Introduction to Operations Management:! Session 1!

Professor Gad Allon Kellogg School of Management, Northwestern University

G. Allon

What do you mean by Operations?

What Is Meant by Operations?

The secret of Zaras success is its speedfour weeks for a new fashion idea to hit the shopsand the feedback that store managers send to head ofce, to help it ne-tune its ideas. There is also rm control from Spain, the sole logistics hub. The Economist Mar 10, 2011. The average time patients spend waiting to see a health-care provider is 22 minutes, and some waits stretch for hours. Orthopedists have the longest waits, at 29 minutes; dermatologists the shortest, at 20. The report also noted that patient satisfaction dropped signicantly with each ve minutes of waiting time. The Wall St. Journal Oct 18, 2010.

Opus = Work (Latin)

Who has better operations?

G. Allon

Southwest and Bags Fly Free

What annoys travelers most, Consumer Reports, June 2010

G. Allon

Three Questions on Improvement

!! !! !!

What is an improvement?
!!

Linking operations to strategy Linking operational ows to nancial ows

Where to target improvement?

!!

How to improve?

G. Allon

Who has better operations?

Price Ships everywhere

Absolutely, Positively, overnight !! !! !! !! Hub and Spoke Five empty planes in indirect routes 10% of planes y half empty by design Each package is inspected by three employees

G. Allon

Strategic View: Whats an improvement

G. Allon

A Strategic Framework for Process Design and Improvement: Three questions

1.!

competitive strategy

What is our strategic position: how do we compete & provide value in the market? !! What is the value proposition to our customers? !! Rank (Price, Time, Quality, Variety)

Alignment

operations strategy

2.!

Given our strategic position, what must operations do particularly well? !! Which competencies must ops develop? !! Rank (Cost, Time, Quality, Flexibility) Given needed competencies, how should operations processes be structured to develop competencies that support strategy? !! Process choice (structure) and management

Process structure & mgt

3.!

Southwest Airlines vs. American Airlines

Competitive Strategy: ! Price ! On time performance Process: ! Flying point to point ! Flying to smaller airport ! No assigned seats ! Bags y free ! Limited number of aircraft 10

Competitive Strategy: ! Variety of origins and destinations Process: ! Hub and spoke ! Different types of aircrafts ! Baggage fees

G. Allon

Summary
!!

Whats an improvement:
!! !!

Maximizing Value Alignment (Tradeoff)

11

G. Allon

Next:! Process View: Where to target improvement

G. Allon