Operations Strategy. BIZ2121 Production & Operations Management. Sung Joo Bae, Associate Professor. Yonsei University School of Business

Transcription

1 BIZ2121 Production & Operations Management Operations Strategy Sung Joo Bae, Associate Professor Yonsei University School of Business Disclaimer: Many slides in this presentation file are from the copyrighted material in 2010 by Pearson Education, Inc. Publishing as Prentice Hall.

2 A few operational issues for this class For HW 1, submit the hard copy (before the class begins) There are deadlines set up for the HWs Office hours by appointment (any time)

3 My expectation I want you. to be to think to relate to work to learn to feel

4 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

5 From here

6 To here Source:

7 Who s in charge of this? Who is he? Let s find out who he is and what he does in Apple. (wiki)

8 How about this face? Familiar?

9 Product Design and Development vs. Operations Management Fancy new product is not the end of the game Think about the quality control, logistical challenge of this type of product

10 Why is OM critical? Apple; AirTran; American Standard Companies; Amgen; Adobe Systems, Inc.; Autodesk, Inc; ebay; Heidrick & Struggles; InBev; Kohlberg Kravis Roberts & Company; Mattel, Inc; Motorola; PepsiCo; Raytheon Company; Starbucks Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall.

11 Across the Organization Finance Acquires financial resources and capital for inputs Material & Service Inputs Sales Revenue Operations Translates materials and service into outputs Figure 1.1 in our textbook Support Functions Accounting Information Systems Human Resources Engineering Product & Service Outputs Marketing Generates sales of outputs

12 iphone 4 Bumper Program

13 A Process View Departments have their own objectives and resources to achieve them. Processes may cross different department boundaries, and require resources from several departments. External environment Internal and external customers Inputs Workers Managers Equipment Facilities Materials Land Energy 1 2 Processes and operations Outputs Goods Services Information on performance Figure 1.2

14 A Process View Mfr vs. Svc Manufacturing: Transformation of materials on following dimensions physical properties, shape, size, surface finish, joining parts and materials More like a manufacturing process More like a service process Physical, durable output Output can be inventoried Low customer contact Long response time Capital intensive Quality easily measured Intangible, perishable output Output cannot be inventoried High customer contact Short response time Labor intensive Quality not easily measured Figure 1.3 Q. Is McDonald a service provider or manufacturer? Samsung Electronics? Hyundai Motors?

15 An Extended Process View (supplier included) External environment Internal and external suppliers Internal and external customers Inputs Workers Managers Equipment Facilities Materials Land Energy 1 2 Processes and operations Outputs Goods Services Information on performance Figure 1.2 modified

16 External suppliers The Supply Chain View Strategic insight: Processes must add value for customers throughout the supply chain. Support Processes Supplier relationship process New service/ product development Order fulfillment process Customer relationship management External customers Figure 1.4

17 The Supply Chain View Core processes are sets of activities that deliver value to external customers 1. Supplier relationship process Negotiating fair prices Scheduling on-time deliveries Gaining ideas from critical suppliers 2. New service/product development process 3. Order fulfillment process (e.g. Tesco Homeplus) 4. Customer relationship process Support processes provide vital resources and inputs to the core processes

18 Support Processes TABLE 1.1 EXAMPLES OF SUPPORT PROCESSES Capital acquisition Budgeting Recruitment and hiring Evaluation and compensation Human resource support and development Regulatory compliance Information systems Enterprise and functional management The provision of financial resources for the organization to do its work and to execute its strategy The process of deciding how funds will be allocated over a period of time The acquisition of people to do the work of the organization The assessment and payment of people for the work and value they provide to the company The preparation of people for their current jobs and future skills and knowledge needs The processes that ensure that the company is meeting all laws and legal obligations The movement and processing of data and information to expedite business operations and decisions The systems and activities that provide strategic direction and ensure effective execution of the work of the business

19 Managerial Practice 1.2 (p.42) - Group Discussion Zara Case What are the operational innovation (i.e. process innovation) that Zara achieved? How can you measure the success of this operational innovation?

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21 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

22 Operations Strategy Corporate Strategy Environmental scanning Core competencies Core processes Global strategies Market Analysis Market segmentation Needs assessment Competitive Priorities Cost Quality Time Flexibility Operations Strategy New Service/ Product Development Design Analysis Development Full launch Yes No Performance Gap? Figure 1.5 Decisions Managing processes Managing supply chains Competitive Capabilities Current Needed Planned

23 Corporate Strategy Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization s function Environmental scanning: monitoring trends in the environment Developing core competencies: unique resources and strengths Workforce Facilities location, flexibility Market and financial know-how Systems and technologies Developing core processes (Hyundai Card vs. KB Star) Global strategies Procurement, competition global vs. local standard (McDonald vs. Jollibee, Burger King s Bulgogi Burger) Expansion make/buy/alliance

24 Market Analysis Market segmentation The process of identifying groups of customers with enough in common to be the target for a specific product or service Needs assessment Service or product needs (price, quality, degree of customization) Delivery system needs (convenience, safety, reliability, speed, etc.) Volume needs (volume, variability and predictability in volume) Other needs

25 Competitive Priorities are The critical operational dimensions a process or supply chain must possess to satisfy internal or external customer

26 Forming teams for team projects 4-5 students (no less than 4, no more than 5)

27 Competitive Priorities TABLE 1.2 DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES COST Definition Process Considerations Example 1. Low-cost operations QUALITY Delivering a service or a product at the lowest possible cost 2. Top quality Delivering an outstanding service or product 3. Consistent quality TIME Producing services or products that meet design specifications on a consistent basis 4. Delivery speed Quickly filling a customer s order 5. On-time delivery 6. Development speed Meeting delivery-time promises Quickly introducing a new science or a product Processes must be designed and operated to make them efficient May require a high level of customer contact and may require superior product features Processes designed and monitored to reduce errors and prevent defects Design processes to reduce lead time Planning processes to increase percent of customer orders shipped when promised Cross-functional integration and involvement of critical external suppliers Costco products on pallets, negotiations with suppliers Ferrari superior product features and high performance McDonald s standardization, training, procurement Dell superior order fulfillment United Parcel Service (UPS) efficient logistics and warehousing processes Li & Fung, Zara fast NPD and delivery

28 Competitive Priorities TABLE 1.2 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 8. Variety Handling a wide assortment of services or products efficiently 9. Volume flexibility Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand Low volume, close customer contact, and easily reconfigured Capable of larger volumes than processes supporting customization Processes must be designed for excess capacity Ritz Carlton highly individualized service Amazon.com IT in delivering the variety of products The United States Postal Service (USPS) handling Christmas volume!!!

29 Competitive Priorities - Fedex What is the CP for Fedex? How did it change over time? Are CPs Stable or Dynamic?

30 Competitive Priorities - Fedex Are CPs Stable or Dynamic?

31 Competitive Priorities - Fedex Are CPs Stable or Dynamic? FedEx CP switched from on-time delivery (speed) to low-cost and zero error-rate (dependability)

32 Sales ($) Sales ($) Order Winners and Qualifiers Order Qualifier Order Winner Low Threshold High Low High Achievement of competitive priority Figure 1.6 A demonstrated level of performance of an order winner that is required for a firm to do business in a particular market segment Achievement of competitive priority A criterion customers use to differentiate the services or products of one firm from those of another

33 Operations Strategy: Toyota case? Corporate Strategy Environmental scanning Core competencies Core processes Global strategies Market Analysis Market segmentation Needs assessment Competitive Priorities Cost Quality Time Flexibility Operations Strategy New Service/ Product Development Design Analysis Development Full launch Yes No Performance Gap? Figure 1.5 Decisions Managing processes Managing supply chains Competitive Capabilities Current Needed Planned

34 Operations Strategy: Toyota case? Corporate Strategy Environmental scanning Core competencies Core processes Global strategies Market Analysis Market segmentation Needs assessment Competitive Priorities Cost ($1000/car in 3-4 yr) Quality New Service/ Product Development New design that reduces the number of parts No Operations Strategy Yes Performance Gap? Decisions Managing processes rethinking Lean System Simple and slim equipment Shortening the paint time Managing supply chains 30% cut in procurement Competitive Capabilities Current Needed Planned

35 Operations Strategy 1. Receive transactions 2. Pay A Bank s Credit Card Division 3. Assembles and sends the bill 4. Process payments Merchants Credit Card Holders

36 Operations Strategy TABLE 1.3 OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS Competitive Priority Low-cost operations Measure Capability Gap Action Cost per billing statement $ Target is $0.06 Eliminate microfilming and storage of billing statements Consistent quality Weekly postage $17,000 Target is $14,000 Percent errors in bill information 0.90% Acceptable No action Develop Web-based process for posting bills Percent errors in posting payments 0.74% Acceptable No action Delivery speed Volume flexibility Lead time to process merchant payments 48 hours Acceptable Utilization 98% Too high to support rapid increase in volumes No action Acquire temporary employees Improve work methods

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

38 Productivity Improvement

39 Productivity Improvement

40 Case: Starwood s new program 1. What are the key inputs and outputs associated with Starwood s new meeting planning process 2. How does the meeting planning process at Starwood interact with the following core processes in their hotels Customer relationship (internal & external) New service or product development Order fulfillment Supplier relationship

41 OM as a Set of Decisions 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 Part 1: Part 2: Part 3: Designing & building operation systems Managing Operation systems Managing beyond boundaries: supply chain management

42 Operations Strategy Big picture Corporate Strategy Environmental scanning Core competencies Core processes Global strategies Market Analysis Market segmentation Needs assessment Competitive Priorities Cost Quality Time Flexibility Operations Strategy New Service/ Product Development Design Analysis Development Full launch Yes No Performance Gap? Figure 1.5 Decisions Managing processes Managing supply chains Competitive Capabilities Current Needed Planned

43 Challenges in OM Part 1: Designing & building operation systems Part 2: Managing Operation systems Part 3: Managing beyond boundaries: supply chain management

44 Solved Problem 1

45 Solved Problem 1

46 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?

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