01 - Competing With Operations

Competing With Operations
Operations Management -1
OPERATIONS MANAGEMENT -1
Term 2, B2013-15, Oct-Dec 2013
TAPMI, Term 2, B2013-15, Oct-Dec 2013
Prof. Kedar P. Joshi

Session No. Topic Pre mid- Coverage Process View of Operations Management Nested Processes Service and Manufacturing Processes Core Processes and Support Processes Operations Strategy and Link to Corporate Strategy Competitive Priorities and Capabilities Operations Strategy as a Pattern of Decisions Productivity Challenges in Operations Management Process Strategy Across the Organization Process Strategy Decisions Process Structure in Services Process Structure in Manufacturing Production and Inventory Strategies Layout Customer Involvement: Advantages & Disadvantages Resource Flexibility Capital Intensity Economic Scope Strategic Fit for Manufacturing processes & Service processes Strategies for Change Process Analysis across the organization A Systematic Approach (six steps) Flow Charts, Service Blueprints
Pre Session Readings Case/ Operations Tour and/or other Special Topic
Competing with Operations
Chapter 1 of Text Book
Case: Chads Creative Concepts, p30-31 of Textbook (odd group) Chapter 3 of Text Book Case: Custom Molds, Inc., p119-120 of text book (even group) 6 Videos: A note on Process Analysis (Abridged) Chapter 4 of Text Book 2 Videos: Case related (batch shop) Case*: Stonehaven, Inc. (Harvard: 9-696-048)
2&3
Process Strategy
4&5
Process Analysis 1

Session No. Topic Pre mid- Coverage
6&7
Process Analysis 2
Measuring Output Rates (Work measurement Time Study Method, Work Sampling) Learning Curve Analysis (optional, if time permits) Evaluating Performance (Checklists, Scatter Diagrams, Pareto Chart, Cause-and-Effect Diagram)
Supplement H & G from Krajewski resources
8&9
Constraint Management
The Theory of Constraints Key Principles of the TOC How the Firms Operational measures relate to its Financial measures (optional) Identification and Management of bottlenecks in service processes & manufacturing processes Line Balancing Planning Capacity Across the organization Measures of Capacity and Utilization Economies of Scale Capacity Timing and Sizing Strategies A Systematic Approach to Long-term capacity decisions
Case*: Dont Bother Me, I Cant Cope Chapter 7 of Text Book 3 Videos: Case related (line shops)
10 & 11
Capacity Planning
Case: Natural Blends, Inc. (Harvard: 9-698-012) 2 Videos: Case related (flow shop) 3

Session No. Topic Post mid- Coverage
12 & 13
Quality and Performance
14 & 15
Project Management
Quality and Performance Across the organization Costs of Quality: (Prevention, Appraisal, Internal and External) Total Quality Management Six Sigma and DMAIC process Acceptance Sampling (optional) Control Charts for Variables Control Charts for Attributes Process Capability International Quality Documentation Standards Defining and Organizing Projects Selecting the Project Manager and Organizational Structures for projects Work Breakdown Structures Diagramming the Network (PERT) CPM- Cost/Time Tradeoffs) (optional) Assessing Risks in Projects Buffer session for Assignment discussion, extra discussions, or for spill overs.
Text book exercises
Text book exercises
16
Wrap up
Evaluation Scheme
Weightage cumulative
100% 50% 10% 15% 25%
60%
70%
10%
5%
10%
25% 10%
30% 10%
Quiz 1
Quiz 2
Group Assignment 1
Mid-term Examination
Group Assignment 2
Quiz 3 End-term Examination
Prescribed Text Book:

Krajewski, Lee J., Ritzman, Larry P., Malhotra, Manoj K., and Srivastava, Samir K. (2011/latest), Operations Management Processes and Supply Chains, (9th/Latest Edition), Indian Subcontinent Adaptation, Pearson Education Inc., New Delhi.
Please do all the pre reads regularly and thoroughly, and be ahead of the class. Be an active listener in the class and be an active participant, and contribute. Both are important for becoming effective managers and leaders. If lectures are missed, a large amount of learning is lost. Hence please attend all lectures. Read business papers and journals regularly to identify and track Operations Management Trends No Mobile phones are allowed inside the classroom.
OPERATIONS MANAGEMENT -1
Term 2, B2013-15, Oct-Dec 2013
Agenda
Process View of Operations Management Nested Processes Service and Manufacturing Processes Core Processes and Support Processes Operations Strategy and Link to Corporate Strategy
Competitive Priorities and Capabilities Operations Strategy as a Pattern of Decisions Productivity Challenges in Operations Management
Organizational Functions
Marketing
Gets customers
Operations
creates product or service
Finance/Accounting

TAPMI, Term 2, B2013-15, Oct-Dec 2013 Prof. Kedar P. Joshi
Obtains funds Tracks money

10
Options for Increasing Contribution

Current Sales Cost of Goods Sold Gross Margin Finance Costs Net Margin Taxes @ 25% Contribution $100,000 -80,000 20,000 -6,000 14,000 -3,500 10,500 Finance & Accounting Option Sales Revenue : +50% Finance Costs: -50% $150,000 -120,000 30,000 -6,000 24,000 -6,000 18,000 Marketing Option OM Option Production Costs: -20% $100,000 $100,000 -80,000 20,000 -3,000 17,000 -4,250 12,750 -64,000 36,000 -6,000 30,000 -7,500 22,500
11
Changing Business Environment

Liberalization & Entry of Competitive Firms Large Scale Product Substitution by Large Variety and Small Volumes Service Integration with Manufacturing Disinvestments in Public sectors New Parameters of Competition Pervasive Influence of Technology
12
Challenges for the Indian Industry

Global Competition & Export Orientation Flexibility, Time Increased Technological advancements
Because of the changed operating environment most of yesterdays ideas may no longer relevant !
Market Share Informed Consumers

Shorter Product Life Cycles
13
A Situation of Competitive Advantage

Pizza Hut traditionally had eat-in and take-out channels. Dominos entered the market with delivery and take-out channels, providing more convenience at a lower price. Pizza Hut was forced to respond with a delivery channel. Correspondingly, to stay in the mind space of their customers, Dominos also opened eat-in restaurants at many locations.
Operations Management
The systematic design, direction, and control of processes that transform inputs into services and products for internal and customers
Operations Management
is
the process of managing resources to deliver
Goods & Services

to Customers
A Process View
External environment
Internal and external customers Inputs Workers Managers Equipment Facilities Materials Land Energy Processes and operations Outputs Goods Services
1
2
3 5
4 Information on performance
Some questions
Can we store 3 seats from an 8 a.m. Mangalore Delhi flight fro use tomorrow? Can beauty parlor provide you service at 10 am while you are attending a class in college? Can you touch, feel, count and assess in a very objective fashion a music concert you attended?
18
A Process View
More like a manufacturing process
More like a service process
Figure 1.3
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
The Supply Chain View

Support Processes
External suppliers
New service/ product development Supplier relationship process Order fulfillment process
External customers
Customer relationship management
The Supply Chain View

Core processes are sets of activities that deliver value to external customers
1. 2. 3. 4. Supplier relationship process New service/product development process Order fulfillment process Customer relationship process
Support processes provide vital resources and inputs to the core processes
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 Recruitment and hiring Evaluation and compensation Human resource support and development Regulatory compliance Information systems Enterprise and functional management
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
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
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
Operations Strategy Decisions Managing processes Managing supply chains
Yes
Performance Gap?
Figure 1.5
Competitive Capabilities Current Needed Planned

Competitive Priorities
TABLE 1.2 | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES
Definition Process Considerations Example
COST
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
QUALITY
2. Top quality Delivering an outstanding service or product Producing services or products that meet design specifications on a consistent basis Quickly filling a customers order Meeting delivery-time promises Quickly introducing a new science or a product May require a high level of customer contact and may require superior product features Processes designed and monitored to reduce errors and prevent defects Ferrari
3. Consistent quality
McDonalds
TIME
4. Delivery speed 5. On-time delivery 6. Development speed 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
Dell United Parcel Service (UPS) Li & Fung
Competitive Priorities
TABLE 1.2 | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES
Definition Satisfying the unique needs of each customer by changing service or products designs Process Considerations Low volume, close customer contact, and easily reconfigured Example Ritz Carlton
FLEXIBILITY
7. Customization
8. Variety
9. Volume flexibility
Handling a wide assortment of services or products efficiently

Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand
Capable of larger volumes than processes supporting customization

Processes must be designed for excess capacity
Amazon.com
The United States Postal Service (USPS)
Order Winners and Qualifiers

Order Winner
Sales (Rs) Sales (Rs)
Order Qualifier
Low High Achievement of competitive priority
Low Threshold High Achievement of competitive priority
Figure 1.6
Operations Strategy
TABLE 1.3 OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS Measure Capability Gap Action Competitive Priority Low-cost operations
Cost per billing statement Weekly postage Percent errors in bill information Percent errors in posting payments Lead time to process merchant payments Utilization
$0.0813
Target is $0.06
Eliminate microfilming and storage of billing statements Develop Web-base process for posting bills No action
$17,000 0.90%
Target is $14,000 Acceptable
Consistent quality
0.74%
Acceptable
No action
Delivery speed
48 hours
Acceptable
No action
Volume flexibility
98%
Too high to support rapid increase in volumes
Acquire temporary employees Improve work methods
Trends in Operations Management

Productivity improvement Global competition
Ethical, workforce Diversity and Environmental issues
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?
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
Output Input
= 1.25
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 $37,500, so Labor hours of input = 14 hours week 16 weeks class
Labor productivity
= 224 hours/class $37,500/class Output = = 224 hours/class Input

= $167.41/hour
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 Attires 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?
Solved Problem 2
SOLUTION
Value of output = (52 defective 90/defective) + (80 garments 200/garment) = $20,680 Labor hours of input Labor productivity = 360 hours = Output
Input
$20,680
360 hours
= $57.44 in sales per hour

01 - Competing With Operations

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Competing With Operations

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Competing with Operations

Chapter 1 of Text Book

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Supplement H & G from Krajewski resources

Chapter 6 of Text Book

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Quality and Performance

Chapter 5 of Text Book

Text book exercises

Chapter 2 of Text Book

Text book exercises

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

100% 50% 10% 15% 25%

Quiz 3 End-term Examination

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Prescribed Text Book:

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Competing With Operations

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Prof. Kedar P. Joshi

Competing With Operations

creates product or service

Obtains funds Tracks money

Competing With Operations

Options for Increasing Contribution

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Changing Business Environment

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

Challenges for the Indian Industry

Market Share Informed Consumers

Shorter Product Life Cycles

Prof. Kedar P. Joshi

Competing With Operations

A Situation of Competitive Advantage

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi

Competing With Operations

TAPMI, Term 2, B2013-15, Oct-Dec 2013

Prof. Kedar P. Joshi