Operations Management & Performance Modeling

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Presentation transcript:

Operations Management & Performance Modeling Operations Strategy Class 1a: Introduction to Operations Introduction & Administrative Key Principles of Course Strategic role of Ops Process view of Ops Strategies, Capabilities and Operation Drivers Wal-Mart Process Analysis Lean Operations Supply Chain Management Capacity Management in Services Quality Management Business Process Reengineering OM&PM/Class 1a OM&PM/Class 1a

Key Principle of course: 1. The Strategic Role of Ops “A company’s operations function is either a competitive weapon or a corporate millstone. It is seldom neutral.” [Skinner ‘69] ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a

Key Principle of Course: 2. The Process View of Ops By rethinking the IBM Austin assembly plant and introducing cells, distance traveled by a card was cut from 1.5 miles to 200 yards floor space was reduced to half production tripled with about the same number of workers. [Chicago Tribune, July 1992] OM&PM/Class 1a OM&PM/Class 1a

Operations & the Process View: What is a Process? Inputs Outputs Goods Services Labor & Capital Feedback for control Transformation Process Flow Units (RM, people, information, etc.) Resources Operations Management OM&PM/Class 1a

What is Operations Management? Management of business processes How to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs. What is appropriate? ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a

What are “appropriate capabilities”? An example: A Supply Chain Market Distribution Production Service Delivery System Service Outputs The market + your strategy determine criteria for appropriate. OM&PM/Class 1a

What defines a “good process”? Performance: Financial Measures Absolute measures: revenues, costs, operating income, net income Net Present Value (NPV) = Relative measures: ROI, ROE ROA = Survival measure: cash flow OM&PM/Class 1a

Firms compete on product attributes. This requires process capabilities. Price (Cost) Quality Customer service Product quality Time Rapid, reliable delivery New product development Flexibility Variety or volume flexibility “order winners” “capabilities” OM&PM/Class 1a

Process Capabilities are affected by Process Drivers/Levers Process structure/architecture jobs activities & storage/inventories: quantity & location resources: capacity & throughput routes: information and product flow positioning (product/process focus) capabilities (technology, “real” investment) Operations Planning & Control Organization ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a

Linking the strategic role & process view: Strategic Operational Audit Business Strategy compatible? Desired Capabilities . . . Marketing Strategy Operations Strategy Financial Strategy p, Q, t, flexibility Operations Structure: Processes & Resources OM&PM/Class 1a OM&PM/Class 1a

A Strategic Framework for Operations Corporate Strategy businesses in which the corporation will participate acquisition & allocation of key corporate resources to each business Business Unit Strategy scope of the business (product/market/service segments) basis on which BU will achieve and maintain competitive advantage Operations Strategy (and mkt strat, fin strat ...) What must operations do particularly well? Which capabilities must ops develop? Operations Structure How should operations processes be structured to develop capabilities that support strategy? ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a

Wal-Mart Corporate Strategy Operations Structure Operations Strategy (Gain competitive advantage by) providing customers access to quality goods, when and where needed, at competitive prices Operations Structure Cross docking EDI Fast transportation system Focused locations Communication between retail stores Operations Strategy Short flow times Low inventory levels OM&PM/Class 1a OM&PM/Class 1a

Wal-Mart (Resulting Benefits) Inventory at retail stores turned over twice a week (Industry averages once every two weeks) Improved targeting of products to markets Sales per square foot increased from $102 in 1985 to $140 in 1991 (Industry average increased from $102 to $110) ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a

Historical Development of OM Craft guilds & Cottage Industry 1765: Factory System (Adam Smith, James Watt) 1810: American System of Mfg (Whitney’s interchangeable parts) 1890s: Bicycle boom (sheet metal stamping, electrical resistance welding) * Scientific Management >> Time & motion studies (Frederick Taylor 1900s) April 1, 1913: Mass Production (Henry Ford’s Moving Assembly Line) 1927: Flexible Mass Production (Alfred Sloan & GM) * Statistical Quality Control (Walter Shewhart at Bell Labs, 1930s) Hawthorn Studies (Elton Mayo at Western Electric, 1930s) 1970: Toyota Production System (Taiichi Ohno) 1980s-now: Ops in the spotlight Manufacturing Strategy Paradigm (HBS) Lean Ops: JIT, CAD/CAM, CIM, FMS, TQM, business reengineering ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a

Class 1a Learning Objectives An operation as a transformation process Product Attributes / Operational Capabilities Process Drivers / Operations structure Link between business strategy, operations strategy, and operations structure ....................................................................................................................................................................................................................................................................................................................................................................................................................................................... ........................................................................................................................................................................................................................... ............................................................................................................................................................................................................................ OM&PM/Class 1a OM&PM/Class 1a