Krajewski Om9 Ppt 01

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COMPETING WITH OPERATIONS

PowerPoint Slides by Jeff Heyl Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

For Operations Management, 9e by Krajewski/Ritzman/Malhotra © 2010 Pearson Education 1–1

Operations Management  The systematic design, direction, and control of processes that transform inputs into services and products for internals, as well as external, customers  Processes can be linked together to form a supply chain – interrelated processes within a firms and across different firms that produce a service or product to the satisfaction of the customers

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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Across the Organization Finance Acquires financial resources and capital for inputs

Material & Service Inputs

Sales Revenue

Support Functions

Operations

• • • •

Accounting Information Systems Human Resources Engineering

Translates materials and service into outputs Figure 1.1

Marketing Generates sales of outputs

Product & Service Outputs


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A Process View External environment Internal and external customers Inputs • Workers • Managers • Equipment • Facilities • Materials • Land • Energy

Outputs • Goods • Services

Processes and operations

1

3 5

2

4

Information on performance Figure 1.2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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A Process View

More like a manufacturing process

• • • • • •

Physical, durable output Output can be inventoried Low customer contact Long response time Capital intensive Quality easily measured

More like a service process

• • • • • •

Intangible, perishable output Output cannot be inventoried High customer contact Short response time Labor intensive Quality not easily measured

Figure 1.3 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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The Supply Chain View

New service/ product development

Supplier relationship process

Customer relationship management

Order fulfillment process

External customers

External suppliers

Support Processes


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The Supply Chain View  Core processes are sets of activities that deliver value to external customers 1. Supplier relationship process 2. New service/product development process 3. Order fulfillment process 4. Customer relationship process

 Support processes provide vital resources and inputs to the core processes


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Support Processes TABLE 1.1

|

EXAMPLES OF SUPPORT PROCESSES

Capital acquisition

The provision of financial resources for the organization to do its work and to execute its strategy

Budgeting

The process of deciding how funds will be allocated over a period of time

Recruitment and hiring

The acquisition of people to do the work of the organization

Evaluation and compensation

The assessment and payment of people for the work and value they provide to the company

Human resource support and development

The preparation of people for their current jobs and future skills and knowledge needs

Regulatory compliance

The processes that ensure that the company is meeting all laws and legal obligations

Information systems

The movement and processing of data and information to expedite business operations and decisions

Enterprise and functional management

The systems and activities that provide strategic direction and ensure effective execution of the work of the business


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Operations Strategy  Specifies the means by which operations implements corporate strategy and helps build a customer-driven firm  Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions


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Operations Strategy Corporate Strategy • Environmental scanning • Core competencies • Core processes • Global strategies

Market Analysis • Market segmentation • Needs assessment Competitive Priorities • Cost • Quality • Time • Flexibility New Service/ Product Development • Design • Analysis • Development • Full launch

No

Yes

Performance Gap?

Operations Strategy

Decisions • Managing processes • Managing supply chains

Competitive Capabilities • Current • Needed • Planned


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Corporate Strategy  Environmental scanning  Developing core competencies 1. Workforce 2. Facilities 3. Market and financial know-how 4. Systems and technologies

 Developing core processes

 Global strategies


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Market Analysis  Market segmentation

 Needs assessment  Service

or product needs

 Delivery

 Volume  Other

system needs

needs

needs


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Competitive Priorities TABLE 1.2

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DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES

COST

Definition

Process Considerations

Example

1. Low-cost operations

Delivering a service or a product at the lowest possible cost

Processes must be designed and operated to make them efficient

Costco

2. Top quality

Delivering an outstanding service or product

May require a high level of customer contact and may require superior product features

Ferrari

3. Consistent quality

Producing services or products that meet design specifications on a consistent basis

Processes designed and monitored to reduce errors and prevent defects

McDonald’s

4. Delivery speed

Quickly filling a customer’s order

Design processes to reduce lead time

Dell

5. On-time delivery

Meeting delivery-time promises

Planning processes to increase percent of customer orders shipped when promised

United Parcel Service (UPS)

6. Development speed

Quickly introducing a new science or a product

Cross-functional integration and involvement of critical external suppliers

Li & Fung

QUALITY

TIME


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Competitive Priorities TABLE 1.2

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DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES

FLEXIBILITY

Definition

Process Considerations

Example

7. Customization

Satisfying the unique needs of each customer by changing service or products designs

Low volume, close customer contact, and easily reconfigured

Ritz Carlton

8. Variety

Handling a wide assortment of services or products efficiently

Capable of larger volumes than processes supporting customization

Amazon.com

9. Volume flexibility

Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand

Processes must be designed for excess capacity

The United States Postal Service (USPS)


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Order Winners and Qualifiers

Sales ($)

Order Winner

Low

High

Achievement of competitive priority

Sales ($)

Order Qualifier

Low

Threshold

High

Achievement of competitive priority Figure 1.6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

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Using Competitive Priorities At an airline  Customer relationship  Top

quality

 Consistent  Delivery

quality

speed

 Variety

 New service development  Development

speed

 Customization  Top

quality


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Using Competitive Priorities At an airline  Order fulfillment  Low-cost

operations  Top quality  Consistent quality  On-time delivery  Variety


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Using Competitive Priorities At an airline  Supplier relationship  Low-cost

operations  Consistent quality  On-time delivery  Variety  Volume flexibility


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Operations Strategy TABLE 1.3

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OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS

Competitive Priority

Measure

Capability

Gap

Action

Low-cost operations





$0.0813







$17,000





0.90%



Acceptable



No action



0.74%



Acceptable



No action



48 hours



Acceptable



No action



98%



 Consistent quality

 

Delivery speed



Volume flexibility



Cost per billing statement Weekly postage Percent errors in bill information Percent errors in posting payments Lead time to process merchant payments Utilization


Target is $0.06 Target is $14,000

Too high to support rapid increase in volumes



 

Eliminate microfilming and storage of billing statements Develop Web-base process for posting bills

Acquire temporary employees Improve work methods

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Trends in Operations Management  Productivity improvement  Global competition  Ethical, workforce, and environmental issues


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Productivity Improvement EXAMPLE 1.1 Calculate the productivity for the following operations:

a. Three employees process 600 insurance policies in a week. They work 8 hours per day, 5 days per week.

SOLUTION Policies processed a. Labor productivity = Employee hours 600 policies = = 5 policies/hour (3 employees)(40 hours/employee)


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Productivity Improvement EXAMPLE 1.1 Calculate the productivity for the following operations:

b. A team of workers makes 400 units of a product, which is sold in the market for $10 each. The accounting department reports that for this job the actual costs are $400 for labor, $1,000 for materials, and $300 for overhead. SOLUTION Value of output a. Multifactor productivity = Labor cost + Materials cost + Overhead cost =

(400 units)($10/unit) $4,000 = = 2.35 $400 + $1,000 + $300 $1,700


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Application This Year

Last Year

Year Before Last

2,762,103

2,475,738

2,175,447

Employment (hrs)

112,000

113,000

115,00

Sales of manufactured products ($)

$49,363

$40,831

—

Total manufacturing cost of sales ($)

$39,000

$33,000

—

Factory unit sales ($)

 Calculate the year-to-date labor productivity: Last Year

This Year factory unit sales

2,762,103

employment

112,000

= 24.66/hr

2,475,738 113,000

Year Before Last

= 21.91/hr

2,175,447 115,000

= $18.91/hr

 Calculate the multifactor productivity: This Year sales of mfg products

$49,363

total mfg cost

$39,000


= 1.27

Last Year $40,831 $33,000

= 1.24

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OM as a Set of Decisions USING OPERATIONS TO COMPETE

 In practice, managers make strategic and tactical decisions 1. Each part of the organization designs and operates processes 2. Each function is connected through shared resources

Competing with Operations Project Management

MANAGING PROCESSES

Process Strategy Process Analysis Quality and Performance Capacity Planning Lean Systems

MANAGING SUPLY CHAINS

Supply Chain Design Supply Chain Integration Location Inventory Management Forecasting Operations Planning and Scheduling Resource Planning


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Challenges in OM Part 1: Using operations to compete Part 2: Managing processes

Part 3: Managing supply chains


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Solved Problem 1 Student tuition at Boehring University is $150 per semester credit hour. The state supplements school revenue by $100 per semester credit hour. Average class size for a typical 3-credit course is 50 students. Labor costs are $4,000 per class, material costs are $20 per student per class, and overhead costs are $25,000 per class. a. What is the multifactor productivity ratio for this course process? b. If instructors work an average of 14 hours per week for 16 weeks for each 3-credit class of 50 students, what is the labor productivity ratio?


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Solved Problem 1 SOLUTION a. Multifactor productivity is the ratio of the value of output to the value of input resources. Value of output =

50 student class

3 credit hours student

$150 tuition + $100 state support credit hour

= $37,500/class Value of inputs = Labor + Materials + Overhead = $4,000 + ($20/student  50 students/class) + $25,000 = $30,000/class

Multifactor productivity = Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

Output Input

=

$37,500/class = 1.25 $30,000/class 1 – 27

Solved Problem 1 SOLUTION b. Labor productivity is the ratio of the value of output to labor hours. The value of output is the same as in part (a), or $45,000, so

Labor hours of input =

14 hours week

16 weeks class

= 224 hours/class Labor productivity =

Output $45,000/class = Input 224 hours/class

= $200.89/hour


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Solved Problem 2 Natalie Attire makes fashionable garments. During a particular week employees worked 360 hours to produce a batch of 132 garments, of which 52 were ―seconds‖ (meaning that they were flawed). Seconds are sold for $90 each at Attire’s Factory Outlet Store. The remaining 80 garments are sold to retail distribution at $200 each. What is the labor productivity ratio of this manufacturing process?


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Solved Problem 2 SOLUTION Value of output = (52 defective  90/defective) + (80 garments  200/garment) = $20,680 Labor hours of input = 360 hours Output $20,680 Labor productivity = = Input 360 hours = $57.44 in sales per hour


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Krajewski Om9 Ppt 01

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