AUBH MGMT 520 Operations Management PDF

MGMT 520: Operations Management for Global Supply Chains Dr. Giuseppe Cantafio Dr. Giuseppe Cantafio PhD, MSc(Eng), BSc(Eng), PGCert(HE), SFHEA My Experience: Let’s talk About us Name Education/Work experience About the course: Attendance Discussion...

MGMT 520: Operations Management for Global Supply Chains Dr. Giuseppe Cantafio Dr. Giuseppe Cantafio PhD, MSc(Eng), BSc(Eng), PGCert(HE), SFHEA My Experience: Let’s talk About us Name Education/Work experience About the course: Attendance Discussion Breaks Assessment CH 1: Operations and Productivity Learning Objectives When you complete this chapter, you should be able to: Define operations management Identify the 10 strategic decisions of operations management Explain the distinction between goods and services Explain the difference between production and productivity Compute single-factor productivity Compute multifactor productivity Identify the critical variables in enhancing productivity What is operations management ?  Is there an operations management department at the organization you are working at? Someone who is an operations manager is managing what?  What? What is operations management ? Operations Management (OM): is the set of activities that creates value in the form of goods and services by transforming inputs into outputs. Production: is the creation of goods and services. Organizing to Produce Goods and Services Essential functions: 1. Marketing – generates demand 2. Production/operations – creates the product 3. Finance/accounting – tracks how well the organization is doing, pays bills, collects the money Organization Charts Organization Charts Organization Charts  The Supply Chain Can a firm create value to customers by itself only? Competition is no longer between companies, It is between supply chains! How does it come to you?  The Supply Chain A global network of organizations and activities that supplies a firm with goods and services Members of the supply chain collaborate to achieve high levels of customer satisfaction, efficiency, and competitive advantage  Why? Why study OM? 1. OM is one of three major functions of any organization; we want to study how people organize themselves for productive enterprise 2. We want (and need) to know how goods and services are produced 3. We want to understand what operations managers do 4. OM is such a costly part of an organization What Operations Managers Do Basic Management Functions: Planning Organizing Staffing Leading Controlling  The Strategic Decisions 1. Design of goods and services Defines what is required of operations Product design determines cost, quality, sustainability and human resources. 2. Managing quality Determine the customer’s quality expectations Establish policies and procedures to identify and achieve that quality  The Strategic Decisions 3. Process and capacity design How is a good or service produced? (by hand? machine?) Commits management to specific technology, quality, human resources, and investments 4. Location strategy Nearness to customers, suppliers, and talent Considering costs, infrastructure, logistics, and government  The Strategic Decisions 5. Layout strategy Integrate capacity needs, personnel levels, technology, and inventory (indicates the best placement of resources). Determine the efficient flow of materials, people, and information 5. Human resources, job design and work management Recruit, motivate, and retain personnel with the required talent and skills Integral and expensive part of the total system design  The Strategic Decisions 7. Supply chain management Integrate supply chain into the firm’s strategy Determine what is to be purchased, from whom, and under what conditions 8. Inventory management Inventory ordering and holding decisions Optimize considering customer satisfaction, supplier capability, and production schedules  The Strategic Decisions 9. Scheduling Determine and implement intermediate- and short- term schedules Utilize personnel and facilities while meeting customer demands 10.Maintenance Consider facility capacity, production demands, and personnel Maintain a reliable and stable process  Operations for Goods and Services Services – Economic activities that typically produce an intangible product (such as education, entertainment, lodging, government, financial, and health services)  Differences Between Goods and Services CHARACTERISTICS OF SERVICES CHARACTERISTICS OF GOODS Intangible: Ride in an airline seat Tangible: The seat itself Produced and consumed simultaneously: Beauty salon produces a haircut that Product can usually be kept in inventory (beauty care products) is consumed as it is produced Unique: Your investments and medical care are unique Similar products produced (iPads, earbuds) High customer interaction: Often what the customer is paying for (consulting, Limited customer involvement in production education) Inconsistent product definition: Auto Insurance changes with age and type of Product standardized (iPhone) car Often knowledge based: Legal, education, and medical services are hard to Standard tangible product tends to make automation feasible automate Services dispersed: Service may occur at retail store, local office, house call, or Product typically produced at a fixed facility via Internet Quality may be hard to evaluate: Consulting, education, and medical services Many aspects of quality for tangible products are easy to evaluate (strength of a bolt) Reselling is unusual: Musical concert or medical care Product often has some residual value What is productivity? Discussion When we say.. The chef is productive The tailor is productive The student is productive The employee is productive What do we mean?  What is productivity? The creation of goods and services requires changing resources into goods and services. Productivity: The ratio of outputs (goods and services) divided by one or more inputs (such as labor, capital, or management).  Productivity Units produced Productivity = Input used Measure of process improvement Represents output relative to input Only through productivity increases can our standard of living improve Multi-Factor Productivity Output Multifactor = Labor + Material + Energy + Capital + Miscellaneous Also known as total factor productivity Output and inputs are often expressed in dollars Multiple resource inputs  multi-factor productivity  Measurement Problems Quality may change while the quantity of inputs and outputs remains constant External elements may cause an increase or decrease in productivity Precise units of measure may be lacking  Productivity in the Service Sector Productivity improvement in services is difficult because: 1. Typically labor intensive 2. Frequently focused on unique individual attributes or desires 3. Often an intellectual task performed by professionals 4. Often difficult to mechanize and automate 5. Often difficult to evaluate for quality Current Challenges in OM Globalization Sustainability Technological change Ethics, Social Responsibility, and Sustainability Develop and produce safe, high- quality green products Train and motivate employees in a safe workplace Coffee Break 15 minutes Chapter 2 : Operation Strategy in Global Environment Learning Objectives When you complete this chapter, you should be able to: Define mission and strategy Identify and explain three strategic approaches to competitive advantage Understand the significant key success factors and core competencies Use factor rating to evaluate both country and outsource providers Reasons to globalize?  Reasons to Globalize 1. Improve the supply chain 2. Reduce costs and exchange rate risks 3. Improve operations 4. Understand markets 5. Improve products 6. Attract and retain global talent  Improve the Supply Chain Locating facilities closer to unique resources Reduce Costs Risks associated with currency exchange rates Reduce direct and indirect costs Trade agreements can lower tariffs World Trade Organization (WTO) North American Free Trade Agreement (NAFTA) European Union (EU)  Improve Operations Understand differences between how business is handled in other countries Japanese – inventory management Germans – robots International operations can improve response time and customer service  Understand Markets Interacting with foreign customers, suppliers, competition can lead to new opportunities  Improve Products Remain open to free flow of ideas Toyota and BMW manage joint research and development Reduced risk, state-of-the-art design, lower costs Samsung and Bosch jointly produce batteries  Attract and Retain Global Talent Offer better employment opportunities Better growth opportunities and insulation against unemployment Relocate unneeded personnel to more prosperous locations Cultural and Ethical Issues Social and cultural behavior differs International laws, agreements, codes of conduct for ethical behaviors Despite cultural and ethical differences, we observe extraordinary mobility of capital, information, goods, and people  Companies Want To Consider National literacy rate Work ethic Rate of innovation Tax rates Rate of technology Inflation change Availability of raw Number of skilled materials workers Interest rates Political stability Population Product liability laws Transportation Export restrictions infrastructure Variations in language Communication system What is a Mission? What is a Strategy?  Developing Missions and Strategies Mission statements tell an organization where it is going Strategies tell the organization how to get there  Mission Mission – the purpose or rationale for an organization’s existence  Organization’s purpose for being  Answers “What do we contribute to society?”  Provides boundaries and focus  Exercise What is the “mission” of the organization you are currently working at? Strategic Process  Strategy Strategies require managers to Develop action plan to achieve mission Ensure functional areas have supporting strategies Exploit opportunities and strengths, neutralize threats, and avoid weaknesses  Strategies for Competitive Advantage 1. Differentiation – better, or at least different 2. Cost leadership – cheaper 3. Response – more responsive  Competing on Differentiation Distinguishing the offerings of an organization in a way that the customer perceives as adding value Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts the customer’s perception of value.  Experience Differentiation Engaging a customer with a product through imaginative use of the five senses, so the customer “experiences” the product Theme parks use sight, sound, smell, and participation Movie theatres use sight, sound, moving seats, smells, and mists of rain Restaurants use music, smell, and open kitchens  Competing on Cost Low-cost leadership means achieving maximum value, as perceived by the customer. Does not imply low quality  Competing on Response Flexibility is matching market changes in design innovation and volumes o A way of life at Hewlett-Packard Reliability is meeting schedules o German machine industry Quickness in design, production, and delivery o Johnson Electric, Pizza Hut OM’s Contribution to Strategy Product Life Cycle  Implementing Strategic Decisions Blank BRAND NAME DRUGS, INC. GENERIC DRUGS CORP. COMPETITIVE PRODUCT DIFFERENTIATION ADVANTAGE STRATEGY LOW-COST STRATEGY Product selection and Heavy R&D investment; extensive Low R&D investment; focus on design labs; focus on development in a broad development of generic drugs range of drug categories Quality Quality is major priority, standards Meets regulatory requirements on exceed regulatory requirements a country-by-country basis, as necessary Process Product and modular production Process focused; general process; tries to have long product production processes; “job runs in specialized facilities; builds shop” approach, short-run capacity ahead of demand production; focus on high utilization Location Still located in city where it was Recently moved to low-tax, low- founded labor-cost environment  Implementing Strategic Decisions BRAND NAME DRUGS, INC. GENERIC DRUGS CORP. Blank COMPETITIVE PRODUCT DIFFERENTIATION ADVANTAGE STRATEGY LOW-COST STRATEGY Layout Layout supports automated Layout supports process-focused “job shop” product-focused production practices Human Hire the best; nationwide Very experienced top executives provide resources searches direction; other personnel paid below industry average Supply chain Long-term supplier relationships Tends to purchase competitively to find bargains Inventory Maintains high finished goods Process focus drives up work-in-process inventory primarily to ensure all inventory; finished goods inventory tends to be low demands are met Scheduling Centralized production planning Many short-run products complicate scheduling Maintenance Highly trained staff; extensive Highly trained staff to meet changing process parts inventory and equipment demands  Exercise What if your employer decided to outsource your current work function, what will happen?  Strategic Planning, Core Competencies, and Outsourcing Outsourcing – transferring activities that have traditionally been internal to external suppliers Accelerating due to 1. Increased technological expertise 2. More reliable and cheaper transportation 3. Rapid development and deployment of advancements in telecommunications and computers  Theory of Comparative Advantage If an external provider can perform activities more productively than the purchasing firm, then the external provider should do the work Purchasing firm focuses on core competencies  Risks of Outsourcing ADVANTAGES DISADVANTAGES Cost savings Increased logistics and inventory costs Gaining outside expertise that comes Loss of control (quality, delivery, etc.) with specialization Improving operations and service Potential creation of future competition Maintaining a focus on core Negative impact on employees competencies Accessing outside technology Risks may not manifest themselves for years  Rating Outsourcing Providers Insufficient analysis most common reason for failure Factor-rating method Points are assigned for each factor for each provider Weights are assigned to each factor  Rating Provider Selection Criteria Table 2.3 Factor Ratings Applied to National Architects' Potential IT Outsourcing Providers UMN (JORDAN)  Done for today! Thank you for joining me, see you next class! Remember, you are now one step closer to your GRADUATION