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Welcome MGT329: 

Welcome MGT329

Operations Management: MGT329: 

Operations Management: MGT329 Lecture: Monday and Wednesday 9:30 AM - 10:45 AM 11:00 AM – 12:15 PM Professor: Jeff Street Office: BA 434 Phone: X4184 Cell: (770) 654-2056 e-mail: strejeff@isu.edu

Course Books: 

Course Books Operations Management For Competitive Advantage, 11th Edition, by Richard B. Chase, F. Robert Jacobs and Nicholas J. Aquilano. The Goal, by Eliyahu M. Goldratt and Jeff Cox

Grading: 

Grading The grade received in the course will be based on: Participation/Homework (25%) Exam I (25%) Exam II (25%) Final Exam (25%)

Some questions to be addressed in this course include: : 

Some questions to be addressed in this course include: How does the customer fit into operations strategy? How is globalization affecting business and operations strategies? What effect are new technologies having on the utilization of an organization’s resources?

Some questions to be addressed in this course include:: 

Some questions to be addressed in this course include: How has the concept of quality management changed, and how does it affect operations? Why is continuous improvement in the operations management function necessary for an organization to remain competitive?

Why Study Operations Management?: 

Why Study Operations Management? Operations Management Business Education Systematic Approach to Organizational Processes Career Opportunities Cross-Functional Applications

Development of OM as a Field : 

Development of OM as a Field

Current Issues: 

Current Issues Speeding up the time it takes to get new products and services into production. Developing flexible production systems to enable mass customization of products and services. Managing global production/supply networks. Developing and integrating new production technologies into existing production systems.

Current Issues: 

Current Issues Achieving high quality quickly and keeping it up in the face of restructuring. Managing a diverse workforce. Conforming to environmental constraints, ethical standards, and government regulations.

Overview: Introduction to Operations Management: 

2 Overview: Introduction to Operations Management What is Operations Management Why Study Operations Management? Operations Decision Making Managing Transformations Service or Good? Closed vs. Open System Perspectives Development of OM as a Field Current Issues

What is Operations Management?: 

What is Operations Management? Operations Management is a functional area of business devoted to the management of an organization's resources to create products or services. The set of resources includes an organization's know-how, facilities, work-force, materials, and equipment. Operations Management issues permeate all levels of an organization's decision making from the long-term strategic to the tactical to the day to day operations.

Slide13: 

Operations management is concerned with the design, operation, and improvement of the production system that creates the firm’s primary products and services. [Even Elmer’s, ISU, and Portneuf Medical Center are production systems]

Operations Decision Making: 

Operations Decision Making Marketplace Corporate Strategy Operations Strategy Operations Management Marketing Strategy Finance Strategy People Plants Parts Processes Planning and Control Production System

Managing Transformations “The Production System”: 

Managing Transformations “The Production System” People Plants Parts Processes Planning and Control Transformation is enabled by The 5 Ps of OM: [A.K.A. The 5 Ms…Man, Machines, Materials, Methods, And Management] Micro View

Transformations: 

Transformations Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications

Competitive Priorities: 

Competitive Priorities Quality (including Service) Price (or production cost) Delivery (speed) Flexibility

Core services are basic things that customers want from products (or services) they purchase.: 

Core services are basic things that customers want from products (or services) they purchase. Core Services Definition

Core Services Performance Objectives (Competitive Priorities): 

Core Services Performance Objectives (Competitive Priorities) Operations Management Flexibility “customized” Quality “made correctly” Delivery Speed “on-time” Price (or cost Reduction) “Competitively”

Value-added services (or features) differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way. (i.e. increase “switching costs”): 

Value-added services (or features) differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way. (i.e. increase “switching costs”) Value-Added Services Defined

Value-Added Service Categories: 

Value-Added Service Categories Operations Management Information “educate customer” Problem Solving “close gaps” Sales Support “flex to demands” Field Support “grow utility”

Value-Added Factory Services: 

Value-Added Factory Services Information - provide critical data to market Problem Solving – troubleshooting ability Sales Support – demonstrate the offering Field Support – replace/replenish stock, spares

Service or Good?: 

Service or Good? “If you drop it on your foot, it won’t hurt you.” (Good or service?) “Services never include goods and goods never include services.” (True or false?)

What about McDonald’s?: 

What about McDonald’s? Service or Manufacturing? The company certainly manufactures tangible products Why then would we consider McDonald’s a service business?

Front and Back Office: 

Front and Back Office Front Office Customer Service Provider Back Office

Slide26: 

Collect payment 15 seconds 60 seconds Fail point Standard execution time 2 minutes 30 seconds 15 seconds 20 seconds How would an Operations Management focus apply here? Not seen by customer but necessary to performance Line of visibility Back Office Front Office

Operations Strategy and Competitiveness: 

Operations Strategy and Competitiveness Chapter 2

Operations Strategy and Competitiveness - Overview: 

Operations Strategy and Competitiveness - Overview Operations Strategy A Framework for Operations Strategy in Manufacturing Operations Strategy in Services Meeting the Competitive Challenge Productivity Measurement

Operations Strategy: 

Operations Strategy Customer Needs Corporate Strategy Operations Strategy Processes, Infrastructure, and Capabilities

Strategy Process: 

Strategy Process Forced-Choice Model Strategic options Requirements for implementing options Contingency plans Statement of mission Interrelated set of financial and nonfinancial objectives Statement of strengths and weaknesses Forecast of operational needs Major future programs Broad economic assumptions Key government and regulatory issues Major technological forces Significant market opportunities and threats Explicit strategies of competitors

Slide31: 

Customer Needs Corporate Strategy SBU Operations Strategy Decisions on Processes and Infrastructure Example Strategy Process More Product Increase Org. Size Increase Production Capacity Build New Factory

Hierarchy of Strategy Process: 

Hierarchy of Strategy Process

Operations Strategy --Formulation: 

Operations Strategy --Formulation Customers Get to know; team up with next and final customer. Continual, rapid improvement in lead time, quality, cost, flexibility and variability.

Operations Strategy --Formulation: 

Operations Strategy --Formulation Company Achieve unified purpose via information; team involvement in planning and implementing change.

Operations Strategy --Formulation: 

Operations Strategy --Formulation Competitors Get to know the competition and world-class leaders.

Operations Priorities: 

Operations Priorities Cost Quality Delivery Speed Flexibility Service Delivery Reliability Coping with Changes in Demand Flexibility and New Product Introduction Speed Traditional Competitive Priorities

A Framework for Manufacturing Strategy: 

A Framework for Manufacturing Strategy Customer Needs New product : Old product Competitive dimensions & requirements Quality, Cost, Delivery, Flexibility, and Service Operations & Supplier capabilities R&D Technology Systems People Distribution Support Platforms Financial management Human resource management Information management Enterprise capabilities Operations and Supplier Capabilities R&D Technology Systems People Distribution

Operations Strategy: 

Operations Strategy Customer Needs Corporate Strategy Operations Strategy Processes, Infrastructure, and Capabilities

Slide39: 

Technology Systems People R & D Distribution CIM JIT TQM Finance Human Resources Information MGT Customer Needs Performance priorities and requirements Quality Delivery Flexibility Price Service New Product Development Order fulfillment after sales service Capabilities:Enterprise, Operations, Suppliers

competitive priorities: 

competitive priorities Quality Flexibility Service Cost Lead Times Variability

Dealing with Trade-offs: 

Dealing with Trade-offs For example, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less effective at dealing with commonly occurring problems. For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.

World-Class Manufacturing: 

World-Class Manufacturing World-class manufacturers [i.e. operations] no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. They have become order qualifiers. Distinctive Competency What are the order winners in today’s market?

Distinctive competency: 

Distinctive competency “A strength that sets a business apart from its competition” McDonald’s Disney World or Disney Land Delta Airlines Intel Corporation UPS

Strategy Begins with Priorities: 

Strategy Begins with Priorities Consider the case of a personal computer manufacturer. 1. How would we segment the market according to product group? Personal use Small business Large Corporations 2. How would we identify product requirements, demand patterns, and profit margins for each group?

How do we identify order winner and order qualifiers for each group?: 

How do we identify order winner and order qualifiers for each group? quality cost delivery flexibility service

Slide46: 

How do we convert order winners into specific performance requirements? Us (Distinctive Competencies) Competition (Them)

Slide47: 

7 Service can be an “order winner” Warranty Roadside Assistance Travel Planning Loaner Vehicles Leases Car Dealership

Again, What is Operations Management?: 

Again, What is Operations Management? Operations Management is the functional area of business devoted to the management of an organization's resources to create products or services.

What is Productivity?: 

What is Productivity? A measure of the effective use of resources, usually expressed as the ratio of output to input. Output Productivity = Input

What factors affect the productivity of a business?: 

What factors affect the productivity of a business? work methods capital quality training technology management

What methods can be used to improve productivity?: 

What methods can be used to improve productivity? develop productivity measures measurement is necessary to control the operation look at overall productivity develop methods for achieving productivity improvements establish reasonable goals for improvement measure and communicate improvements to both customers and employees

Slide52: 

Total Measure Productivity Total measure Productivity = Outputs Inputs or = Goods and services produced All resources used [Productivity versus Throughput]

Slide53: 

Partial measures of productivity = Output or Output or Output or Output Labor Capital Materials Energy Partial Measure Productivity

Slide54: 

Multifactor measures of productivity = Output . Labor + Capital + Energy or Output . Labor + Capital + Materials Multifactor Measure Productivity

Slide55: 

Example of Productivity Measurement You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. Which productivity measure should be used? Answer: Could be classified as a Total Measure or Partial Measure. Is productivity increasing or decreasing? Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 = 0.23. So, productivity is decreasing slightly.

Example: 

Example 10,000 Units Produced Sold for $10/unit 500 labor hours Labor rate: $9/hr Cost of raw material: $5,000 Cost of purchased material: $25,000 What is the labor productivity?

Example--Labor Productivity: 

10,000 units/500hrs = 20 units/hour (10,000 unit*$10/unit) (500hrs*$9/hr) What do these calculations tell us? More importantly -- What don’t they tell us? Example--Labor Productivity = $22.22

Applying Productivity Figures: 

Applying Productivity Figures You’ve just told your boss that the plant labor productivity is better than that of a plant in a related business. What does this really mean?

Productivity measures: 

Productivity measures need to be tracked over time need to include all possible inputs are difficult to compare between companies or industries do not (directly) include measures of timeliness or quality [th********] [sc*** and re****]

Solution for Problem #1: 

Solution for Problem #1

Solution to Problem #2: 

Solution to Problem #2

Solution to Problem #2: 

Solution to Problem #2

Slide63: 

Lasik Vision

Lasik Vision: 

Lasik Vision What was Lasik Vision’s competitive priority? High volume – low cost Other priorities? Flexibility? Delivery? Quality?

Lasik Vision: 

Lasik Vision Is this the appropriate approach in this industry? Is standardization more difficult in health care? What repercussions, actual or perceived might occur with this priority?

Lasik Vision: 

Lasik Vision Given that a company has chosen this priority, what needs to be done to achieve success?

Lasik Vision -- Update: 

Lasik Vision -- Update January 15, 2001 – Icon Laser Eye Centers proposes takeover of Lasik Vision March, 2001 – takeover complete April 4, 2001 – Lasik Vision in bankruptcy April 23, 2001 – Dr. Hugo Sutton and others purchase assets of Lasik Vision. Clinic reopens as Lasik Eye Centres