Lecture 1 MBF2213 Operations Management Prepared by Dr Khairul Anuar L1: Operations Management 1
Key operations questions What is operations management? Why is operations management important in all types of organization? What is the input transformation output process? What is the process hierarchy? How do operations processes have different characteristics? What are the activities of operations management? 2
Operations management defined Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services. 3
Slack et al. s model of operations management
Slack et al. s model of operations management Transformed resources Materials Information Customers Input resources Transforming resources Design Operations strategy Operations management Planning and control Operations strategy Improvement Operation s performance Output products and services Customers Facilities Staff 5
Operations management is fashionable! The consultancy services market % of world revenues of 40 largest consultancy firms Organizational design 11 Benefits/Actuarial 16 Financial 6 Marketing/sales 2 Operations and process management 31 IT strategy 17 Corporate strategy 17 6
The three basic functions of enterprises Digital Stock Ford Motor Company 7
The activities of core functions in some organizations Core functional activities Internet service provider (ISP) Fast food chain International aid charity Furniture manufacturer Operations Maintain hardware software and content Implement new links and services Make burgers, etc. Serve customers Maintain equipment Give service to the beneficiaries of the charity Make components Assemble furniture Marketing and sales Promote services to users and get registrations Sell advertising space Advertise on TV Devise promotional materials Develop funding contracts Mail out appeals for donations Advertise in magazines Determine pricing policy Sell to stores Product / service development Devise new services and commission new information content Design hamburgers, pizzas, etc. Design decor for restaurants Develop new appeals campaigns Design new assistance programmes Design new furniture Co-ordinate with fashionable colours
Operations management at IKEA Design elegant products which can be flat-packed efficiently Design a store layout which gives smooth and effective flow Ensure that the jobs of all staff encourage their contribution to business success Site stores of an appropriate size in the most effective locations Continually examine and improve operations practice Maintain cleanliness and safety of storage area Arrange for fast replenishment of products Monitor and enhance quality of service to customers 9
Operations are everywhere The best way to start understanding the nature of Operations is to look around you. Everything you can see around you (except the flesh and blood) has been produced by an operation. Every service you consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation. Operations Managers create everything you buy, sit on, wear, eat, throw at people and throw away. 10
Interfunctional relationships between operations and other functions Accounting and finance function Human resources function Engineering/ technical function Analysis of new technology options Provision of relevant data Financial analysis for performance and decisions Understanding of human resource needs Recruitment development and training Understanding of process technology needs Understanding of the capabilities and constraints of the operations process Operations function Understanding of infrastructural and system needs Information technology (IT) function New product and service ideas Market requirements Provision of systems for design, planning and control, and improvement Product/service development function Understanding of the capabilities and constraints of the operations process Marketing function 11
Prêt a Manger High-end sandwich and snack retailer Use only wholesome ingredients All shops have their own kitchens where fresh sandwiches are prepared every day Fresh ingredients are delivered early every morning Same staff who serve you at lunch made the sandwiches that morning We don t work nights, we wear jeans, we party 12
The three basic functions at Prêt a Manger Product/ Service development Nutritional mechanical and aesthetic design of the sandwiches and snacks Promotional activities, market research, etc. Marketing Operations Design, location and management of stores and in-store processes and the network that supplies them 13
Operations management in all types of organization Automobile assembly factory Operations management uses machines to efficiently assemble products that satisfy current customer demands 14
Operations management in all types of organization (Continued) Physician (General practitioner) Operations management uses knowledge to effectively diagnose conditions in order to treat real and perceived patient concerns 15
Operations management in all types of organization Management consultant Operations management uses people to effectively create the services that will address current and potential client needs Source: Shutterstock.com: Indianstockimages
Operations management in all types of organization (Continued) Disaster relief charity Operations management uses ours and our partners resources to speedily provide the supplies and services that relieve community suffering 17
Operations management in all types of organization (Continued) Advertising agency Operations management uses our staff s knowledge and experience to creatively present ideas that delight clients and address their real needs 18
Operations management uses machines knowledge to efficiently assemble products to effectively diagnose conditions to treat real and perceived patient concerns people to effectively create services that will address current and potential client needs ours and our partners resources to speedily provide supplies and services that relieve community suffering our staff s knowledge and experience to creatively present ideas that delight clients and address their real needs 19
Operations management is changing The business environment is changing, for example: Increased cost-based competition Higher quality expectations Demands for better service More choice and variety Rapidly developing technologies Frequent new product/service introduction Increased ethical sensitivity Environmental impacts are more transparent More legal regulation Greater security awareness Prompting operations responses, for example: Globalization of operations networking Information-based technologies Internet-based integration of operations activities Supply chain management Customer relationship management Flexible working patterns Mass customization Fast time-to-market methods Lean process design Environmentally sensitive design Supplier partnership and development Failure analysis Business recovery planning 20
Operations input resources and outputs Outputs are products and services that add value for customers
Inputs and outputs at Prêt a Manger Transformed resources Ingredients Packaging Customers Input resources Served and satisfied customers Customers Transforming resources Equipment Fittings Staff 22
Examples of dominant transformed resource inputs Predominantly processing inputs of materials All manufacturing operations Mining companies Retail operations Warehouses Postal services Container shipping line Trucking companies Predominantly processing inputs of information Accountants Bank headquarters Market research company Financial analysts News service University research unit Telecoms company Predominantly processing inputs of customers Hairdressers Hotels Hospitals Mass rapid transports Theatres Theme parks Dentists
Most operations produce products and services Crude oil production Aluminium smelting Acme Whistles Pure products Outputs that are exclusively tangible Specialist machine tool production Restaurant Information systems provider Prèt a Manger IKEA Mixture of products and services Outputs that are a mixture of the tangible and intangible Management consultancy Psychotherapy clinic Mwagusi Safari Lodge Pure services Outputs that are exclusively intangible 24
Figure 1.4 Changes in the business environment are shaping a new operations agenda
Most operations produce products and services
Some operations described in terms of their processes Operation Airline Some of the operation s inputs Aircraft Pilots and air crew Some of the operation s processes Check passengers in Board passengers Some of the operation s outputs Transported passengers and freight Department store Ground crew Passengers and freight Products for sale Sales staff Information systems Fly passengers and freight around the world Care for passengers Source and store products Display products Give sales advice Customers and products assembled together Police Frozen food manufacturer Customers Police officers Computer systems Information systems Public (law-abiding and criminals) Fresh food Operators Sell products Crime prevention Crime detection Information gathering Detaining suspects Source raw materials Prepare food Lawful society, public with a feeling of security Frozen food Processing technology Freeze food Cold storage facilities Pack and freeze food
Operations can be analyzed at three levels Flow between operations The level of the supply network Flow between processes The level of the operation The level of the process Flow between resources
Operations can be analyzed at three levels (Continued) Flow between operations Flow between processes Flow between resources Operations management is concerned with the flow of transformed resources between operations, processes, where External operations interact with internal processes to form the external supply network Processes form an internal supply network and become each others customers and suppliers
Example of analysis at three levels The supply network Flow between operations Studios Casting agency Creative agency Promotion agency Programme/ video maker Broadcasting company A programme and video supply network The operation Flow between processes The programme and video operation
Example of analysis at three levels (Continued) The supply network Flow between operations Programme and video maker The operation Flow between processes Engineering Marketing and sales Finance and accounting Production unit Post production Set and props manufacture The programme and video operation
Example of analysis at three levels (Continued) The supply network Flow between operations Programme and video maker The operation Flow between processes Set and props manufacture The Set and props manufacturing process Set design Set construction Props acquisition Set finishing
The television and video company divided into two end-to-end business processes End-to-end process for programme production Engineering Programme marketing and sales Programme finance and accounting Programme production unit Programme post production Programme set and props manufacture End-to-end process for music video production Music video marketing and sales Music video finance and accounting Music video set and props manufacture Music video production unit Music video post production 33
All functions use processes to provide service Human resources Finance OperationsMarketing Information systems Sales Any organization 34
Two end-to-end business processes
Table 1.4 Some examples of processes in non-operations functions
Differences within sectors are often greater than the differences between sectors Financial services An account management centre at a large retail bank Financial analyst advising a client at an investment bank Pearson Education Ltd. MindStudio Furniture manufacturing Mass production of kitchen units Craft production of reproduction antique furniture Hotels Pearson Education Ltd. Rob Judges Value-for-money hotel Lobby of an international luxury hotel Photodisc. Life File. Emma Lee Photodisc. Photolink. Jack Star 37
The 4 Vs A typology of operations and processes Low Volume High High Variety Low High Variation in demand Low High Visibility Low 38
A typology of operations and processes (Continued) The implications of high and low Volume in operations and processes Implications Implications Low repetition Each staff member performs more of each task Less systemization High unit costs Low Volume High High repeatability Specialization Capital intensive Low unit costs 39
A typology of operations and processes (Continued) The implications of high and low Variety in operations and processes Implications Implications Flexible Complex Match customer needs High unit costs High Variety Low Well defined Routine Standardized Regular Low unit costs 40
A typology of operations and processes (Continued) The implications of high and low Variation in operations and processes Implications Implications Changing capacity Anticipation Flexibility In touch with demand High unit costs High Variation in demand Low Stable Routine Predictable High utilization Low unit costs 41
A typology of operations and processes (Continued) The implications of high and low Visibility in operations and processes Implications Implications Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs High Visibility Low Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs 42
A 4 Vs profile of two operations Low Volume High High Variety Low High Variation Low High Mwagusi Safari Lodge Visibility Important to understand how different operations are positioned on the 4 Vs. Is their position where they want to be? Do they understand the strategic implications? Formule 1 Hotel Low 43