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Strategic Operations Management

Prof. Noel M. Teves

Introduction to Strategic Operation Management

Chapter 1

Learning Objectives
Describe and differentiate Operation Management, Strategic Management and Strategic Operations Management. Understand the concept of Strategic Operations Management the major responsibilities that face operations managers



Operation Management
is the set of activities that creates value in the form of goods and services by transforming inputs into outputs The management of systems or processes that create goods and/or provide services Focus Planning & Decision-making

Operation Management
Is concerned with those activities that enable an organization (and not one part of it only) to transform a range of basic inputs into outputs for the end customer. Is very wide in scope of responsibilities and will draw upon a range of functions within the organization, not be limited to a specific department. Is concerned with uniting these other areas and functions into a central core of capabilities for the organization.

Operation Management
Is no longer limited to a narrow focus on organization-specific activity. In the modern era of operations management, organizations no longer see themselves as a stand-alone element in the overall process but will, instead, see themselves as part of a wider, extended enterprise.

Operation Management
The activities, decisions and responsibilities of managing the production and delivery of products and services. A transformation process, operations turns individual inputs into a valuable output. The operations function is the part of the organization that is responsible for this activity

Strategic Management
Art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve its objectives

Strategic Management
Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. In essence, the strategic plan is a company s game plan

Strategy Formulation
Vision & Mission External Opportunities & Threats Internal Strengths & Weaknesses Long-Term Objectives Alternative Strategies Strategy Selection

Key Attributes of Strategic Management

 Directs the organization toward overall goals and objectives.  Involves the inclusion of multiple stakeholders in decision making.  Needs to incorporate short-term and longterm perspectives.  Recognizes tradeoffs between efficiency and effectiveness.

Why is operations management so important?

Operations can have a significant impact on strategic success  Operations management can reduce costs  Operations management can increase revenue  Operations management can reduce the need for investment  Operations management can enhance innovation

Scope of Operations Management

Operations Management includes:

Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees Deciding where to locate facilities Supply chain management And more . . .


Operation Management
Operations managers
The staff of the organization who have particular responsibility for managing some or all of the resources which comprise the operation s function Responsible for overseeing the overall activities of the function of the organization which are:
Primary Function Support Function

The broad scope of operations management s responsibilities

Technical Function
Product/Service Development Function

Accounting and Finance Function

Process Technology Options

Process Technology needs

Communicating the capabilities and constraints of operations process

Financial Provision of analysis for relevant data performance and decision Operations a Functions making Communicate Communicating Human the capabilities Market Resource Needs and constraints Requirements Communicating of operations Recruitment, Information Human process Systems for development System Needs Resource design, and training Function planning, and control and improvement Core Functions

New product/service ideas

Marketing Function

Information System Function

Support Functions

Activities of Core Functions in some Organizations

Core Functional Activities Internet Service Provider Promote Services to users and get registrations Sell advertising space Fast Food Chain International aid Charity Develop funding contracts Mail out appeals for donations Furniture Manufacturer Advertise in magazines Determine pricing policy Sell to stores Marketing and Sales Advertise on TV Device promotional materials

Product/Service Development

Devise new service and commission new information content

Design Hamburgers, pizzas, etc. Design dcor for restaurants

Develop new appeals campaigns Design new assistance programs

Design new furniture's Coordinate with fashionable colors


Maintain hardware, software and content Implement new links and services

Make burgers, pizza, etc. Serve customers Clear away Maintain equipment

Give service to the beneficiaries of the charity

Make components Assemble furniture

Why Study Operation Management?

OM is one of three major functions (marketing, finance, and operations) of any organization We want (and need) to know how goods and services are produced We want to understand what operations managers do OM is such a costly part of an organization

What Operations Managers Do?

Basic Management Functions Planning Organizing Staffing Leading Controlling

Strategic Operations Management

Working Definition

Refers to the management of systems or processes of formulating, implementing, and evaluating organizations that create goods and/or services which aims to achieve competitive advantage with a specific purpose.

Significant Events in Operation Management

Historical Events
Era Events / Concepts Steam Engines Industrial Revolution Division of Labor Interchangeable parts Principles of Scientific Management Scientific Management Time and motion studies Activity Scheduling chart Moving Assembly Line Dates 1769 1776 1790 1911 1911 1912 1913 Originated by: James Watt Adam Smith Eli Whitney Frederick W. Taylor Frank and Lilian Gilbreth Henry Gantt Henry Ford

Historical Events
Era Events / Concepts Hawthorne Studies Dates 1930 1940 s Human Relations Motivation Theories 1950 s 1960 s Linear Programming Digital Computer Operations Research Simulation, waiting line theory, decision theory, PERT/CPM MRP, EDI, EFT, CIM 1947 1951 1950 s Frederick Herzberg Douglas McGregor George Dantzig Remington Rand Operations Research Group Joseph Orlicky, IBM and others Originated by: Elton Mayo Abraham Maslow

1960 s 1970 s

Historical Events
Era Events / Concepts JIT (Just-in-time) TQM (Total Quality Mgt) Quality Revolutions Strategy and Operations Business Process Reengineering Six Sigma Dates 1970 s 1980 s 1980 s 1990 s 1990 s Originated by: Taiichi Ohno (Toyota) W. Edwards Deming, Joseph Juran Wickham Skinner, Robert Hayes Michael Hammer, James Champy GE, Motorola

Historical Events
Era Internet Revolution Events / Concepts Internet, WWW, ERP, Supply Chain Management E-Commerce WTO, European Union, and other trade agreements, global supply chains, outsourcing, BPO, Service Science Dates 1990 s Originated by: ARPANET, Tim BernersLee SAP, i2 Technologies, ORACLE Amazon, Yahoo, eBay, Google, and others Numerous Countries ad Companies

2000 s 1990 s 2000 s


The Heritage of Operation Management

Division of labor (Adam Smith 1776; Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Coordinated assembly line (Ford/ Sorenson 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950)

The Heritage of Operation Management

Computer (Atanasoff 1938) CPM/PERT (DuPont 1957) Material requirements planning (Orlicky 1960) Computer aided design (CAD 1970) Flexible manufacturing system (FMS 1975) Baldrige Quality Awards (1980) Computer integrated manufacturing (1990) Globalization (1992) Internet (1995)

Eli Whitney
Born 1765; died 1825 In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket

Cotton Gin and Musket

Frederick W. Taylor
Born 1856; died 1915 Known as father of scientific management In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first motion and time studies and Industrial management

Created efficiency principles

Taylor s Principles
Management Should Take More Responsibility for:
Matching employees to right job Providing the proper training Providing proper work methods and tools Establishing legitimate incentives for work to be accomplished

Frank & Lillian Gilbreth

Frank (1868-1924); Lillian (1878-1972) Husband-and-wife engineering team Further developed work measurement methods Applied efficiency methods to their home and 12 children! Book & Movie: Cheaper by the Dozen, book: Bells on Their Toes

Henry Ford
Born 1863; died 1947 In 1903, created Ford Motor Company In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station

Paid workers very well for 1911 ($5/day!)

W. Edwards Deming
Born 1900; died 1993 Engineer and physicist Credited with teaching Japan quality control methods in post-WW2 Used statistics to analyze process His methods involve workers in decisions

Contributions From
Human factors Industrial engineering Management science Biological science Physical sciences Information technology

New Challenges of Operation Management

Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization

Global focus Just-in-time Supply chain partnering Rapid product development, alliances Mass customization Empowered employees, teams

Why Study Strategic Operations Management?

Operations and operations management are of strategic importance to an organization. This is because all of the aspirations that modern day organizations have to excel in any of the following:
mass customization lean production agile manufacturing customer-centric provision and so on

Why Study Strategic Operations Management?

Organization depends on the ability of the organization to actually do these things and such capabilities reside within operations. E.g. Toyota and Dell Computers

Chapter 1