Operations Management Critical Analysis

OPERATIONS MANAGEMENT: as a competitive weapon mks [email protected] ac. in http://mks507. vistapanel. net Prof. (Dr. ) Manoj K Srivastava Operations Management Area 1. The Systems Approach C O N T E N T S 2. 3. OM Definition Ten Critical Decisions 4. 5. The Cases 4V Typology of Operations 6. 7. Productivity Competitiveness 8. 9. Manufacturing Vs. Service? The History 10. The Future 1 Systems Approach Systems Approach Reduce waste…or enhance output… 2 OM Definition What is Operations Management? What is Operations? a function or system that transforms inputs into outputs of greater value
Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs TYPES OF TRANSFORMATIONS • • Physical: Locational: as in manufacturing operations as in transportation operations What is a Transformation Process? a series of activities along a value chain extending from supplier to customer. activities that do not add value are superfluous and should be eliminated • • Exchange: Physiological: as in retail operations as in health care What is Operations Management? esign, operation, and improvement of productive systems • • Psychological: Informational: as in entertainment as in communication Value Engineering / Value Analysis ? Use ? Esteem ? Time ? Place 3 What Operations Managers do? ? Service, product design…………….. ? Quality management………………… ? Process, capacity design………….. ? Location ……………. ………………… Ten Critical Decisions ? Layout design ……………………….. ? Human resources, job design…….. ? Supply-chain management………… ? Inventory management ……………. ? Scheduling …………………………… ? Maintenance …………………………. 4 The Cases Britannica Story
Invite your enemy onto the roof, then remove the ladder Sun tzu The Art of War 36 Stratagems 1988 1988-93 Britannica (Leader, 230 years experience, 1768), $1000 Microsoft encyclopedia from funk & Wagnall’s encyclopedia Searchability, Multimedia, Graphics, Timeline (20 feet), cross-links, updating 1993 1995 Price $300 (cost of CD:$1) (in-fact you can purchase encarta encyclopedia + a PC in Britannica price) Britannica has to jump in a business which was not its strength, Price still $1000 1997 Reduced to $125, later on free online, crashed twice Innovation in Operations McDonald’s Corp Olympic Flame ? ? ? Facing Increased Competition Smarter and More Demanding Customers Less Brand Loyal Switched to hamburger bun that does not require toasting. ? Customers prefer taste of new bun ? Saves time and money, QSVC Model ? ? ? ? 10,000 runners 15,000 miles through 42 states in 84 days Two years of planning Must plan for no-show runners and rush hour traffic ? Cost of this operation in the neighbourhood of $20 million Innovation in Operations Ginger Hotel BillDesk No-frills, June 2004 No room service, travel desk, swimming pool Wi-fi, Two type of room: Rs. 999 and Rs. 1199, Prabhat Pani, CEO, Roots Corporation

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Operations typology: 4V Approach Differences within sectors are often greater than the differences between sectors Financial services An account management centre at a large retail bank Financial analyst advising a client at an investment bank Furniture manufacturing Mass production of kitchen units Craft production of reproduction ‘antique’ furniture Hotels Value-for-money hotel Lobby of an international luxury hotel A Typology of Operations: 4 V’s Low Volume High High how many products or services are made by the operation? how many different types of products or services are made by the operation?
High Variety Low High Variation in demand Low how much does the level of demand change over time? how much of the operation’s internal working are ‘exposed’ to its customers? High Visibility Low Implications Low repetition Each staff member performs more of job Less systemization High unit costs Flexible Complex Match customer needs High unit costs Changing capacity Anticipation Flexibility In touch with demand High unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs A Typology of Operations Implications
High repeatability Specialization Capital intensive Low unit costs Well defined Routine Standardized Regular Low unit costs Stable Routine Predictable High utilization Low unit costs Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs Low Volume High High High Variety Low High Variation in demand Low High Visibility Low 6 Productivity Effectiveness Efficiency Productivity Types of Productivity Single Factor Productivity Output Labor Output Materials Output is of quality nature Output Capital Multifactor Productivity
Output Labor + Materials + Overheads Output Labor + Energy + Capital Total Factor Productivity Goods and Services Produced All inputs used to produce them America West’s Reverse Pyramid system This is in contrast to the approach used by many airlines of just boarding all seats starting from the back of the plane and working forward. 7 Competitiveness Competitiveness The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens. A firm is competitive if it can produce products [… of superior quality or lower costs than its domestic and international competitors. (US-President`s Commission on Industrial Competitiveness 1985, S. 6) Global Competitiveness Ranking 1. Switzerland 2. Sweden 3. Singapore 4. United States 5. Germany 6. Japan 7. Finland 8. Netherlands 9. Denmark India 51 10. Canada China 27 Competition Within Industries Increases When ? Firms are relatively equal in size and resources ? Products and services are standardized ? Industry growth is slow or exponential Barriers to Entry ? ? Economies of scale Learning curves Capital investment Access to supply and distribution channels 8 Manufacturing vs. services Degree of Servitization Manufacturing and Service Employment Manufacturing Employment and Production Services as % of GDP Tangibility Spectrum Economic Offerings can determine prior to purchasing can only be discerned after purchase or during consumption or use customer must believe in, but cannot personally evaluate even after purchase & consumption Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Perishability Production & Consumption 9 History of OM Five Eras of Operations Management Journey of Operations Management Adam Smith uge increases in productivity obtainable from technology or technological progress are possible match human and physical capital, Division of labor Eli Whitney • • In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications – Musket parts could be used in any musket Significant events in operations management ? ? ? ? Division of labor Standardized parts Scientific management Coordinated assembly line (Smith (Whitney (Taylor (Ford 1776) 1800) 1881) 1913) ? ? ? Gantt charts Motion study Quality control (Gantt (Gilbreths (Shewhart 1916) 1922) 1924) 10
Where are we going? Exciting New Challenges in Operations Management Changing Challenges Past Local or national focus Batch (large) shipments Causes Low-cost, reliable worldwide communication and transportation networks Cost of capital puts pressure on reducing investment in inventory Global Focus Future Just-in-time shipments Low-bid purchasing Quality emphasis requires that suppliers be engaged in product improvement Shorter life cycles, rapid international communication, computer-aided design, and international collaboration Affluence and worldwide markets; increasingly flexible production processes Changing sociocultural milieu.
Increasingly a knowledge and information society. Environmental issues, ISO 14000, increasing disposal costs Supply-chain partners Rapid product development, alliances, collaborative designs Mass customization Empowered employees, teams, and lean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing Lengthy product development Standardized products Job specialization Low cost focus