Operations

and Project
Management

1
Operations in different industrial sectors

What operations are typical of

Primary? Secondary? Tertiary sectors?
 What % of UK GDP does each produce?
What has been the shift in P -S -T% emphasis
1970-2004 in UK exports/imports?
What % of visible trade in 2002 was made up of
manufactures?

Most services incl. elements of product

& viz.

2
What do Operations Managers do?

choose
With your partner,
"an operation"
and list the main
activities the
role demands
 role demands
operations manager planning
 planning
must manage. decisions
 decisions
coordination
 coordination
systems
 systems

3
What is Operations Management?

 Core management activity - “operations deliver”

 Creating,
systems
operating & controlling transformation

 inputs (resources + ideas) produce outputs (goods

and services) for customers (external + internal)
 Managing processes & methods:
 production, productivity, efficiency
 resources: staff (80%) + physical,
technical systems
 Design for production, delivery,
information & control, value- added, quality
 Concerns = design, supply, capacity, scheduling,
quality
4
Operations as a system

Demanding environment

Technology

Boundary management

Boundary management
Energy
Materials
Transformation Goods &
(Conversion) Services
Labour
Process
Capital
Information

Feedback (information) - control over

process inputs & technology

5
Process System (Operation), Variety & Volume

 One-off jobbing - specials, design, build,deliver. Low volume, low standardisation

 Project Management - large, coordinated, special case
 job shop: small batch production, disconnected flow. Low volume, multiple but
similar products
 connected flow line
 one product - high volume,
high standardisation
 large batch - high volume,  roledemands
demands
high standardisation across role
 many product variants  decisions
decisions
 Continuous flow - high volume,
high standardisation
 information
information
 coordination
coordination
 Services
 flexibilities
flexibilities
 supplychain
supply chain
 customer
customer
interface
interface

6
Processes: Characteristics Matrix

Process Make-to-Order
Make-to-Stock
Characteristics Assemble-to-Order
Oil refinery Automobile assembly line
Flour milling Telephone company
Line Flow
Cannery Electric utility
Cafeteria
Machine shop Machine shop
Fast food Restaurant
Batch Flow Glassware factory Hospital
Furniture Custom jewelry
Speculation homes Buildings
Commercial painting Movies
Project
Ships
Portraits
• Market conditions, competition
• Capital requirements
• Labour supply & cost
• Management skills
• Materials supply & cost Source: T. Hill
• State of technology 7
Roles of Operations Manager

Strategic change involves re-structuring, re-engineering

Marketeer Innovator

Strategic change involves enhancing the

Customer service criteria
Enhanced
- emphasises Quality
Product/service

operation’s infrastructure
Quality performance
Dependability Speed
Range New prod. devel

Maintainer Reorganiser
- emphasises Quality
Basic

Schedule Product/service
Dependability performance
Quality Flexibility
Price/cost Speed
Traditional Enhanced
Operations process design 8
Ops Mgt - a complex interfacing role

• thinkers + doers + decision-takers

• many people to be managed + 70% of assets
• largest budget areas/cost centres
• direct costs & overheads, process and time-oriented
• measurable/controllable measures of progress + outputs (product,
volume, time, £, wastage, labour).
• work-flow and cash-flow
• short-termism (time constraints & dependencies)
• cost of a day’s lost production vs. long-term perspectives
• hard-edged management of product & process technology
• information sub-systems to control the whole
• logistics and dispersed operations

9
A Broad Field

 market & strategic implications

 research, design & development (product & service)
 tactical programmes (product-service mix, variety + value)
 capacity management & scheduling
 facilities & layout
 information & control systems
 process design & engineering, work study & productivity
 materials planning & stock control
 work structuring, motivation & rewards
 equipment maintenance & servicing
 QA
 health, safety & environmental care
10
 The Operations Environment

Competitive
External The Economy, the Society
Environment
Staff & Design &
Marketing
skills Engineering

Suppliers Ops: transformation system Customers

Finance & Purchasing Information

Accounting & Logistics Systems

Government

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Linking operations to business strategy

strategic alternatives
 product imitator Marketing
Marketing fits
fits easily
easily within
within
 product innovator corporate
corporate debate.
Corporate
debate.
Corporate bosses
bosses seldom
seldom have
have
operations
operations experience.
experience. Assume
Assume
“operations”
“operations” will
will cope.
cope.
"We
"We sell
sell products
products & & services
services NOT
NOT
market
market segments"
segments"
How to
• qualify for market entry and
• become “order winners” in a market.
Focus on how products/services win orders
NOW and TOMORROW

12
Operations Strategy

Contribution to
• competitiveness and market leadership

Operations functions
• needs clear, consistent, achievable objectives & implementation
• A move from safe, conservative ops to market/fashion leader?
requires different + better
• responsiveness,quality, information, control, skills
• production processes, supplier relationships
• uses of technology and design applications

Who
Who &
& what
what drives
drives ops
ops strategy
strategy &
& technological
technological innovation?
innovation?
Accountants,
Accountants, marketing,
marketing, sales,
sales, partners,
partners, innovators
innovators and
and
inventions,
inventions, competitors,
competitors, customers?
customers?

13
Beyond the Engineering Ops Mgr.

Traditionally busy-busy male/macho.

 hard - reactive, fire-fighters
 local, technically focused thinkers (not corporate HQ types)
 “gut-feel”, “get the goods out”
 lower level focus on things > concepts, now > tomorrow, trade-offs >
creativity, coping > long-term
How does this fit in with
services?
Need to think strategically
 informed, systematic development Failures on quality & price?
 intelligent, visionary implementation
 researched decision-making: detailed evaluation & planning
 balancing constraints
 co-ordinate people/teams, technology & IT systems

14
Operations Strategy Model

Business strategy

Operations Strategy
Mission

Distinctive Functional strategies:

Internal & Competence marketing, finance,
external engineering, staff &
Objectives
analysis cost, quality, flexibility, delivery information systems

Policies:
process, quality systems,
capacity,& inventory

Consistent decisions Results

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Policy Areas

Policy Examples Strategic Choices

Process In or out Make or buy,
Automation automation, routinisation.
Process flow FMS, JIT
Job specialisation
Supervision
Quality QMS approach, Inspection or zero defects, technical &
Systems Training, suppliers Managerial skills, costs of quality

Capacity Facility size, One big or several small facilities

Location, Near markets, low cost, or foreign
investment Permanent or temporary

Stock & Stock levels, High or low levels, centralised or

logistics Distribution, decentralised, tight controls?
Control systems Warehousing

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From the early 1980s

Operations gets more attention

Not just manufacture (declining in terms of GDP) but services also.

Main influences:
• Competition & Pacific Rim industrial machine
• Privatisation, open markets & de-regulation
• Demand for higher quality goods - cheaper &delivered quicker.
• Market entry and order winners.
home firms losing market share must improve ops. practices
learn from Japanese experience

Are ops. managers sufficiently focused:

• To influence value added chain as a whole?
• Make more contribution to strategic processes?

17
 Michael Porter -- Value-Added Chain Analysis

Support Technology development

Activities
Procurement

Primary Inbound Operations Outbound Marketing After

Activities logistics logistics and sales sales
service

Employee management
Support
Activities Firm’s infrastructure

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Value-Added Chain

Ops. Managers to address every activity on the chain.

Performance related, value-added objectives include

 right, first time. Produce to target + quality.

 time compression - customer response, lead times,
eliminate delays, bottlenecks & inventory
 predictability - control events, actions & relationships for
flexibility (new products/service range, volume & delivery)
 control over costs (staff, facilities/technology, materials)
 NB produce in-house or buy-in(out-source).

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Analyse each value-added stage

 identify elements/content (I-P-O + info) of each

stage + design characteristics
 how do we (& how well do we) secure supplies
/suppliers & other inputs?
 how effectively do we
 manufacture components from raw materials?
 assemble components into finished goods & services?
 distribute finished product to wholesalers, retailers & end-
users?
 provide maintenance & after-care?

20
Peters & Waterman - In Search of Excellence

Core business, stick to the knitting, lean organisation

 Sept 1996 British Airways consider selling off BA Engineering,

concentrate on transporting passengers & cargo. Out-sourcing to
save £1 billion
 baggage handling & ticket processing
 aircraft engineering maintenance
 in-flight catering • Ops Mgr. involv’t in
strategic decisions?
 computer services • Can vertically
Profitable market leader anticipating
integrated firm
 deregulation of air travel become too lean?
 lower fares & new competition • Undermining
quality/flexibility by
zealous out-sourcing?

21
Strategy reflected in

 policies, plans/programmes, budgets & allocations

 systems, methods, actions, behaviours, communications
Key Facets
 product devel. + PLC + innovators & imitators
 self-sufficiency (vertical integration) or out-sourcing
 automation & technological exploitation
 adjusting the product-service mix
 delivering quality, price + availability (qualifiers vs. order winners)
 process choice & improvement
 site/branch location
 planning & information systems (transaction + MIS)
 people: competencies & commitment (competitive advantage)
22
Ops Mgt Decision Framework

1. 2. 3. Product/operations
strategy
Winning orders
Corporate Marketing in the 4. Process 5. Infrastructure
objectives strategy marketplace? choice
• Γροωτη • Προδυχτ/σερϖιχε • πριχε • χηοιχε • φυνχτιον
• Συρϖιϖαλ µαρκετσ & • θυαλιτψ • τραδε−οφφσ συππορτ
• προφιτ σεγµεντσ • δελιϖερψ σπεεδ • ποσιτιονινγ • οπσ πλαννινγ &
• ΡΟΙ • Ρανγε + ρελιαβιλιτψ • χαπαχιτψ: ινφο σψστεµσ
• οτηερ ≤ • Μιξ • ρεσπονσιϖενεσσ σιζε, τιµινγ, • ΘΑ & χοντρολ
µεασυρεσ • ςολυµεσ το δεµανδ λοχατιον • σψστεµσ
• Στανδαρδισατιον • δεσιγν φεατυρεσ • ρολε οφ ενγινεερινγ
ϖσ. χυστοµισατιον & λεαδερσηιπ ινϖεντορψ ιν • χλεριχαλ
• Λεϖελ οφ • προδυχτ/σερϖιχε προχεσσ προχεδυρεσ
ιννοϖατιον ρανγε • ωαγε σψστεµσ
• Λεαδερ ϖσ. • τεχηνιχαλ • ωορκ &
φολλοωερ συππορτ οργανισατιοναλ
στρυχτυρεσ

Source: Hill T, Manufacturing Strategy, Macmillan, 1993

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Contributions

Capacity & capability

 Can we produce? How well?
Efficiency
 How well is the process managed & controlled?
 The transformation indicators & ratios?
 Cost/unit, cost/patient day, profit/employee,
sales/employee?
Benchmark comparisons
 efficiencies, processes & outputs
 investment - £, technical & human
 quality, systems, R&D

24
Market growth & profitability

 increased capacity = long term investment (irreversible?)

 have we the capacity to make/offer?
 what will be the order rate/demand?
 will customers queue, wait, take part-orders?
 insufficient capacity (lose market share + difficult to catch up)
 excess capacity ---> higher costs, low/negative ROI
 inadequate capacity, long lead times, quality problems,
competitors advantage
 Do we lead or follow demand? At end of PLC: market
saturation, over-capacity, price competition.
 Divest or diversify?

25
 Product-Process Matrix

1. Low vol. & 4. High vol. and

2. Multiple products, 3. Few major products
standardization, standardization,
low volume higher volume
one of a kind commodity products

Product Structure
1 Jobbing Commercial
Printer

None
Process Structure

2 Batch Heavy
Equipment

3 Line flow Refridgerator

(assembly) assembly

4 Continuous Refinery
Flow process None
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 Mass Customisation & Strategic Process Choices

after T Hill HIGH/LONG

Social
Counselling
Make to
Order On-line
Internet
education

Cost/Lead Time
Modular Volume
kitchen
Assemble to installation
Order

Subs
MASS
Dell CUSTOMISATION
Make to Stock
White-goods Customisation
producer
LOW/
SHORT
LOW Degree of
HIGH
customisation 27
 Operations & the Product Life Cycle

Maturity

Growth
Profit
Development & launch

£/volume Develop
or decline

Loss Product Life Cycle

Implications for Operations Strategy?

Time

28
New Product Design Process

Concept development

Product design Preliminary process design

Pilot production/testing Final process design

29
 Design for manufacture (source T. Hill)

original design
revised design

final design

one-piece base &

elimination of fasteners

Assembly using Design for push-and-snap

common fasteners assembly

Modular design
More variety from a set components (modules) to be
assembled. Reduce complexity & costs of product variations
30
MTS and MTO

• Advantages/disadvantages
• Key performance measures
• Information flows

Characteristics Make-to-Stock Make-to-Order

Product Producer-specified Customer-specified
Low variety High variety
Inexpensive Expensive

Objectives Balance inventory, Manage delivery lead

capacity, and times and capacity
service
Main operations Forecasting Delivery promises
problems Planning production Delivery time
Control of inventory

31
 Make or Buy Decision

 compare costs
 quantitative + qualitative decision
 buy
 Poor internal capacity/facilities?
 Less complex acquisition, less internal scheduling & mgt
 Specialist, volume supplier, offers expertise & lower prices
 make
 Cannot buy item/service at price, quality, quantity or delivery
 Increase utilisation and capacity (plant & people)
 Reliability, risk - not being supplied to quality on time etc
 Retain autonomy/independence

32
Flows thru manufacturing and supply chains

Supplier Stock Process Stock Customer

Supplier Process Stock Customer

Supplier Stock Process Customer

Supplier Process Customer

Source: Wild

33
 Resource & customer flows thru. service systems

Time/capacity
Resource Slack
Process Customer
Customer Queue

Resource
Process Customer
Customer Queue

Resource Slack
Process Customer
Customer

Source: Wild

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