Operations Management 1

Opera&ons
Management OM0100_0112
Andreas Robo&s ALBA Jan. 2012
Andreas Robotis

Education

BS Mechanical Engineering- National Technical University of Athens

MSc Mechanical Engineering- USC (Los Angeles, CA)

MSc Electrical Engineering-UCLA (Los Angeles, CA)

Ph.D. INSEAD

Teaching

Operations Management, Operations Strategy, Sustainable Supply Chain Management, Statistics

Research Focus

Operational Leasing, Remanufacturing, Reverse Logistics

ALBA, OM0100_0112, Andreas Robo&s
Plagiarism is not accepted and it leads to a fail grade and addi&onal consequences according to ALBA rules In your write-ups, always men&on the references you use (books, ar&cles, etc.). Failing to do so and presen&ng somebody elses work as yours is considered plagiarism. This course requires your ac&ve par&cipa&on. It is also required to read all cases ahead of class. No late hand in of write-ups.
WHY OPERATIONS MANAGEMENT?

The consultancy services market: % of revenue of 40 largest firms Marketing Financial 2% 6% Organizational Design 11% Accounting 16% Operations and Process Management 31%
IT strategy 17%
Corporate Strategy 17%
Impact of announcements on share price

Marketing events
Change in firm name Brand leveraging Celebrity endorsement New product introduction Affirmative action awards 0.7% 0.3% 0.2% 0.7% 1.6%
Financial events
Stock splits 3.3% Open market share repurchase 3.5% Seasoned equity offerings -3.0%
Information technology events

IT Investments B2C e-commerce B2B e-commerce IT problems 1.0% 10.5% 3.3% -1.7%
Operational events
Increase in capital expenditure Increase in R&D expenditure
Source: Singhal (2007)
1.0% 1.4% Effective TQM implementation 0.7% Internal corporate restructuring 1.0% Decrease in capital expenditure -1.8% Plant closing -0.7% Undersupply (shortfalls) -7.2%
A message..
How you manage your opera&ons can have a signicant impact on your rms nancial performance..
Interrelatedness of industrial decisions

Product Design
What products should be offered by the company?
Process Design
How to manufacture the products?
Production capacity
How many products should be manufactured?
Classification by response to market

Procurement lead time Fabrication lead time Assembly lead time Delivery lead time Zero Finished goods inventory = assembly lead time Components inventory = Fabrication lead time + Assembly lead time = Procurement lead time + Fabrication lead time + Assembly lead time
Make-to-stock MTS Assemble-to-order ATO Make-to-order MTO Engineeringto-order ETO
Raw materials inventory Anticipated production Production to order Order Entry Point
Make-to-stock Process
Manufacture Assemble F.G. I. Ship
Characteristics: standardization, short delivery times, low costs
Delivery Lead Time
Delivery Date Order Received
Make-to-order Process
Raw Material
Manufacture
Assemble
Ship
Delivery Lead Time

Order Received Delivery Date
Characteristics: Customization, Long delivery times, high costs

Assemble-to-order Process
W.I.P.
Manufacture
Assemble
Ship
Characteristics: Mass Customization, medium delivery times, medium costs
Delivery Lead Time

Order Received
Delivery Date
Process re-sequencing at Benetton
Standard Process
Dyed Yarns Finished Sweaters
Dyeing
Knitting
Benetton Process
White Garments Finished Sweaters
Knitting
Dyeing
Classification by process type

dependent on the quantities produced, the level of standardization, and the organization of the production process
1. Non-repetitive production (project) 2. Job shop 3. Batch production 4. Repetitive Flow / Assembly Lines / Mass Production 5. Continuous flow (process)
1. non-repetitive production / projects

non-routine, non-repetitive undertaking with clear start and finish
Examples: Apollo mission, Alaska Pipeline, Olympics, install SAP, new car development, build a refinery, build a highway Project size: Small - within department, Medium - within company, Large - multiple organizations Characteristics: a) Non-routine, non-repetitive undertaking b) Clear start & finish temporary activity c) Limited learning curve d) Less room for correcting bad decisions e) Many departments / organizations involved f) Activities unbalanced Layout: Equipment is brought to the place of production
2. Job Shop
Production of variety of small-volume customized products, most requiring different set of sequence of processing steps. Grinding Forging Lathes
Painting
Welding Milling machines
Drills
Examples: print shop, machine shop, tool and die shop, some plastic molding operations
Office
Foundry
Characteristics: a) Wide variety of parts or products b) Flexible process c) Different routings, complex material flow d) Labor intensive e) Information as to what to do next follows with the job Layout: Similar equipment grouped together
3. Batch production
Products produced in periodic batches
Examples: chemical industry, semi-conductor fabrication, apparel, metal forming / machining
Characteristics:
a) Produce products of similar type at same time b) Product moves from department to department in batches c) Fixed lot sizes (batch size) due to high setup times (reconfigure facility periodically to achieve some variety) d) Typically standard product mix, but some flexibility in volume and mix of outputs e) Typcially similar flow pattern through plant Similar to Job Shop
Layout:
4. Repetitive Flow / Assembly Line

Production of discrete parts moving from one workstation to next at a controlled rate
Examples: auto assembly lines, consumer electronics, computers, packaging lines
Characteristics: a) Small number of products b) Product moves from one operation to the next c) Standardized, often automated material flow via assembly line, e.g. belt conveyor d) High fixed costs, specialized equipment Layout: Product specific equipment grouping
Different types of assembly lines

Front Panels Jeep
Boeing 767
Sandwich
Difference in assemblies for airplane, sandwich, automobile?

5. Continuous Flow
Material flows continuously from one process to next
Examples: oil refinery, food processing, paper making,
Characteristics: a) Small number of products b) Material moves constantly from one process to next c) High degree of automation (high capital needs) d) WIP low relative to output Layout: Product specific layout
King Soopers Bakery
King Soopers Bakery

Flexibility
50 cakes/hr 1000 pastries/hr Cake line 7000 loaves/hr
Pastry line Bread line

Low High
Volume
Process comparison
Cakes
process volume job shop low
Pastry
batch prod. moderate moderate moderately difficult / expensive
Bread
line flow high high difficult & expensive
automation low / none capacity change easy & inexpensive
labor
skilled
semi-skilled
little skill
Product Process Matrix

Projects Customization / Variety (Flexibility) Job Shop Batch Prod. Repetitive Flow Continuous Flow Volume (Productivity)
Why not off diagonal?
the optimal way to serve very distinct market segments, such as express and ground, is to operate highly efcient, independent networks.

FedEx Corp.
Our integrated air and ground network enhances pickup and delivery density and provides us with the exibility to transport packages using the most efcient mode or combination of modes.

United Parcel Service

Operations Management & Operations Strategy

Operations Management is
about controlling, managing, and improving operational (daily) repetitive economic activities
often concerned with a individual process and given set of resources and products.
Operations Strategy is
about choosing the asset bundle & processes and building future capabilities
less about one process, more about the collectivity
must specify all resources and processes in the value chain and plan for the future

Competitive Strategy & Operations Strategy

Competitive strategy: ..the search for a favorable competitive position in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a protable and sustainable position against the forces that determine industry competition. The essence of formulating competitive strategy is relating a company to its environment. (Porter)
Operations strategy is strategy with the brightness turned up on choosing real assets & processes and building future capabilities:
It is less about industries and choosing a position, more about rms and delivering, enhancing and protecting the value proposition
It must specify all real assets and processes in the value chain and plan for the future being mindful of the companys strategy, other parts of the organization, and the competition

What do these companies/products have in common?
QUALITY!
DELIVERY!
FLEXIBILITY! (tailored products)

(LOW) COST! (LOW) QUALITY?
Internal Perspective of Operations Strategy

Three views of Operations

Competency View Operations Strategy Resource View
Set of real assets
-Tangible
-Intangible
Values: Organizational priorities
Cost, Flexibility, Availability/time, Quality
What operations can and cannot do

Process View
Network of activities;
-Flow of physical units
-Flow of information
-Flow of nance

Max NPV
Operations strategy is plan for developing and acquiring resources and conguring processes such that the resulting competencies maximize net present value.

Big Picture: Principle of Alignment

Competitive Strategy
How do we compete & provide value to our customers?
Prioritize our customer value proposition around price, responsiveness, quality, variety
Resource perspective
Market perspective
What must operations do particularly well?
Competencies
Prioritize our process competencies around cost, flow time, quality, flexibility
Resources & Processes
How do we configure and develop our operations?

Configure the activity network or processes Develop the bundle of real assets or resources
Adopt the market and resource perspective to ensure that activities, assets and competencies are aligned with the competitive position sought over time

The Framework and Key Elements

Competitive Strategy
Price
Availability / Timing
Variety
Quality

Competencies Operations Strategy Resources

(Capacity Portfolio) Size
How many
resources, how much capacity?

Cost

Capacity

Flexibility

Quality

Processes
(Activity Network) Location
Where are resources? Type of network
Timing
When is capacity adjusted?
Type
What kinds of assets? Function & Flexibility
Supply
Sourcing, Supply mgt, Extent of vertical integration
Technology Innovation
Product tech Process tech Info & coordination tech How do we innovate, learn, improve?
Demand
How do we manage demand?
Example: Zara

Competitive Strategy Competencies Operations Strategy Resources
(Capacity Portfolio) Size Timing Type Location Supply
Prioritize timely availability & selection (Variety)
Keeping price & quality reasonable
High perceived quality (style)

Fast response times. High level of coordination between designers and retailers

Processes
(Activity Network) Technology Innovation Demand
Fully owns large design centers, factories and distribution centers

Outsources little; most suppliers located in Spain
Controlling interest in 90% of retail network
Makes more trendy clothes, gets basic stuff from offshore
Design capacity 11,000 new styles per year, 200 professionals
Invested in tech for low set-up times. Centralized distribution.
High assets/sales ratio, low utilization (~50%)
Use of IT to share information throughout the supply chain
Direct access to highways, road networks and airports.
Short style campaigns > demand induced by scarcity

Fast new designs inspired by urban hot spots, fashion shows, feed ALBA, OM0100_0112, back from obo&s
Andreas R retailers.
Is Zara model for everyone?

High customer willingness to pay for speed-to-market
Short production life cycle with high demand uncertainty
Low costs of excess capacity and lower scale of economies
Low costs of stock outs and distribution relative to inventory holding.

Great operations strategies are tailored to each rms overall strategy and environment.

Strategic Operational Audit

How to access Strategic Fit (External alignment)

Deliverable Value Propositions
Resource view
Strategy Gap?
Value Proposition
Market view
Competencies
Competency Gap?
Needed Competencies
Resources & Processes
Resource & Process Gap?
Needed Resources & Processes
Product-Process Matrix

How to access focus (Internal alignment)

Process Technology (Flexibility)
Job Shop (High)
C A Jumbled flow Process segments loosely linked
Disconnected line flow Jumbled flow but a dominant flow exists
Connected line flow (e.g., assembly line)
Continuous, automated, rigid line flow Process segments tightly linked
Flow Shop
(Low) Standardized Products Customer Solutions

Commodity products Few Major Products Many Products High volume (Low) ALBA, OM0100_0112, Andreas Robo&s One of a kind Low volume
Product Concept (High) (Variety)
Balanced Scorecard

How to describe OS and overall alignment

Customer Perspective
Value Proposition Financial Perspective
Growth Strategy
Productivity x Revenue
Innovation/Learning
Perspective
Innovation/ Learning
Competencies Operations Strategy Resources Processes Internal Operations Perspective

Understanding Trade-offs

high
Customer Trade-offs

BJG
high
Firm Trade-offs

BJG
Custom design Job shop process
Private jet owner
Process Flexibility
Customiza9on
low
low
Commuter airline
C&D Aerospace
Standard design Flow shop process
C&D Aerospace
high
Total Cost of Ownership
low
high
Unit Cost
low
Trade-off Principle: Operational competencies are governed by
trade-offs. These rm trade-offs are shaped by the choice of resource bundle and the conguration of the activity network.

Improvement and the Efcient Frontier

Improvement creates options to increase differentiation or cost-efciency
The frontier is the outer envelope of all competency trade-off curves

100
90 80 70 60 50 40 30 20 10 1
100
operational improvement
Product Selec9on N
New op&ons for this year
Last years posi&on
$1.12
$1.10
$1.08 $1.06 $1.04 Unit Cost c (inverted)
$1.02
$1.08 $1.06 $1.04 Unit Cost c (inverted) ALBA, OM0100_0112, Andreas Robo&s $1.00
90 80 70 60 50 40 30 20 10 1
Firm 3 Firm 4
Set of not-attainable competencies at this time
Product Selection N
cOE
Ecient fron9er
Firm 2
Firm 1
$1.12
$1.10
$1.02
$1.00
$0.98
$0.96
Focused Operations

Focus is a joint property of the process and of how we choose to utilize it.
Focus principle: A focused operation is more likely to have a competitive advantage by being near the frontier.

Non-cost competency X A focused process has a consistent operating point on its trade-off curve Non-cost competency X The operating points of an unfocused process are scattered over a large region on its trade-off curve
High
Unit Cost c
Low
High
Unit Cost c
Low
How to Focus: Divide and conquer

Partition products and services into groups with homogeneous competency needs. (The example to the right has 3 groups.) Consider product-line rationalization.
For each group, separate those resources and processes that critically support its value proposition while sharing the others.
Create a charter for each operation to retain focus over time.

Competency Space
Quality
Cost eciency
Degree of focus of opera9onal system One single system shared by three groups Three separate tailored systems, each one degree of focused on one group focus
Focus is not easy

Difcult to resist barrage of opportunities.

Always easy to see what you lose than what you gain from focus.

Focus is often incorrectly confused with narrow product mix

High variety operations excel by focusing on processes. Examples: Dell, Taco Bell, Five star hotels and restaurants,

Requires strategic commitment hence is risky


Operations Management 1

Transféré par

Informations du document

Description originale:

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Operations Management 1

Transféré par

Droits d'auteur :

Formats disponibles

Opera&ons

ALBA, OM0100_0112, Andreas Robo&s

ALBA, OM0100_0112, Andreas Robo&s

WHY OPERATIONS MANAGEMENT?

Corporate Strategy 17%

ALBA, OM0100_0112, Andreas Robo&s

Impact of announcements on share price

Information technology events

Increase in capital expenditure Increase in R&D expenditure

Source: Singhal (2007)

ALBA, OM0100_0112, Andreas Robo&s

ALBA, OM0100_0112, Andreas Robo&s

ALBA, OM0100_0112, Andreas Robo&s

ALBA, OM0100_0112, Andreas Robo&s

Interrelatedness of industrial decisions

What products should be offered by the company?

How to manufacture the products?

How many products should be manufactured?

ALBA, OM0100_0112, Andreas Robo&s

Classification by response to market

Make-to-stock MTS Assemble-to-order ATO Make-to-order MTO Engineeringto-order ETO

ALBA, OM0100_0112, Andreas Robo&s

Characteristics: standardization, short delivery times, low costs

Delivery Lead Time

Delivery Date Order Received

ALBA, OM0100_0112, Andreas Robo&s

Delivery Lead Time

Characteristics: Customization, Long delivery times, high costs

Characteristics: Mass Customization, medium delivery times, medium costs

Delivery Lead Time

ALBA, OM0100_0112, Andreas Robo&s

Process re-sequencing at Benetton

Classification by process type

ALBA, OM0100_0112, Andreas Robo&s

1. non-repetitive production / projects

Welding Milling machines

Examples: chemical industry, semi-conductor fabrication, apparel, metal forming / machining

4. Repetitive Flow / Assembly Line

Examples: auto assembly lines, consumer electronics, computers, packaging lines

Different types of assembly lines

Difference in assemblies for airplane, sandwich, automobile?

Examples: oil refinery, food processing, paper making,

King Soopers Bakery

ALBA, OM0100_0112, Andreas Robo&s

King Soopers Bakery

Pastry line Bread line

automation low / none capacity change easy & inexpensive

ALBA, OM0100_0112, Andreas Robo&s

Product Process Matrix

Why not off diagonal?

Operations Management  & Operations Strategy

ALBA, OM0100_0112, Andreas Robo&s

Competitive Strategy  & Operations Strategy

What do these companies/products have in common?

What do these companies/products have in common?

What do these companies/products have in common?

FLEXIBILITY! (tailored products)

What do these companies/products have in common?

(LOW) COST! (LOW) QUALITY?

ALBA, OM0100_0112, Andreas Robo&s

Internal Perspective of Operations Strategy

Big Picture: Principle of Alignment

What must operations do particularly well?

Operations Management & Operations Strategy

Competitive Strategy & Operations Strategy