Operations Management Midterms Reviewer PDF

Operations Management (OPMAN) CM 1 4) Human Resources (HR): Ensures the company has the right employees with the Operations Management Over...

Operations Management (OPMAN) CM 1 4) Human Resources (HR): Ensures the company has the right employees with the Operations Management Overview right skills. HR handles hiring, training, and Definition: Operations Management involves all employee compensation. activities required to produce and deliver goods or services to customers. The main goal is to design, manage, and improve systems that Example: HR hires skilled workers and trains create the company's products or services. them to operate machines that assemble car engines. Operations Function Different Operation Roles in Org. It embraces all the activities required to create and deliver an organization’s goods or services 1) Product and Service Design: Operations to its customers or clients. Operations managers work with departments like Management is concerned with the design, marketing to design products that meet management, and improvement of the systems customer needs and can be efficiently that create the organization’s goods or services. produced. Example: In a phone company, operations managers ensure the phone’s design is both Other Business Function appealing to customers and easy to 1) Operations: Responsible for creating the manufacture at a reasonable cost. product or service for the customer. 2) Process Design and Planning: They plan the steps required to create the product or service. This includes determining the Example: In a car manufacturing plant, resources needed, the equipment required, operations involve assembling cars from and the order in which tasks are performed. different parts. 2) Marketing: Ensures the product or service has the features customers want and Example: For a clothing manufacturer, the communicates its value to customers. It is process might include cutting fabric, sewing, the heart of the business. and quality checks before packaging the clothes. 3) Forecasting and Demand Management: Example: Marketing surveys show that Operations managers predict how much of customers want eco-friendly cars, so the a product customers will need and plan the operations team builds electric vehicles. inventory accordingly. 3) Finance: Manages the company's money. Ensures funds are available for raw materials, employee salaries, and Example: A toy company will produce more toys equipment. before the holiday season based on forecasted demand. Example: Finance ensures there is money to buy car parts and pay employees.  Operations Management (OPMAN) 4. Transformation Process In operations management, the transformation process refers to converting inputs (such as raw materials, labor, and equipment) into outputs (finished goods or services). This process is essential for delivering what customers pay for. Example: In a bakery, inputs like flour, sugar, and labor are transformed into bread and cakes Key Concepts in Operations Management (outputs). Efficiency and Productivity: Ensuring that Transformation Processes can be categorized the resources used in operations (like time, into four groups: manufacture (the physical money, and materials) are utilized in the best creation of products, e.g. automobiles), service way to produce the desired output. (the treatment of customers or storage of products, e.g. hospitals or warehouses), supply (a change in ownership of goods, e.g. retail), and Quality Control: Maintaining consistent transport (the movement of materials or quality in products or services. Operations customers, e.g. taxi service). managers set standards to ensure customers get the best possible product. Supply Chain Management: Managing the flow of goods and services from suppliers to the final customer. The overall transformation can be described as the macro operation, and the more detailed Notes transformations within this macro operation as micro-operations. For example, the macro 1) Operations Management involves operation in a brewery is making beer (Figure collaborating with various 1.3). The micro operations include: departments to ensure the successful creation and delivery of products or milling the malted barley into grist services. mixing the grist with hot water to form wort 2) The goal is to ensure efficiency, quality, cooling the wort and transferring it to the and timely delivery while keeping costs fermentation vessel in check. adding yeast to the wort and fermenting the Continuous Improvement: Operations liquid into beer management also focuses on improving processes over time to increase filtering the beer to remove the spent yeast efficiency and reduce waste. decanting the beer into casks or bottles.  Operations Management (OPMAN) CM 2 Example: The Land Cruiser’s specification might include details such as engine capacity Product Development (e.g., 5.7L V8 engine), safety standards, off-road Product development is the complete process of capabilities (4WD), and luxury features (like bringing a new product or service to market or leather interiors and advanced navigation improving an existing one. This includes systems). ideation, design, testing, and launch. 3. Concept Development Example: Toyota’s continuous improvement of Concept development involves coming up with the Land Cruiser from its 1957 model to the new product ideas and evaluating whether they 2024 version represents product development. are feasible. Prototypes are often created to test They not only improved the vehicle’s design but the concept before moving to full-scale also integrated new technologies such as production. enhanced safety features and advanced driver- Example: Toyota likely developed multiple assistance systems. design concepts when creating the 2024 Land Cruiser, testing different engines, designs, and features before settling on the final version that Process of Product Development would meet customer demands for modern features and environmental efficiency. 1. Understanding Customer Needs Understanding customer needs involves knowing the preferences and expectations of 4. Design Principles the target market. Businesses gather feedback, observe trends, and conduct research to ensure These are guidelines that ensure products are the product is designed with the customer in functional, attractive, and easy to use. Key mind. principles include durability, simplicity, and innovation. Example: Toyota focused on providing a durable, off-road vehicle to meet the needs of Example: Toyota followed the principle of customers who wanted both luxury and durability by making the Land Cruiser a vehicle ruggedness. By listening to feedback, they that can handle both city driving and rough off- introduced features like better suspension road terrain. Simplicity in design ensures that it systems and advanced safety technologies in remains easy to use, while innovation keeps it later versions of the Land Cruiser. competitive in the market. 2. Product/Service Specifications 5. Quality Assurance Specifications are the detailed, technical Quality Assurance (QA) ensures the product requirements that a product must meet. This meets the set standards and functions properly. includes materials, dimensions, performance This includes testing during production and after metrics, and quality standards. to ensure consistency.  Operations Management (OPMAN) Example: Toyota would perform extensive 4. Decline testing on the Land Cruiser’s performance, o This is when the product’s sales decline due safety features, and durability, ensuring that to market saturation, changing trends, or each vehicle meets global standards before it’s better alternatives. sold to customers. o Example: If Toyota does not continue innovating or releasing updated versions, Life Cycle Management (LCM) the Land Cruiser might eventually enter the decline phase as other SUVs become more It involves managing a product throughout its life popular. in the market. There are four key stages: 1. Introduction o This is when a product is first launched. Sales are typically low as the product is new, and marketing efforts are high to create awareness. o Example: When Toyota launched the first Land Cruiser in 1957, they had to invest in marketing to let people know about its off- road capabilities. 2. Growth o As the product gains acceptance, sales grow rapidly, and profits start to increase. Life Cycle Management Strategies o Example: The Land Cruiser saw significant growth in the 1960s and 1970s, as more These are actions taken to extend the customers began recognizing its durability product’s life in the market, such as and performance. releasing new versions, updating features, or rebranding. 3. Maturity Example: Toyota keeps the Land o At this stage, the product has reached its Cruiser in the maturity phase by peak, and sales growth slows. Competition releasing new models every few years may also increase, and the company may with significant improvements, such as need to make improvements or changes to the 2024 version, which likely includes stay competitive. cutting-edge technology and eco- friendly advancements. o Example: By the 1990s, the Land Cruiser had matured in the market. Toyota General Strategy Approach: introduced new features like advanced safety technology and more luxurious 1. Competitive Advantage interiors to keep it appealing to customers. Competitive advantage refers to a company’s ability to outperform its competitors by offering  Operations Management (OPMAN) something unique, such as better pricing, efficiency in production. quality, or features. CM 3 Example: Toyota maintains a competitive Strategy: advantage in the automobile industry by offering Strategy is a comprehensive plan that defines reliable, fuel-efficient vehicles at affordable how a business will achieve its long-term goals. prices. Their hybrid technology is also a It covers decisions about resources, distinguishing factor that sets them apart from competition, and market positioning. A well- many competitors. defined strategy gives direction to all business 2. Customer Satisfaction operations and helps in achieving sustainable growth. Customer satisfaction is about meeting or exceeding the expectations of customers with a product or service. High satisfaction often leads Example: A global retail company may adopt a to customer loyalty. cost-leadership strategy by focusing on reducing costs and offering products at a lower price than competitors (e.g., Walmart). Example: Toyota ensures customer satisfaction by providing excellent after-sales service and Operations Strategy: producing cars known for durability and low Operations strategy focuses on how the maintenance costs, keeping customers coming business organizes and manages its operations back for new models. to achieve its strategic goals. It involves the 3. Risk Mitigation alignment of production, facilities, and resources with the market's needs. Operations Risk mitigation involves identifying potential strategy ensures that every part of the risks to the business and implementing company’s production and service delivery strategies to minimize or avoid them. processes contribute effectively to the business's competitive advantage. Example: Toyota mitigates risks by diversifying its product line. They offer everything from Example: A smartphone manufacturer that affordable sedans to luxury SUVs, reducing the focuses on innovative technology and cutting- risk of relying on one market segment. edge design in production to maintain its competitive advantage, like Apple. 4. Resource Optimization Resources: Resource optimization refers to using company Resources include all the physical, financial, resources, such as finances, labor, and human, and technological assets a business materials, efficiently to maximize productivity utilizes in its operations. These can range from and reduce waste. machinery and equipment to the skills of workers and the capital available for investment. Example: Toyota optimizes resources by implementing lean manufacturing practices, Example: A food delivery service uses a fleet of such as the Toyota Production System (TPS), vehicles, delivery staff, and a software platform which focuses on reducing waste and improving as resources to meet customer demand.  Operations Management (OPMAN) Market Requirements: o Benefit: This approach allows for incremental improvements and Market requirements are the needs, innovations based on real-world conditions, expectations, and preferences of the leading to increased efficiency and customers and the market as a whole. problem-solving from within the operational Operations must adapt to these needs to stay workforce. competitive. This can include factors such as price, quality, delivery speed, and o Example: A manufacturing worker notices customization. that changing the order of certain assembly steps reduces time and waste, which leads to a more efficient production process. Example: An online retailer may prioritize fast 3. Market-Requirements Perspective: shipping and easy returns to meet customer expectations and stand out in a crowded o Definition: This perspective places market marketplace like Amazon. demands at the core of operational strategies. The operations are designed to meet or exceed customer expectations, 4 Perspectives of Operations Strategy: adapting to changes in customer preferences or market trends. 1. Top-Down Perspective: o Benefit: Ensures that the company stays o Definition: This perspective takes the competitive by directly responding to the overall corporate strategy and cascades it demands of the market, helping to build down to influence and guide the operations customer satisfaction and loyalty. strategy. The focus is on ensuring that operations align with the company’s o Example: A fast-food chain might introduce strategic goals. healthier menu options to cater to a growing consumer demand for nutritious, low-calorie o Benefit: A top-down approach ensures that meals. the company’s operational activities directly support its overarching business goals. It 4. Operations Resources Perspective: offers clear guidance and consistency o Definition: This perspective emphasizes across all departments. the company’s existing resources— o Example: A company focused on whether physical, human, or technological. sustainability might establish green The strategy focuses on leveraging these production methods across all its factories resources to achieve competitive as part of its top-down strategy to reduce advantages and maximize efficiency. carbon emissions. o Benefit: Helps companies optimize 2. Bottom-Up Perspective: resource use, reduce waste, and improve processes, ultimately lowering costs and o Definition: In this approach, operational increasing productivity. strategies evolve from the day-to-day experiences and suggestions of employees o Example: A factory that invests in upgrading its machinery to improve production speed and reduce downtime. working in operations. It focuses on continuous improvement and innovation based on practical challenges encountered Top-Down Approach: in the workplace.  Operations Management (OPMAN) Definition: The top-down approach is where the overall corporate strategy is o Example: Toyota’s just-in-time production developed by senior management and then system minimizes inventory costs and passed down to guide operational decisions. reduces waste by only producing vehicles It emphasizes hierarchical decision-making. when there is demand. Benefit: This approach ensures a unified 2. Facilities: direction throughout the company, with all levels of operations working towards the o Definition: Refers to the physical locations same long-term goals. It fosters where production or service delivery consistency in decision-making and occurs, including factories, warehouses, execution. and offices. Facilities should be efficiently designed to optimize productivity and Example: In a company like Coca-Cola, the minimize costs. decision to emphasize global branding initiatives comes from the top management, and all marketing and operational activities are aligned with this goal. o Example: Amazon places its distribution centers in strategic locations across Bottom-Up Approach: different regions to ensure faster shipping times and efficient delivery. Definition: The bottom-up approach is where operational strategies are informed 3. Product or Service: by insights and feedback from the employees and the experiences of day-to- o Definition: This involves managing the day operations. This allows for flexibility development and lifecycle of a company's and adaptation. products or services to ensure they meet market demands and stay competitive. Benefit: Enables innovation and process improvement directly from the operational level, where employees may have the best o Example: Apple continually updates its understanding of how to optimize iPhone models to introduce new features workflows. and improvements based on technology Example: In a tech company, developers advancements and consumer trends. may suggest improvements to the product 4. Technology: development cycle based on challenges they encounter, which could then shape the o Definition: Technology plays a key role in broader operational strategy. operations strategy, from automation in manufacturing to software that improves decision-making and customer 5 Key Elements of Operations Strategy: experiences. Utilizing the right technology can significantly boost productivity and quality. 1. Production System: o Definition: The production system refers to o Example: Tesla uses cutting-edge the process by which a company converts technology and automation in its car inputs into outputs (products or services). production lines, which helps in reducing It includes workflows, scheduling, quality costs and improving production speed. control, and the supply chain.  Operations Management (OPMAN) 5. Resources: differentiating the company from its rivals through cost, quality, or speed. o Definition: Resources refer to all assets that a business uses in its operations, including human resources, machinery, materials, o Example: Southwest Airlines focuses on and capital. Effective use of resources low-cost operations to offer cheaper airfares ensures that the company operates and compete against other airlines. efficiently and can scale up to meet demand. o Example: A consulting firm relies heavily on 4. Product or Service Strategy: the expertise of its employees, making human resources the critical element of its o Definition: Focuses on the development, operations. innovation, and quality of a company’s product or service offerings to meet customer needs and stand out in the market. Types of Operations Strategy: o Example: Coca-Cola continuously improves its formula and packaging while 1. Core Competency Strategy: maintaining the brand’s core identity to stay o Definition: This strategy focuses on relevant in a competitive beverage market. leveraging the company’s main strengths 5. Customer-Driven Strategy: or core competencies to maintain a competitive advantage. o Definition: Tailors operations to meet or exceed customer expectations and preferences, with the goal of maximizing o Example: Nike focuses on innovation in customer satisfaction and loyalty. sports apparel and branding to maintain its o Example: Netflix uses data to understand edge in the athletic industry. customer viewing habits and tailors its 2. Corporate Strategy: content offerings accordingly, improving the customer experience. o Definition: Aligns operations with the overall mission and strategic goals of the company, ensuring that operational CM 4 activities support long-term growth and profitability. What is a Process? A process refers to a set of structured activities that transform inputs, such as materials, labor, or o Example: A company that aims to expand information, into outputs, such as products or globally will align its operations strategy by services. The goal is to achieve efficiency, building supply chains and distribution quality, and consistency in production or service centers in new international markets. delivery. For instance, in a restaurant kitchen, the process 3. Competitive Strategy: includes receiving orders, preparing ingredients, cooking, and plating the food for o Definition: This strategy focuses on delivery to the customer. creating a competitive edge by  Operations Management (OPMAN) process is organized around the product. It emphasizes efficiency and consistency. Relevance of Process Example: A soft drink bottling plant producing Processes are critical to ensure resources are thousands of bottles per hour. The focus is on used optimally and waste is minimized. A well- high efficiency, with minimal variations in the designed process can lead to higher product (e.g., different bottle sizes or flavors). productivity, reduced costs, improved quality, and greater customer satisfaction. 4. Mass Customization Focus For example, an optimized manufacturing line Description: Combines the efficiency of for smartphones ensures that raw materials like product focus with the flexibility of process chips, screens, and batteries are assembled focus, allowing companies to produce quickly, minimizing waste and producing customized products in large volumes. consistent, high-quality devices. Four Process Strategies Example: Nike’s customization program, where 1. Process Focus customers can design their own shoes online, choosing the color, material, and style. Despite Description: Involves low-volume, high-variety the customization, the shoes are produced on a production, which is flexible and tailored to large scale, maintaining efficiency. specific customer needs. Each product or service is unique, requiring specialized Process Technology processes. Hard Technology: Refers to physical tools, equipment, and machinery that automate or assist in the production process. Example: A custom jewelry maker where each piece is handcrafted based on customer Example: Robots in a car assembly plant that specifications. Since each order is different, the weld and assemble parts with precision and production process is flexible and designed to speed, reducing human labor and increasing handle variability. production rates. 2. Repetitive Focus Soft Technology: Involves software systems and processes that manage and Description: A middle ground between process control production or service activities. focus and product focus. This strategy produces standard products with some variety in Example: ERP (Enterprise Resource Planning) moderate volumes. Repetitive processes are software, which schedules production, manages often seen in assembly lines. inventory, and tracks orders in a manufacturing firm, improving coordination and reducing errors. Example: A car manufacturing plant where cars are assembled on a production line. While the Classification of Production Systems and overall process is repetitive, there are variations Processes in color, engine size, and interior options, Make-to-Order (MTO) depending on customer preferences. Description: Products are only manufactured 3. Product Focus after receiving customer orders, offering high Description: This strategy is used for high- customization but requiring longer lead times. volume, low-variety production, where the  Operations Management (OPMAN) Example: A tailor shop that makes bespoke 4. Job Shop suits based on each customer’s specific Description: Handles small-scale production measurements and fabric preferences. where each job is unique and often requires Make-to-Stock (MTS) specific customizations. Description: Products are manufactured in advance and stored in inventory, ready to be Example: A machine shop that fabricates sold when demand arises. This allows for faster specialized parts for machinery. Each job varies customer fulfillment but risks overproduction. based on the customer's design and needs. Example: Supermarkets that stock canned 5. Project goods. These products are made in bulk, stored, and replenished regularly based on sales Description: Large, complex tasks with a forecasts. defined timeline and objective. Projects are usually custom and non-repetitive. Types of Processes 1. Continuous Flow Example: The construction of a bridge or Description: A process used for high-volume skyscraper. Each project requires different production where materials flow continuously materials, designs, and teams. through the system. Service Process Design Example: An oil refinery, where crude oil is Service process design focuses on how continuously processed into gasoline and other services are structured and delivered to the petroleum products. customer. It often involves high customer interaction, and efficiency in delivering the 2. Mass or Assembly Line service is critical. Description: Used for large-scale production of Example: In a restaurant, the service process standard products with little variation. Products includes seating customers, taking orders, move sequentially through different stages of preparing food, and serving. The design of this production. process impacts the customer experience and satisfaction. Example: Car manufacturing on an assembly Techniques for Improving Service line where different parts (engine, body, seats) Productivity are added as the vehicle moves down the line. 1. Separation 3. Batch or Intermittent Description: Segregating different service Description: Produces goods in batches, often activities to increase efficiency and focus. with changes between batches for different products. Example: In a hospital, administrative tasks like patient registration are handled separately from Example: A bakery that bakes large batches of medical care, allowing doctors to focus solely on bread followed by a different batch of cakes. patient treatment.  Operations Management (OPMAN) 2. Self-Service Description: Letting customers perform some of the service tasks themselves, reducing labor and improving speed. Example: Self-checkout kiosks in supermarkets, where customers scan and bag their own items, reducing the need for cashier staff. 3. Focus Description: Streamlining services to concentrate on core offerings and reduce complexity. Example: Fast-food restaurants like McDonald’s, which focus on a limited menu to ensure fast service and high efficiency. 4. Automation Description: Using machines or technology to perform services that would otherwise require human labor. Example: Automated reservation systems in hotels or airlines, where customers can book services online without interacting with staff.