Today’s Topic: Operations: Today’s Topic: Operations The Manufacturing, Logistics and Service functions, and their relationships to technical jobs -or- “if you can’t produce and deliver it, it’s unlikely that anyone will pay you any money”


Course Schedule: Course Schedule Mar 13: Marketing & Positioning/ Educational Technology Corp Mar 27: Sales & Sales Channels/ Cisco Apr 3: Marketing & Sales/ CardioThoracic Systems Apr 10: Market-focused Product Development/Guidant Apr 17: Operations/Toyota Apr 24: Product launch/Goodyear May 12: final exam; product launch/Loctite


THIS WEEK we will try to find a better exam time than May 12th; come to class with your availability post-Apr 24 !!!: THIS WEEK we will try to find a better exam time than May 12th; come to class with your availability post-Apr 24 !!!


Last Class & Final: Last Class & Final Product launch: decisions upon launching a new product (Goodyear case); and summary of key learnings from the course Final exam: decisions on product launch (Loctite case)


Operations: Operations The function of creating, delivering, and servicing a company’s products and/or services….. includes all but designing, marketing and selling them


The Operations Flow : The Operations Flow Sales forecasts are given by sales (or marketing) to manufacturing…… Manufacturing produces products (“finished goods”)and spare parts (“spares”) ………and/or delivers the service (ops)…… Logistics (or “distribution”) handles physical distribution to end-customers and/or channels, and is responsible for delivery of spare parts and repair services….. and everyone blames Ops if anything goes wrong!


Operations’ Challenge is to Balance….: Operations’ Challenge is to Balance…. COGS: COP and COS (cost of manufacture, cost of service, and logistics expense) Inventory (full-stream: materials, work-in- process, finished goods, spare parts) Customer service (delivery/response intervals, and quality of services)


The Operations Balance: The Operations Balance COGS Inventory Customer Service


Operations: Short Term Issues: Operations: Short Term Issues Cost of Goods/Cost of Service Production scheduling Manufacturing yield/quality/cycle time Inventory management Logistics efficiency/cost Returns and repairs management Customer service quality


Operations: Longer Term Issues: Operations: Longer Term Issues In-house or outsourced? Capacity planning: building capacity (just) in advance of when it will be needed, with minimum capital Investing in process technology Building supporting IT systems Regularizing the new product introduction (NPI) process


Manufacturing Costs Depend on…….: Manufacturing Costs Depend on……. Capacity utilization Capital costs (depreciation on capital) Process technology/yield Cycle time, set-up intervals, run volumes Product designs !! Materials costs (BOM) NPI process efficiency


Operations’ Challenge is to Balance….: Operations’ Challenge is to Balance…. COGS: COP and COS (cost of product manufacture, cost of service, and logistics expense) Inventory (full-stream: materials, work-in- process, finished goods, spare parts) Customer service (delivery/response intervals, and quality of services)


Operations is impacted by “inputs” from…….: Operations is impacted by “inputs” from……. Marketing Sales R&D and others (IT, finance, HR, … )


Marketing: Inputs/Impacts: Marketing: Inputs/Impacts Product line/model breadth Cost/COGS targets Product quality targets New product strategy (big-bang or incremental/inch-up) Customer service requirements Sales promotions/incentives Sales forecasts (long-run)


Sales: Inputs/Impacts: Sales: Inputs/Impacts Sales forecasts (short-run) Warranty/return management Commitments to customers Quality of installation/maintenance Accuracy of customer orders Ability to “level out” sales volume


R&D: Inputs/Impacts: R&D: Inputs/Impacts Product designs (for cost and service) Design changes/modifications Product materials/components Quality and timeliness of “hand-offs” Process engineering efforts (or not) Role in manufacturing engineering Support for concurrent engineering


Reading Assignment: Reading Assignment Can Marketing and Manufacturing Coexist? -- read to understand the issues listed in the article’s Exhibit Toyota: Demand Chain Management -- an example of world-class operations management


Assignment Questions: Assignment Questions How can the actions of technical people (R&D, technical sales, etc) impact the marketing-manufacturing issues cited in the first reading? Provide one thought/example for each of the 8 issues in the “Coexist” exhibit Pick any 4 of the 8 issues in the “Coexist” exhibit and explain how Toyota’s demand chain process design deals with each of those 4 issues


Assignment: R&D Impacts on…?: Assignment: R&D Impacts on…? Capacity planning Production scheduling Logistics/distribution Quality assurance Breadth of product line Costs (COGS: COP and COS) New Product Introduction Customer service


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Can Marketing and Manufacturing Coexist?: Can Marketing and Manufacturing Coexist?


Next Week’s Assignment: Next Week’s Assignment Goodyear: The Aquatred Launch themes: product launch, marketing and sales channels


Goodyear/Aquatred Case Summary: Goodyear/Aquatred Case Summary 1991: tire business is “stagnant” Goodyear market share is #1 in the US; #3 worldwide Financially, it is a break-even business Launching a new, high-performance tire Has to decide how to position the product, which channels to launch the product into, and how to price and promote the product


Considerations (hints)….: Considerations (hints)…. State of the market Consumer preferences and behavior Channel structure and trends Channel economics Goodyear and Aquatred competitive positioning Aquatred’s chances of success


Assignment Questions: Assignment Questions What are Aquatred’s strengths and weaknesses? Should Goodyear target current Michelin customers? What is the appropriate positioning of the Aquatred? Identify the positives and negatives of Goodyear using: (a) independent dealers, (b) large tire chains, (c) mass merchants What should the Aquatred MSRP be? Why? Rank the promotional options: advertising, channel incentives, channel training