OPERATIONS MANAGEMENT

with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-1
Role of Operations

VIDEO 1-1.1
Lesson Objectives

LESSON 1-1 OBJECTIVES

By the end of this lesson you will be
able to:
Describe what operations management is
Understand the process view of
operations management
Illustrate operations management based
successes in different types of
businesses
Connect operations management to
business performance

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-1
Role of Operations

VIDEO 1-1.2
Describing Operations Management

RECOGNIZING OPERATIONS
MANAGEMENT
Take the device that you are using to
view this

RECOGNIZING OPERATIONS
MANAGEMENT
Operations management impacted:
Product design
Assembly
Supplier selection
Employee training
Sales outlet
Troubleshooting support
Safe disposal

OPERATIONS MANAGEMENT
IN EVERYDAY PRODUCTS

Furniture that you are sitting on

(flickr.com/uofdenver, 2011)

OPERATIONS MANAGEMENT
IN EVERYDAY PRODUCTS

Furniture that you are sitting on

Restaurant you eat at

(Case, 2008)

OPERATIONS MANAGEMENT
IN EVERYDAY PRODUCTS

Furniture that you are sitting on

Restaurant you eat at
Car or bicycle you use

(Mercat, 2009)

OPERATIONS MANAGEMENT
IN EVERYDAY PRODUCTS

Furniture that you are sitting on

Restaurant you eat at
Car or bicycle you use
Recyclable waste you dispose

(Ong, 2006)

OPERATIONS MANAGEMENT
IN EVERYDAY PRODUCTS

Furniture that you are sitting on

Restaurant you eat at
Car or bicycle you use
Recyclable waste you dispose
News that you listen to or read

(U.S. Department of Defense, 2013)

DEFINING OPERATIONS
MANAGEMENT
Operations Management is about
organizations effectively and
efficiently using their resources and
activities to transform materials and
information into goods and services
for customers.

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW OF OPERATIONS MANAGEMENT

PROCESS VIEW
REFLECTION
Consider any organization in other
words, a company, business, or a
non-profit entity.
Apply the Process View of
Operations to think of the main
inputs, processes, and outputs.

(commons.wikimedia.org/Pluke, 2011)

IN-VIDEO QUESTION 1

Reflect on the sub-processes related

to the main products goods and
services of the business and the
support processes that support the
existence of the business.
Left: (commons.wikimedia.org/Pluke, 2011) Right: (flickr.com/taymazvalley, 2015)

IN-VIDEO INSIGHTS 1

Reflect on the sub-processes related

to the main products goods and
services of the business and the
support processes that support the
existence of the business.

FEATURES OF OPERATIONS
MANAGEMENT
All goods, services, and information
exchanges involve operations.
We assess operations in relation to
expectations.
Many areas of an organization and
many organizations are involved.
Processes range from long-term
strategic to day-to-day operational,
and can be completely internal.

STUDYING OPERATIONS
MANAGEMENT DECISIONS
Operations strategy
Process analysis
Supply chain management
Quality management

REFERENCE
Image Credits
Dorm room [Online image]. 2011. Retrieved September 10, 2015 from
https://www.flickr.com/photos/uofdenver/5710501931
Famous Dave's interior [Online image]. 2008. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Famous_Dave's_interior.jpg
Hostutler, A. (2013). Woodruff interviews Chuck Hagel for PBS NewsHour [Online image]. Retrieved September 10,
2015 from https://commons.wikimedia.org/wiki/File:Judy_Woodruff_interviews_Chuck_Hagel_for_PBS_NewsHour.jpg
Mercat, C. (2009). Cambridge CMS bicycle racks [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Cambridge_CMS_Bicycle_Racks.jpg
Ong, T. (2006). NEA recycling bins along Orchard road [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:NEA_recycling_bins,_Orchard_Road.JPG
Pluke, (2011). CPT Hardware Input output [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:CPT_Hardware-InputOutput.svg
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 from
https://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0
http://creativecommons.org/licenses/by/3.0/

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-1
Role of Operations

VIDEO 1-1.3
Operations Based Successes

Faster claims turnaround

Better fraud detection
Lower costs of claims processing
Owed to operations management
feature:
Customer claims process using mobile
vans for adjusters
(Farris, Thompson, and Steenburgh, 2015; Hammer, 2004)
(progressive.com)

Lower costs
Better utilization
Better labor productivity
Faster airplane turnaround

southwest.com

Owed to operations management

features:
Point-to-point routes
Smaller airports
One type of aircraft
Cross-trained staff
(Schmenner, 2004)

Customized product messenger

bags
Quick delivery
Owed to operations management
features:
Combining make-to-stock with make-toorder production
Efficient capacity utilization
(Cattani, Dahan, and Schmidt, 2005)
(timbuk2.com)

Lower prices
Lower costs
Lower inventories
Owed to operations management
features:
Cross-docking
Supply chain relationships
Information technology
(Lu, 2014)
(walmart.com)

Keeping up with changing fashions

Consistent reasonable pricing
Fewer inventory-clearance discounts
Owed to operations management
features:
Quick response from design to
production to distribution
Systematic timing of product release,
followed by frequent updates
(Caro and Margalef, 2014)
(zara.com)

SUCCESS TIED WITH OTHER

BUSINESS DECISIONS
Business strategy
Marketing
Economics
Finance
Human resource management
Managerial accounting
Information systems

IN-VIDEO QUESTION 2

What aspects of Dells

manufacturing operations for
personal computers could have
contributed to its past success?
Left: (dell.com) Right: (flickr.com/taymazvalley, 2015)

IN-VIDEO QUESTION 2

What aspects of Dells

manufacturing operations for
personal computers could have
contributed to its past success?
Left: (dell.com) Right: (flickr.com/taymazvalley, 2015)

IN-VIDEO INSIGHTS 2

What aspects of Dells

manufacturing operations for
personal computers could have
contributed to its past success?

ULTIMATELY ABOUT
BUSINESS PERFORMANCE

ULTIMATELY ABOUT
BUSINESS PERFORMANCE

ULTIMATELY ABOUT
BUSINESS PERFORMANCE

Adapted from: (Johnson, Christensen and Kagermann 2008)

REFERENCE
Academic Citations
Caro, F., & Martnez de Albniz Margalef, V. (2014). How fast fashion works: Can it work for you, too?. IESE Insight
(21), 58-65. Retrieved from http://www.ieseinsight.com/review/articulo.aspx?doc=114445&seccion=6
Cattani, K., Dahan, E., & Schmidt, G. (2005). Offshoring versus "spackling". MIT Sloan management review, 46(3), 6-7.
Retrieved from http://sloanreview.mit.edu/article/offshoring-versus-spackling/
Farris, P. W., Steenburgh, T. J., & Maiden, S. E. (2015). Progressive insurance: Making pay as you drive a snap for
consumers. Charlottesville, VA: Darden Business Publishing Case Collection.
Hammer, M. (2004). Deep change: How operational innovation can transform your company. Harvard Business
Review, 82(4), 84-93. Retrieved from https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transformyour-company/ar/1
Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Harvard business
review, 86(12), 57-68. Retrieved from https://hbr.org/2008/12/reinventing-your-business-model/ar/1
Lu, C. (2014, May 08). Incredibly successful supply chain management: How does walmart do it? [Weblog] Retrieved
from https://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-Walmart
Schmenner, R. W. (2004). Service businesses and productivity. Decision Sciences, 35(3), 333-347. doi: 10.1111/j.00117315.2004.02558.x

REFERENCE
Image Credits
Dell [Online image]. Retrieved September 10, 2015 from http://www.pngimage.net/dell-logo-png-2547/
Progressive [Online image]. Retrieved September 10, 2015 from https://www.progressive.com/
Southwest [Online image]. Retrieved September 10, 2015 from https://www.southwest.com/
Timbuk2 [Online image]. Retrieved September 10, 2015 from http://www.timbuk2.com/
Walmart [Online image]. Retrieved September 10, 2015 from http://www.walmart.com/
Zara [Online image]. Retrieved September 10, 2015 from http://www.zara.com/us/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0
http://creativecommons.org/licenses/by/3.0/

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-1
Role of Operations

VIDEO 1-1.4
Impact on Return on Assets

RETURN ON EQUITY
ROE = EBIT
Equity

Broken into components using DuPont Analysis

ROE = Assets x Sales x EBIT
Assets
Sales
Equity

Equity
multiplier
Relates to
financial
leverage

Asset
turnover

Operating
margin
ROA

Impacted by operations

(Bodie, Kane, and Marcus, 2004)

ASSET TURNOVER
= Sales
Assets
Ratio depicts revenues generated
related to assets employed
Ratio indicates efficiency or
productivity of assets

OPERATING MARGIN

= EBIT or Operating Income

Sales
Ratio depicts profits related to sales
Ratio indicates profitability of
operations

EFFECTS OF BETTER
OPERATIONS MANAGEMENT
More sales from same assets
Equipment uptime
Overall equipment effectiveness
Set-up time
Part commonality
Inventory control

Higher operating margin from lower

costs
Yields and reject rates

IN-VIDEO QUESTION 3
LETS DO THE NUMBERS
Compute the return on assets, asset
turnover, and operating margin for
HiTech and Luxor.
Reflect on the differences between
the two companies.

(Dugdale, 2010)

IN-VIDEO INSIGHTS 3
Compute the return on assets, asset
turnover, and operating margin for
HiTech and Luxor.
Reflect on the differences between
the two companies.
Sales
Operating Income
Assets

HiTech

Luxor

2,000,000

1,000,000

200,000

60,000

1,650,000

495,000

IN-VIDEO INSIGHTS 3

Sales
Operating Income
Assets

HiTech

Luxor

2,000,000

1,000,000

200,000

60,000

1,650,000

495,000

COMPARING ROA AND ITS

ELEMENTS
HiTech

Luxor

2,000,000

1,000,000

200,000

60,000

1,650,000

495,000

HiTech

Luxor

Return on Assets

12%

12%

Asset Turnover

121%

202%

Operating Margin

10%

6%

Sales
Operating Income
Assets

COMPARING ANHEUSERBUSCH OVER TIME

2008 Takeover By InBev

(ab-inbev.com)

2008

2009

2014

Asset Turnover

19.8%

32.7%

33.0%

Operating Margin

13.0%

16.0%

24.0%

Return on Assets

2.6%

5.2%

7.9%

REFERENCE
Academic Citations
Amigobulls. (2015, July 31). Anheuser-Busch Balance Sheet - Annual (NYSE:BUD). Retrieved from
http://amigobulls.com/stocks/BUD/balance-sheet/annual
Bodie, Z., Kane, A., & Marcus, A. J. (2004). Essentials of investments (5th ed.). Columbus, OH: McGraw-Hill Irwin.
de la Merced, M. J. (2008, July 14). InBev to buy Anheuser-Busch for $52 billion, The New York Times. Retrieved from
http://www.nytimes.com/2008/07/14/business/worldbusiness/14iht-14beer.14460585.html?_r=1&
Leonard, D. (2012, October 25). The Plot to Destroy Americas Beer. Bloomberg Business. Retrieved from
http://www.bloomberg.com/bw/articles/2012-10-25/the-plot-to-destroy-americas-beer

Image Credits
Anheuser-Busch InBev [Online image]. Retrieved September 10, 2015 from
https://en.wikipedia.org/wiki/File:AB_InBev_logo.svg
Dugdale, D. (2010). Analyzing financial data [Online image]. Retrieved September 10, 2015 from
https://flic.kr/p/8LCNW2
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0
http://creativecommons.org/licenses/by/3.0/

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-1
Role of Operations

VIDEO 1-1.5
Lesson 1-1 Recap

LESSON 1-1 RECAP

In this lesson you learned how to:
Define operations management
Understand the prevalence of the inputprocess-output view in the way things get
done
Appreciate the role of operations
management in different types of
businesses
Connect operations management
objectives to financial performance

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-2
Formulation and Implementation

VIDEO 1-2.1
Lesson Objectives

LESSON 1-2 OBJECTIVES

(1 OF 2)

By the end of this lesson you will:

See the relationship between operations
strategy, business strategy, and other
functional strategies
Relate through examples misalignments
in strategy to business failures
Better understand the deliberate choices
for formulating and implementing
operations strategy

LESSON 1-2 OBJECTIVES

(2 OF 2)

By the end of this lesson you will:

Comprehend how some unconventional
choices can be used to compete through
operations
Recognize the differences between
manufacturing and service operations

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-2
Formulation and Implementation

VIDEO 1-2.2
Focused Operations

STRATEGY
An integrated and coordinated set of
commitments and actions designed
to exploit core competencies and
gain a competitive advantage
(Hitt, Ireland and Hoskisson, 1997; p. 115)

Competitive strategy is about being

different. It means deliberately
choosing a different set of activities
to deliver a unique mix of values.
(Porter, 1996; p. 64)

ALIGNMENT AMONG STRATEGIES

CHALLENGE OF
ALIGNMENT
a fully consistent set of manufacturing policies resulting in a
congruent system is highly rare
(Skinner, 1974, p. 116)

Reasons:
Focus on professional/functional goals and lack of coordination
Strategic direction never clarified/codified
Product proliferation without concern of focus
(Skinner, 1974)

ASKING THE RIGHT

QUESTIONS
How can we compete?
Not just how can we increase productivity

How can we improve system

efficiency?
Not just how can we improve labor
efficiency

What should we focus on?

Not just what else should we produce
(Skinner, 1974)

OPERATIONS STRATEGY ELEMENTS

OPERATIONS STRATEGY ELEMENTS

OPERATIONS STRATEGY ELEMENTS

OPERATIONS STRATEGY ELEMENTS

FORMULATING
OPERATIONS STRATEGY
Begin with the customer
What does the market want?
What do targeted customers value in each of the markets that we have decided
to pursue?
How is the market changing?
How are customer needs changing?

ORDER QUALIFIER &

WINNER
Order Qualifier
Minimum selection criterion that permits
products or service to be even
considered by potential customers

Order Winner
Criterion that differentiates the products
or services from competitors, thus
resulting in winning orders of customers
(Hill, 1993)

COMPETITIVE
CAPABILITIES
What is the current capability of the process?
What should the targeted capability of the process be?
In light of targeted customers
And considering competitors

Should we be targeting different customers?

Is the current market that we are serving changing and/or growing
or declining?

TWO SIDES OF A COIN

Order Qualifiers and

Competitive
Example
Winners Attractive Capabilities Needed
Companies
to Customers
from Operations
Low price

Cost

Walmart

Conformance quality

Quality control

Rolls Royce

Added features

Quality improvement

Apple

Fast delivery

Speed

Amazon

Reliable delivery

Dependability

Southwest

Variety

Mix flexibility

Ikea

Personalization

Customization

Subway

IN-VIDEO QUESTION 4
Take any fast food chain and luxurious sit-down restaurant.

Upper left: (mcdonalds.com) lower left: (subway.com) right: (Royan, 2008)

IN-VIDEO QUESTION 4
Take any fast food chain and
luxurious sit-down restaurant.
List the order qualifiers essential
criteria sought by customers and
order winners additional features
that would delight customers for
both businesses.
Compare the two lists.
(flickr.com/taymazvalley, 2015)

IN-VIDEO INSIGHTS 4
Take any fast food chain and
luxurious sit-down restaurant.
List the order qualifiers essential
criteria sought by customers and
order winners additional features
that would delight customers for
both businesses.
Compare the two lists.

OPERATIONS STRATEGY
DECISION AREAS (1 OF 2)
Size of facility and its capacity
Location and layout of facility
Choice of technology
Vertical integration
(Hayes, Pisano, Upton, and Wheelwright, 2005)

OPERATIONS STRATEGY
DECISION AREAS (2 OF 2)
Salaries and incentives, and
employee training
Quality management
Scheduling of production
Centralized versus decentralized
control
(Hayes, Pisano, Upton, and Wheelwright, 2005)

MISALIGNMENTS WITH
FATAL CONSEQUENCES
Kmart
Product mix and sales process mismatch
Empty and overcrowded shelves
(Leinwand and Mainardi, 2010; Williams and Summer, 2010)

(kmart.com)

MISALIGNMENTS WITH
FATAL CONSEQUENCES
Kmart
Product mix and sales process mismatch
Empty and overcrowded shelves
(Leinwand and Mainardi, 2010; Williams and Summer, 2010)

Kodak
Changing technology
(Anderson, 2012)

(kodak.com)

MISALIGNMENTS WITH
FATAL CONSEQUENCES
Kmart
Product mix and sales process mismatch
Empty and overcrowded shelves
(Leinwand and Mainardi, 2010; Williams and Summer, 2010)

Kodak
Changing technology
(Anderson, 2012)

Nokia
Failure to be flexible for customers and
employees
(Anderson, 2012)
(nokia.com)

MISALIGNMENTS AS WAKE-UP CALLS

Starbucks
Temporarily lost sight of changing order qualifiers
and winners of customers after expansion
Quelch, 2008

Increased number of stores rapidly without consideration of delivery of supplies

Cooke, 2010

(toyota.com)

MISALIGNMENTS AS WAKE-UP CALLS

Starbucks
Temporarily lost sight of changing order qualifiers
and winners of customers after expansion
Quelch, 2008

Increased number of stores rapidly without consideration of delivery of supplies

Cooke, 2010

Toyota
Product choices and production competencies mismatch
(MacDuffie and Fujimoto, 2010)

(toyota.com)

REFERENCE
Academic Citations
Anderson, H. (2012, January 12). Why did Kodak, Motorola, and Nortel fail? Information Week. Retrieved from
http://www.informationweek.com/it-leadership/why-did-kodak-motorola-and-nortel-fail/d/d-id/1102245
Cooke, J. A. (2010). From bean to cup: How Starbucks transformed its supply chain. Supply Chain Quarterly, 4(4), 3555. Retrieved from http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/
Hayes, R. H., Pisano, G. P., Upton, D. M., & Wheelwright, S. C. (2005). Operations, strategy, and technology: Pursuing
the competitive edge. Hoboken, NJ: Wiley.
Hill, T. (1993). Manufacturing strategy. Basingstoke, UK: MacMillan.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (1997). Strategic management: Competitiveness and globalization.
Cincinnati, OH: Southwestern Publishing.
Leinwand, P., & Mainardi, C. (2010). Why cant Kmart be successful while Target and Walmart thrive? Harvard
Business Review. Retrieved from https://hbr.org/2010/12/why-cant-kmart-be-successful-w
Porter, M. E. (1996). What is a strategy? Harvard Business Review, (November-December), 61-78. Retrieved from
https://hbr.org/1996/11/what-is-strategy/ar/1
Quelch, J. (2008, July 9). Starbucks: How growth destroyed brand value. Bloomberg Business. Retrieved from
http://www.bloomberg.com/bw/stories/2008-07-09/starbucks-how-growth-destroyed-brand-valuebusinessweekbusiness-news-stock-market-and-financial-advice

REFERENCE
Academic Citations
Skinner, W. (1974). The focused factory. Harvard Business Review, (May-June), 113-121. Retrieved from
https://hbr.org/1974/05/the-focused-factory/ar/1
University of Pennsylvania. (2010, March 31). Under the hood of Toyotas recall: A tremendous expansion of
complexity. Retrieved from http://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-recall-a-tremendousexpansion-of-complexity/
Williams, A. B., & Sumner, G. (2010). Kmart: A capstone case. Academic Forum (27), 39-48. Retrieved from
http://www.hsu.edu/academicforum/2009-2010/WilliamsSumner.pdf

REFERENCE
Image Credits
Kmart [Online image]. Retrieved September 10, 2015 from http://www.kmart.com/
Kodak [Online image]. Retrieved September 10, 2015 from http://www.kodak.com/ek/US/en/corp/default.htm
Manske, M. (2009). 1937 Wheat penny front back [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:1937-Wheat-Penny-Front-Back.jpg
Mcdonalds [Online image]. Retrieved September 10, 2015 from https://en.wikipedia.org/wiki/McDonald's#/media/File:Mcdonalds90s-logo.svg
Nokia [Online image]. Retrieved September 10, 2015 from http://company.nokia.com/en
Royan, J. (2008). Obecni dum restaurant Prague [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Obecni_Dum_Restaurant,_Prague_-_8377.jpg
Starbucks [Online image]. Retrieved September 10, 2015 from http://www.starbucks.com/
Subway [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svg
Toyota [Online image]. Retrieved September 10, 2015 from http://www.toyota.com/
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 from
https://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0
http://creativecommons.org/licenses/by/3.0/

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-2
Formulation and Implementation

VIDEO 1-2.3
Tradeoffs and Combinations

NOTION OF TRADE-OFFS IN
OPERATIONS CAPABILITIES
Cannot achieve one capability
without sacrificing another
To achieve high quality production, costs
will increase
To achieve flexibility, costs will increase
and quality will decrease

PERFORMANCE FRONTIER

Emergency Room

Responsiveness

High

= Healthcare unit or organization

Low

Specialty
Hospital

Cost efficiency

High

SACRIFICING ONE CAPABILITY FOR ANOTHER

= unit or organization

Responsiveness

High

Tradeoffs

Low
Low

Cost efficiency

High

NOTION OF CUMULATIVE
CAPABILITIES

Dependability

BUILDING ON
CAPABILITIES
= unit or organization

Responsiveness

High

Cumulative

Low
Low

Cost efficiency

High

MASS CUSTOMIZATION
Modular designs
Postponement of finishing
Assemble to order
Customer involvement
Using customer intelligence
(Pine, 1999)

IN-VIDEO QUESTION 5
You have probably come across
products that are produced using
mass customization combination
of mass production and
personalization. Reflect on a couple
of these and relate to their
production processes.

(flickr.com/taymazvalley, 2015)

IN-VIDEO QUESTION 5
You have probably come across
products that are produced using
mass customization combination
of mass production and
personalization. Reflect on a couple
of these and relate to their
production processes.

(flickr.com/taymazvalley, 2015)

IN-VIDEO INSIGHTS 5
You have probably come across
products that are produced using
mass customization combination
of mass production and
personalization. Reflect on a couple
of these and relate to their
production processes.

MASS CUSTOMIZED PRODUCTS (1 0F 5)

Hallmarks recordable story books

(hallmark.com)

MASS CUSTOMIZED PRODUCTS (2 0F 5)

Hallmarks recordable story books
Nikes customized shoes

(nike.com)

MASS CUSTOMIZED PRODUCTS (3 0F 5)

Hallmarks recordable story books
Nikes customized shoes
Ford Fiestas combinations of
exterior appearances and interior
trims

(ford.com)

MASS CUSTOMIZED PRODUCTS (4 0F 5)

Hallmarks recordable story books
Nikes customized shoes
Ford Fiestas combinations of
exterior appearances and interior
trims
Personalized M&Ms with message
and photo

(mymms.com)

MASS CUSTOMIZED PRODUCTS (5 0F 5)

Hallmarks recordable story books
Nikes customized shoes
Ford Fiestas combinations of
exterior appearances and interior
trims
Personalized M&Ms with message
and photo
Subway sandwiches
(subway.com)

REFERENCE
Academic Citations
Pine, B. J. (1999). Mass customization: The new frontier in business competition. Boston, MA: Harvard Business
Press.

Image Credits
Ford [Online image]. Retrieved September 10, 2015 from http://www.autobytel.com/ford/fiesta/2011/car-buyingguides/2012-ford-fiesta-gets-new-options-for-better-customization-105941/
Hallmark [Online image]. Retrieved September 10, 2015 from http://www.hallmark.com/recordable-storybooks/
Mymms [Online image]. Retrieved September 10, 2015 from http://www.mymms.com/
Nike [Online image]. Retrieved September 10, 2015 from http://store.nike.com/us/en_us/pw/n/1j7?sl=customize it with
nikeid
Subway [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svg
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 from
https://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0
http://creativecommons.org/licenses/by/3.0/

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-2
Formulation and Implementation

VIDEO 1-2.4
Manufacturing and Service Orientation

MANUFACTURING & SERVICE ORIENTED

OPERATIONS

MANUFACTURING & SERVICE ORIENTED

OPERATIONS

MANUFACTURING & SERVICE ORIENTED

OPERATIONS

MANUFACTURING & SERVICE ORIENTED

OPERATIONS

MANUFACTURING & SERVICE ORIENTED

OPERATIONS

Zeithaml, V. A. (1981)

IN-VIDEO QUESTION 6
Consider Starbucks

What are the physical goods and

what are the intangible services that
customers expect?
Left: (starbucks.com) Right: (flickr.com/taymazvalley, 2015)

IN-VIDEO QUESTION 6
Consider Starbucks

What are the physical goods and

what are the intangible services that
customers expect?
Left: (starbucks.com) Right: (flickr.com/taymazvalley, 2015)

IN-VIDEO INSIGHTS 6
Consider Starbucks

What are the physical goods and

what are the intangible services that
customers expect?

EXAMPLE OF BUNDLING
SERVICES WITH GOODS
At Caterpillar, service doesn't end
at the sale. With every purchase,
Caterpillar offers you the full extent
of our experience and legendary
customer service. The deal and the
handshake isn't the end, it's the
beginning of a beautiful partnership.
(caterpillar.com)

CHALLENGES FOR
OPERATIONS MANAGEMENT
Dimensions of quality
Inventory
Production & consumption
Customer involvement
Employee role
Returns and repairs

FRONT AND BACK OFFICE OPERATIONS

Top: (Ortiz, 2012) Bottom: (www.flickr.com/star/star5122, 2007)

IMPLICATIONS OF FRONT
OFFICE
Direct customer encounters
Provide opportunities to delight
Increase uncertainties in service delivery
parameters
Result in inefficiencies in service delivery
Provide openings for hybrid strategies

SERVICE-PROFIT CHAIN

SERVICE-PROFIT CHAIN

SERVICE-PROFIT CHAIN

(Heskett et al., 2008)

SERVICE ENCOUNTER TRIAD

(Cook et. al., 2006)

TRADING OFF SERVICE LEVEL & COST

SOURCES OF CUSTOMER
VARIABILITY IN SERVICES
Arrival
Request
Capability
Effort
Subjective preference
(Frei, 2006)

CLASSIC TRADEOFF IN SERVICES EFFICIENCY

VERSUS SERVICE

BREAKING THE TRADEOFF

BREAKING THE TRADEOFF

BREAKING THE TRADEOFF

(Frei, 2006)

REFERENCE
Academic Citations
Cook, L. S., Bowen, D. E., Chase, R. B., Dasu, S., Stewart, D. M., & Tansik, D. A. (2002). Human issues in service
design. Journal of Operations Management, 20(2), 159-174. doi: http://dx.doi.org/10.1016/016228800560363
Frei, F. X. (2006). Breaking the trade-off between efficiency and service. Harvard business review, (84), 93101.Retrieved from https://hbr.org/2006/11/breaking-the-trade-off-between-efficiency-and-service/ar/1
Heskett, J. L., Jones, T. O., Loveman, G. W., Sasser, W. E., & Schlesinger, L. A. (2008). Putting the service-profit chain
to work. Harvard Business Review, 118-129. Retrieved from https://hbr.org/2008/07/putting-the-service-profit-chain-towork/ar/1
Zeithaml, V. A. (1981). How consumer evaluation processes differ between goods and services. Marketing of Services,
9(1), 25-32. Retrieved from http://www2.fiu.edu/~ereserve/010019222-1.pdf

REFERENCE
Image Credits
Mario. (2012). Juan Valdez Cafe store at El Dorado Airport, Bogota [Online image]. Retrieved September 10, 2015
from https://commons.wikimedia.org/wiki/File:BOG_04_2012_Juan_Valdez_1334.JPG
In the Ad Hoc kitchen [Online image]. (2007). Retrieved September 10, 2015 from
https://www.flickr.com/photos/24509941@N00/1437458598/
Thomas, A. (2005). Starbucks [Online image]. Retrieved September 10, 2015 from
https://www.flickr.com/photos/anyaka/22331380
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 from
https://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0
http://creativecommons.org/licenses/by/3.0/

OPERATIONS MANAGEMENT
with Gopesh Anand

MODULE 1
Operations Strategy

LESSON 1-2
Formulation and Implementation

VIDEO 1-2.5
Lesson 1-2 Recap

LESSON 1-2 RECAP

In this lesson you learned how to:
Appreciate the importance of alignment
of business and functional strategies
Identify the need for tradeoffs in
operations strategy
Make operations strategy choices to
compete
Recognize the goods and services
continuum and its implications for making
operations strategy choices