CHAPTER 1

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

The business function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company.

A management function
An organizations core function

In every organization whether Service or

Manufacturing, profit or Not for profit
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OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

Companies often do not understand the differences between operational efficiency and strategy Operational efficiency is performing tasks well, even better than competitors Strategy is a plan for competing in the marketplace Operations strategy is to ensure all tasks performed are the right tasks
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A business strategy is developed after taking into many factors and following some strategic decisions such as; What business is the company in (mission) Analyzing and understanding the market (environmental scanning) Identifying the companies strengths (core competencies)

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

Operations Strategy is a plan for the design and management of operations functions Operation Strategy developed after the business strategy Operations Strategy focuses on specific capabilities which give it a competitive edge competitive priorities

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

Four Important Operations Questions: Will you compete on Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?

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Offering product at a low price relative to competition

Typically high volume products

Often limit product range & offer little customization May invest in automation to reduce unit costs Can use lower skill labor Probably use product focused layouts

Low cost does not mean low quality

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Quality is often subjective Quality is defined differently depending on who is defining it Two major quality dimensions include

High performance design:

Superior features, high durability, & excellent customer service

Product & service consistency:

Meets design specifications Close tolerances Error free delivery

Quality needs to address

Product design quality product/service meets requirements Process quality error free products

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Time/speed one of most important competition

priorities

First that can deliver often wins the race Time related issues involve

Rapid delivery:
Focused on shorter time between order placement and delivery

On-time delivery:
Deliver product exactly when needed every time

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Company environment changes rapidly Company must accommodate change by being flexible

Product flexibility:
Easily switch production from one item to another

Easily customize product/service to meet specific requirements of a customer

Volume flexibility:
Ability to ramp production up and down to match market demands

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Decisions must emphasis priorities that support business strategy Decisions often required trade offs Decisions must focus on order qualifiers and order winners

Which priorities are Order Qualifiers? e.g. Must have excellent quality since everyone expects it

Which priorities are Order Winners? e.g. PIA, SHAHEEN & AIR BLUE VS EMIRATES competes on cost McDonalds competes on consistency FedEx TCS DHL competes on speed Custom tailors compete on flexibility

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OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

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To add value Increase product value at each stage Value added is the net increase between output product value and input material value Provide an efficient transformation Efficiency means performing activities well for least possible cost

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Manufacturing
Tangible product Product can be inventoried Low customer contact Longer response time Capital intensive

Services
Intangible product Product cannot be inventoried High customer contact Short response time Labor intensive

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Both use technology Both have quality, productivity, & response issues Both must forecast demand Both will have capacity, layout, and location issues Both have customers, suppliers, scheduling and staffing issues Manufacturing often provides services Services often provides tangible goods

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Some organizations are a blend of service/manufacturing/quasimanufacturing Quasi-Manufacturing (QM) organizations QM characteristics include

Low customer contact & Capital Intensive

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All organizations make decisions and follow a similar path

First decisions very broad Strategic decisions

Strategic Decisions set the direction for the entire company;

they are broad in scope and long-term in nature.

Following decisions focus on specifics - Tactical decision

Tactical decisions: focus on specific day-to-day issues like resource needs, schedules, & quantities to produce are frequent

Strategic decisions less frequent Tactical and Strategic decisions must align
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OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

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Customers demand better quality, greater speed, and lower costs Companies implementing lean system concepts a total systems approach to efficient operations Increased cross-functional decision making

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OM has the most diverse organizational function Manages the transformation process OM has many faces and names such as;
V. P. operations, Director of supply chains, Manufacturing manager Plant manger, Quality specialists, etc.

All business functions need information from OM in order to perform their tasks Most businesses are supported by the functions of operations, marketing, and finance The major functional areas must interact to achieve the organization goals
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OPERATIONS MANAGEMENT CHAPTER 1 SARDAR ROHAIL KHAN

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Technology has positive and negative potentials

Positive
Improve processes Maintain up-to-date standards Obtain competitive advantage

Negative
Costly Promotes dependency Risks such as overstating benefits

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Technology should

Support competitive priorities Can require change to strategic plans Can require change to operations strategy

Technology is an important strategic decision

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Productivity is a measure of how efficiently inputs are converted to outputs

Productivity = output/input

Total Productivity Measure:

Total Productivity = (total output)/(total of all inputs)

Partial Productivity Measure:

Partial Productivity = (total output)/(single input)

Multi-factor Productivity = (total output)/(several inputs)

Multifactor Productivity Measure:

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