool for grouping large amounts of customer data into logical categories, helping managers identify key issues. Affinity diagram A tool for grouping large amounts of customer data into logical categories, helping managers identify key issues. Affinity diagram is a main ingredient of the KJ method, developed in the 1960s by Kawakita Jiro, a Japanese anthropologist. MANAGING CUSTOMER RELATIONSHIP Strategic Partnerships and Alliances: Customer-supplier partnerships are becoming increasingly important for businesses to focus on their core competencies. Benefits: Iimproved product quality, reduced costs, and access to new markets. ★ Two-way communication is essential for successful partnerships. ★ Supplier certification programs can help ensure quality and reliability. CUSTOMER-FOCUSED TECHNOLOGY AND ANALYTICS Technology can significantly enhance customer service and information management. Analytics can help organizations "mine" and understand customer data to offer personalized recommendations and improve marketing strategies.  CRM software leverages technology and analytics to increase customer loyalty, target profitable customers, and streamline communication processes. BENEFITS OF CUSTOMER RELATIONSHIP MANAGEMENT (CRM) SOFTWARE Market segmentation and analysis Tracking sales trends and advertising effectiveness Identifying target customers for marketing initiatives Forecasting customer retention and defection rates Analyzing product bundling opportunities Improving website design and customer experience Providing valuable operational data to managers THREE APPROACHES TO TRACK CUSTOMER SATISFACTION 1. TRANSACTIONAL CUSTOMER SATISFACTION INDEX - immediate feedback; measures customer satisfaction based on specific interactions or transactions 2. ANNUAL RELATIONSHIP CUSTOMER SATISFACTION INDEX - learn about specific attributes of satisfaction and intent for repeat business 3. COMPETITIVE STUDY - learn about specific attributes of satisfaction and intent for repeat business Customer satisfaction and engagement measurement allows an organization to do the following: Key Points: Customer Perceptions: ○ Measure how well you meet customer needs. ○ Compare your performance to competitors. Understanding Loyalty: ○ Identify reasons for customer dissatisfaction and delight. ○ Learn why customers stay loyal or leave. Internal Processes: ○ Find internal practices that affect satisfaction. ○ Improve product design, service delivery, and employee training. Trend Tracking: ○ Monitor changes over time to see if improvements work. ○ Ensure strategies lead to better customer experiences CUSTOMER SATISFACTION MEASURES: DESIGNING SATISFACTION SURVEYS: 1. Determine the purpose of the survey - What research questions does the organization want to answer? - Focus on information that is a "must have," not simply "nice to have." - Who is the customer? INTERNAL CUSTOMERS & EXTERNAL CUSTOMERS - External customers are people outside the organization who buy or use its products or services. - Internal customers are people or departments within the organization who rely on each other to get work done. - Customer satisfaction measurement should not be confined to external customers. - Many organizations use employee opinion surveys or similar vehicles to seek employee feedback on the work environment, benefits, compensation, management, team activities, rewards and recognition, and company plans and values. 2. Identify who should conduct the survey? - Independent third-party organizations often have more credibility to respondents and can ensure objectivity in the results. 3. Define the sample frame for the survey - The target group from which a sample is chosen. - The frame might be the entire customer base or a specific segment. 4. Select the appropriate survey instruments - Formal written surveys by mail used to be the most common means of measuring customer satisfaction - Face-to-face interviews, telephone interviews, and focus groups are also occasionally used. 5. Decide what type of question should be asked in the survey? - The types of questions to ask in a survey must be properly worded to achieve actionable results. LIKERT SCALE - is used for customer satisfaction management 6. Design the reporting format and data entry methods - Surveys should always be pretested to: a.) determine whether instructions are understandable; b.) identify questions that may be misunderstood or poorly worded; c.) determine how long it takes to complete the survey; and d.) determine the level of customer interest. ANALYZING AND USING CUSTOMERS FEEDBACK By analyzing customer satisfaction trends and linking them to internal processes : - businesses can track progress and - identify areas for improvement. Effective measurement highlights processes that impact satisfaction and distinguishes between high and low performers. WHY MANY CUSTOMERS SATISFACTION EFFORTS FAILS? Poor measurements scheme Failure to identify appropriate quality dimensions Failure to weight dimensions properly Lack of comparison to competitors Failure to measure potential and former customers Confusing loyalty with satisfaction MEASURING CUSTOMER LOYALTY NET PROMOTER SCORE (NPS) Is claimed to strongly correlate with market and revenue growth which was developed and is a registered trademark of Fred Reichheld, Bain & Company, and Satmetrix. What is the likelihood that you would recommend us? Responses are rated on a scale from 1 to 10 NET PROMOTER SCORE (NPS) SCORING BREAKDOWN Promoters (scores 9-10) Passives (scores 7-8) Detractors (scores 0-6) NPS is the difference between the percentage of promoters and the percentage of detractors. The NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. The score ranges from -100 (if every customer is a detractor) to +100 (if every customer is a promoter). Example Scenario: You are the manager of a hotel, and you've recently conducted a customer satisfaction survey. You asked 100 guests the question, "How likely are you to recommend our hotel to a friend or colleague?" They responded with ratings from 0 to 10. Here’s the breakdown of their responses: 50 guests gave a score of 9 or 10 (Promoters) 30 guests gave a score of 7 or 8 (Passives) 20 guests gave a score between 0 and 6 (Detractors) 1. Calculate the NPS using the following formula: NPS=%Promoters−%Detractors To calculate the percentage of promoters, follow these steps: 1. Count the number of promoters: In your scenario, 50 guests gave a score of 9 or 10, so you have 50 promoters. 2. Divide the number of promoters by the total number of respondents: The total number of respondents is 100. Percentage of promoters= (Number of promoters/Total number of respondents)×100 For this scenario: Percentage of promoters=(50/100)×100 =50%