Trends and Issues In Operations Management -Prof. M.

Ray

Operations Management
Operations management is defined as
the design, operation, and

improvement of the systems that

create and deliver the firms primary

products and services.

2

Why Study Operations Management?

Systematic Approach to Org. Processes

Business Education/ Career Opportunities

Operations Management

Increase Competitive Advantage/Survival

Cross-Functional Applications
3

Current Trends
96 of the top 100 industries in the U.S. have large $

worth of exports. Exporting industries are characterized by early ongoing investments in advanced product and process technologies.
Productivity is increasing and has become a basis for

competition. Success domestically and globally is dependent on the ability to compete on many fronts, including operations (e.g., internet - easy to find potential customers, but hard to deliver)
Outsourcing of manufacturing and services (e.g., India

and China) is accelerating.

Factors Affecting a Firm's Ability to Ward off Imports and/or Export

Economic/Political
exchange rates trade barriers capital costs inflation capital availability social costs/legal funds flows savings rate interest rates minimum wage

Environmental/social
environmental protection health costs labor unions education system consumer tastes retailing capabilities employee

External
transportation costs logistics resources labor supply, capabilities training resources communications public infrastructure

Corporate

Technological

Operations
costs/productivity quality delivery cycle delivery reliability flexibility for prod change flexibility for vol. change New product introduction inventory mgt. Prod. Planning Control Equip. & process tech #, size, location of facilities logistics customer service information technology

Suppliers
abilities coordination location competition cooperation

strategy R&D risk avoidance engineering role of functions product development Fin-Mktg-Mfg-Eng-R&D process development balance sheet new products financial capacity development process marketing policies export sales competencies Technological sophistication of mgt

Operations Decision Making

Marketplace

Corporate Strategy

Finance Strategy

Operations Strategy

Marketing Strategy

Operations Management

People Materials & Customers

Plants

Parts

Processes Products & Services

Planning and Control

Input

Output

The Transformation Process (value adding)

Key OM Concepts
Efficiency - Doing something at the lowest

possible cost
Effectiveness - Doing the right things to create

the most value for the organization

Value - Quality divided by price

Transformations
Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications
5

Examples of Production Systems

System Hospital Inputs Patients MDs, Nurses Medical Supplies Equipment Conversion Health Care Output (desired) Healthy Individuals

Restaurant

Hungry Customers Prepare Food Food, Chef Serve Food Servers Atmosphere Sheet Steel Engine Parts Tools, Equipment Workers

Satisfied Customers

Automobile Plant

Fabrication High Quality and Assembly Automobiles of Cars Educated Individuals

University

High School Grads Transferring Teachers, Books of Knowledge Classroom and Skills

What about McDonalds?

Service or Manufacturing?

The company certainly manufactures tangible

products
Why then would we consider McDonalds a

service business?

Core Factory Services

Core Services are basic things that customers want from products that they purchase.
Quality Flexibility Speed Price (or production cost)

10

Value-Added Services
Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way.

Information

Problem Solving and Field Support

Sales Support

11

Development of OM as a Field The Names and Emphasis Change, but the Elements Remain Basically the Same!
Scientific Management Moving Assembly Line Hawthorne Studies Operations Research

Manufacturing Strategy
JIT/Lean Manufacturing Manufacturing Resources Planning Service Quality and Productivity

TQM & Six Sigma

Business Process Reengineering Electronic Enterprise Global Supply Chain Mgt.

Historical Underpinnings

OMs Emergence as a Field

13

Some Current Issues

Implementing/sustaining Quality Management initiatives

Consolidating operations resulting from mergers

Speeding up the time to get new products to market Developing flexible production systems to enable mass

customization of products and services

Developing and integrating new technologies Managing global supplier, production and distribution

networks
Outsourcing
14

Operations Strategy
Strategy Process
Customer Needs

Example
More Product

Corporate Strategy

Increase Org. Size

Operations Strategy

Increase Production Capacity

Decisions on Processes and Infrastructure

Build New Factory

Competitive Dimensions
Cost

Quality and Reliability

Delivery Flexibility Speed Reliability Coping with Changes in Demand New Product Introduction Speed Flexibility

Dealing with Trade-offs

For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.
Example II, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems.

Cost
Flexibility Delivery

Quality

Strategy Begins with Priorities

Consider the personal computer assembler

1. How would we segment the market according to product group? 2. How would we identify product requirements, demand patterns, and profit margins for each group? 3. How do we identify order winners and order qualifiers for each group? 4. How do we convert order winners into specific performance requirements?

Competition (Them)

Us Differentiation (Core competencies)

Four Stages of Service Firm Competitiveness

Stage I. Available for Service

Stage II. Journeyman

Stage III. Distinctive Competence Achieved Stage IV. World Class Service Delivery

U. S. Competitiveness Drivers
Product Development

speed development & enhance manufacturability

WIP, space, tool costs, and human effort borrowed from Japanese Keiretsu strong, independent boards of directors

Waste Reduction (JIT Philosophy)

Improved Customer-Supplier Relationships

Improved Leadership

Productivity
Outputs Productivi ty = Inputs
Partial measures output/(single input) Multi-factor measures output/(multiple inputs) Total measure output/(total inputs)

Balanced Scorecard
1. 2. 3. 4. Financial perspective Internal perspective Customer perspective Innovation and learning perspective

Thanks