Introduction to the Field

KEY OUTLINE I. Operations ManagementA Critical Responsibility of Every Manager A. Efficiency Defined B. Effectiveness Defined C. Value Defined What is Operations Management? A. Operations Management (OM) Defined Transformation Processes A. Transformation Process Defined B. Differences Between Services and Goods OM in the Organizational Chart Operations as Service A. Core Services Defined B. Value-Added Serviced Defined Why is Operations Not Perceived as Important? Historical Development of OM A. JIT and TQC 1. Mass Customization Defined B. Manufacturing Strategy Paradigm C. Service Quality and Productivity D. Total Quality Management and Quality Certification E. Business Process Reengineering F. Supply Chain Management G. Electronic Commerce Current Issues in Operations Management

II. III.

IV. V.

VI. VII.

VIII.

Core Services

Basic attributes that customers expect from the products they purchase. They want them, for example, to be made correctly, customized to their needs, delivered on time, and priced competitively. Doing something at the lowest possible cost. Doing the right things to create the most value for the company. Producing products to order in lot sizes of one.

Efficiency Effectiveness Mass Customization

Operations Management (OM) Transformation Process Value

Design, operation, and improvement of the systems that create and deliver the firm's primary products or services. System by which resources are used to convert inputs into desired outputs. Ratio of quality to price paid. Competitive happiness is being able to increase quality and reduce price while maintaining or improving profit margins. (This is a way operations can directly increase customer retention and gain market share.) Services that differentiate the organization from competitors and that build relationships that bind customers to the firm in a positive way

Value-Added Services

KEY POINTS A business education is incomplete without an understanding of modern approaches to managing operations. Operations management (OM) provides a systematic way of examining organizational processes. OM presents interesting career opportunities and the concepts and tools of OM are widely used in managing other functions of a business. The time frame of management decisions is discussed along with the different types of transformation processes. Services are compared to goods production with emphasis on the primary inputs, resources, the primary transformation functions, and the typical desired outputs in a variety of service and operations examples. Value-added services are also discussed along with their benefit to external customers. Operations management is identified within the organizational chart and its role in the organization is defined. Chapter one presents a concept map and outlines the textbook chapters. The chapters are grouped by the key themes of strategic planning, project management, decision analysis, quality, supply chain management, and e-commerce. The historical roots of the development of OM are traced from scientific management through the moving assembly line, the Hawthorne studies, and on to today's current manufacturing topics including supply chain management and e-commerce. This chapter concludes with current issues facing OM executives including effectively consolidating the operations resulting from mergers, developing flexible supply chains to enable mass customization of products and services, managing global suppliers, production, and distribution networks, increased commoditization of suppliers, achieving the service factory, and achieving excellent service from service firms.

Ch 1 KEY REVIEW

True-False Questions
_____ 1.

A business education is complete without an understanding of modern approaches to managing operations.

_____ _____ _____ _____ _____ 6. _____

2. The concepts and tools of OM are widely used in managing other functions of a business. 3. 4. Value is defined as quality divided by price. Operational planning and control decisions are short-term and narrow.

5. In services, the shop floor may be called the front office, dining area, operating room, or passenger cabin, depending on the industry. Frederick W. Taylor developed scientific management. 7. The goal of just-in-time production is to achieve low-volume production using minimal inventories of parts that arrive at the workstation just as they are needed. 8. ISO 9000 certification standards play a major role in setting quality standards for global manufacturers. 9. The quality gurus include W. Edwards Deming, Joseph M. Juran, and Philip Crosby. 10. Optimizing global supplier, production, and distribution networks is not an issue facing OM executives today.

_____ _____ _____

Multiple-Choice Questions
_____ 11. Value added services include all of the following except: A. B. C. D. _____ 12. Information Problem solving Sales support Scientific management

Management decisions within the operations function are: A. B. C. Long-term decisions Intermediate-term decisions Short-term decisions

D. _____ 13.

All of the above

All of the following describe services, except: A. B. C. D. They are tangible. Direct customer involvement is essential. Location of the facility is critical. Customers are part of the production process.

_____

14. Co-workers of Frederick W. Taylor in scientific management included all of the following except: A. B. C. D. Henry L. Gantt Joseph M. Juran Frank Gilbreth Lillian Gilbreth

_____

15. The acronym for the term that describes a program that aggressively seeks to eliminate causes of production defects and a cornerstone of many manufacturers' production practices is: A. B. C. D. JIT FMS TQC SAP

_____16.

A systematic way of looking at organizational processes can include: A. B. C. D. E. How to solve real world problems How to expand globally How many lines to provide at the bank tellers window How many windows are needed in the fast food drive-through All of the above

_____ 17.

Key trends in the future of operations management include: A. B. C. D. E. Radio frequency identification (RFID) Specialization Outsourcing Smart factories All of the above

_____ 18.

Wal-Mart, the giant U.S. retailer, is requiring its top 100 vendors to employ the technology of:

A. B. C. D.

Radio frequency identification Personal computers Pagers Cell phones

_____ 19.

Why do senior executives not understand operations?

A. B. C. D.

They entered organizations through finance, strategy, or marketing They relied on others to mind the details of the actual work Both A and B None of the above

_____ 20.

The Internet has opened new ways for the customer to interact directly with a firm. This information sharing can lead to a new trend of:

A. B. C. D.

Optimizing global supplier, production, and distribution networks Increased co-production of goods and services Managing the customers experience during the service encounter Raising the awareness of operations as a significant competitive weapon

Answer Key

1. 11.

F, 2. T, 3. T, 4. T, 5. T, 6. T, 7. F, 8. T, 9. T, 10. F, D, 12. D, 13. A, 14. B, 15. C, 16. E, 17. E, 18. A, 19. C, 20. B

Operations Strategy and Competitiveness

KEY OUTLINE I. Operations Strategy A. What is Operations Strategy? 1. Operations Strategy Defined Operations Competitive Dimensions A. Competitive Dimensions B. The Notion of Trade-Offs 1. Plant-within-a-Plant (PWP) Defined 2. Straddling Defined C. Order Winners and Qualifiers 1. Order Winner Defined 2. Order Qualifiers Defined D. The Marketing-Operations Link The Corporate Strategy Design Process A. The Financial Perspective B. The Customer Perspective C. The Internal Perspective D. The Learning and Growth Perspective Strategic FitFitting Operational Activities to Strategy 1. Activity-System Maps Defined B. A Framework for Operations Strategy in Manufacturing 1. Core Capabilities Defined C. Developing a Manufacturing Strategy D. Operations Strategy in Services E. Internet Compliments Strategy Attacking Through Operations Productivity Measurement A. Key Performance indicators (KPI) Defined B. Productivity Defined C. How Does Wall Street Evaluate Operations Performance? Conclusion

II.

III.

IV.

V. VI.

VII.

KEY POINTS For a company to be considered world class, it must recognize that the ability to compete in the marketplace depends on developing an operations strategy aligned with the mission of serving the customer. This chapter describes a company's competitiveness and its relative position to other firms in both local and global markets. The competitive dimensions of operations are cost, product quality and reliability, delivery speed, delivery reliability, coping with demand change, flexibility, and new product introduction speed. Central to the concept of operations strategy is the notion of operations focus and trade-offs. The interface between marketing and operations is necessary to provide a business with an understanding of its markets from both perspectives. Operations strategy must be linked vertically to the customer and horizontally to other parts of the enterprise. Chapter two describes the steps for prioritizing competitive dimensions. Operations strategy is also considered in service firms. An example of Southwest Airlines profiles the fitting of operational activities to overall strategy, while the example of Wal-Mart profiles ways to attack the market by using operations. Finally, productivity measures are presented including partial measures, multifactor measures, and total measures of productivity. These measures provide benchmarks to indicate how well the company is doing and are used to measure improvement.
Activity-System Map A diagram showing how a company's strategy is delivered through a set of supporting activities. Core Capabilities Skills that differentiate the manufacturing or service firm from its competitors. Key Performance Indicators A set of measures that help managers evaluate a company's economic performance and help spot the need for changes in operations. Operations Strategy Setting broad policies and plans for using the resources of a firm to best support the firm's long-term competitive strategy. Order Qualifier A dimension that is used to screen a product or service as a candidate for purchase. Order Winner A dimension that differentiates the products or services of one firm from another. Plant-Within-a-Plant (PWP) A concept in which different locations within a facility are dedicated to different product lines. Each location is operated according to its own strategy in order to minimize the confusion associated with shifting from one type of strategy to another. Productivity A measure of how well resources are used. Straddling Occurs when a company seeks to match what a competitor is doing by just adding new features, services, or technologies to existing activities. This often creates problems due to the compromises that may need to be made.

Ch 2 KEY REVIEW
True/False Questions
_____ _____ _____ 3. _____ 4. 1. Competing on cost and being the low-cost producer is a guarantee of profitability and success. 2. There are two characteristics of a product/service that define quality: design quality and process quality. An order winner is the minimum requirement necessary to enter the market with a product or service. Choosing a target market to serve may lead to turning away business or ruling out a market segment that would be unprofitable or too hard to serve given the firm's capabilities. Operations strategy in service firms is generally inseparable from the overall corporate strategy. Productivity is a measure of how well a country, industry, or business unit is using its resources. To increase productivity, we want to make the ratio of inputs to outputs as large as practical. 8. The statement: productivity is a relative measure, means that the productivity value in March is not meaningful by itself but is meaningful only if compared to Februarys productivity value. The ratio of output to a single input is total factor measurement of productivity. Partial measures of productivity give managers information in familiar units, allowing them to easily relate these measures to the actual operations.

_____ 5. _____ 6. _____ 7. _____

_____ 9. _____ 10.

Multiple-Choice Questions
_____ 11. Typical quality issues include which of the following: A. B. C. D. _____ Facility location Extent of use of outside suppliers Defect prevention Organizational structure

12. A major dimension that forms the competitive position of the company includes which of the following: A. B. C. D. Organization Planning Controlling Flexibility

_____ 13.

All firms in the highly competitive soft drink industry must have a readily available, good tasting product as judged by consumers. To differentiate themselves from the other competitors, the manufacturers must use extensive promotion and sponsorship of event. In this industry product availability and quality taste is: A. B. C. D. An order winner A qualifier A world-class manufacturer A plant-within-a plant

_____ 14.

Which of the following is the first step in developing priorities when crafting a manufacturing strategy? A. B. C. D. Determine the order winners and qualifiers for each group. Segment the market according to the product group. Identify the product requirements, demand patterns, and profit margins of each group. Convert order winners into specific performance requirements.

_____ 15.

The Garden Caf made and sold 238 veggie pizzas last Saturday night. They employed two kitchen preparation employees and one cashier and two waitresses who together worked a total of 30 hours during Saturday night. Total labor productivity is: A. B. C. D. 238 7.93 0.13 71.40

_____16.

Special services that are provided to augment the sale of manufactured products can include which of the following: A. B. C. D. E. Technical liaison and support Meeting a launch date Supplier after-sale support Other factors like colors, size, weight, and product mix options All of the above

_____17.

Adherence to a products dimensional tolerances is essential to ensuring a products ____________. A. B. C. D. Reliability Quality Cost Delivery speed

_____18.

Which is considered a component of productivity strategy? A. B. C. D. Improve cost structure Improve asset utilization Both A and B Neither A nor B

_____19.

A company may differentiate itself in the marketplace by: A. B. C. D. Product leadership Customer intimacy Operational excellence All of the above

_____20.

The cultural shifts needed to motivate, empower, and align the workforce behind the company strategy is: A. B. C. D. Strategic competencies Strategic technologies Climate for action Strategic motivation

Answers Key 1. 11. 17. F 2. T 3. F 4. T 5. T 6. T 7. F 8. T 9. F 10. T C 12. D 13. B 14. B 15. B (output/input or 238/30) 16. A 18. C 19. D 20. C C