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Production & Operations Management Chapters The Role of Operations Management Business Process Reengineering Inventory Management Operations Strategy Total Quality Management Supply Chain Management Planning & Control Analyzing Operations New Product/process development Project Management Issues For International Operations Time Based Competition Cost Elements

Understand the basics & the role of operations in today business & learn manufacturing theories Being able to design process/procedures & analyze Data Data warehousing & the role of IT in a successful Production & Operations Management Lean how to manage an ERP-Enterprise Resource Planning & Point of Sale: from order to Delivery Cost effectiveness & Cost oriented process in Operations Management Security in Operations Management Understand Inventory theories & Models: JIT (Just in time), Lean Manufacturing ………….. Start to understand quality management as a general concept & how to set quality Metrics Having access to Effective & efficient Management best practices How to transform Global strategy into daily operations Make difference between & when to use Operations, Production & Project Management Manager toolkit for a successful daily operations Management Learning Objectives of this course

Production & Operations Management Chapter : The Role of Operations Management Business Process Reengineering Inventory Management Operations Strategy Total Quality Management Supply Chain Management ✓ Planning & Control Analyzing Operations New Product/process development Project Management Issues For International Operations Time Based Competition Cost Elements

Factors Affecting Today’s Global Business Reality of Global Competition Production Sharing Pros & Cons of Globalization Quality, Service & Cost challenges The Growth of service Sector Social Responsibility Issues Developing Operations Strategy Elements of Operations Strategy Positioning the Production System Product life cycle Outsourcing Process & Technology Plan Strategic Allocation of Resources Facility Plans Linking Operations & Marketing Strategies Lecture Outlines

Introduction Operational effectiveness is the ability to perform similar operations activities better than competitors. It is very difficult for a company to compete successfully in the long run based just on operational effectiveness. A firm must also determine how operational effectiveness can be used to achieve a sustainable competitive advantage. An effective competitive strategy is critical.

Factors Affecting Today’s Global Business Conditions Reality of global competition Quality, customer service, and cost challenges Rapid expansion of advanced technologies Continued growth of the service sector Scarcity of operations resources Social responsibility issues

Reality of Global Competition Changing nature of world business International companies Strategic alliances and production sharing Fluctuation of international financial conditions

International Companies International companies are those whose scope of operations spans the globe as they buy, produce, and sell. International firms search out opportunities for profits relatively unencumbered by national boundaries. Operations managers must coordinate geopraphically dispersed operations.

Production Sharing Production sharing means that a product might be designed and financed in one country, its materials produced in other countries, assembled in another country, and sold in yet other countries. The country that is the highest-quality, lowest-cost producer for a particular activity would perform that portion of the production of the product.

Pros and Cons of Globalization Pros (Pluses) – Productivity grows more quickly (living standards can go up faster) – Global competition and cheap imports keep a lid on prices (inflation less likely to derail economic growth) – Open economy spurs innovation (with fresh ideas from abroad) – Export jobs often pay more than other jobs – US has more access to foreign investment (keeps interest rates low)

Quality, Service and Cost Challenges Quality – The goal of adequate quality must be replaced with the objective of perfect product and service quality. – The entire corporate culture must be redirected and committed to the ideal of perfect quality. – All employees must be empowered to act. – A commitment to continuous improvement has to be organization-wide.

Quality, Service and Cost Challenges Customer Service – Companies must quickly develop innovative products and respond quickly to customers’ needs. – Organizational structures must be made more horizontal to quickly accommodate change. – Multidisciplined teams must have decision-making authority, responding better to the marketplace. – Large, unwieldy companies are spinning off whole business units making them autonomous businesses that can compete with small, aggressive competitors.

Quality, Service and Cost Challenges Cost – There is continuing pressure to reduce direct costs (of producing and selling) and overhead costs. – It cost the US automakers $1,500 more per auto for labor in 1980 than it cost the Japanese auto-makers. By the 1990s the difference was almost zero. – Giant retailers (like Wal-Mart) squeezed weaker competitors out of the market, giving the retailers the leverage to force their suppliers to streamline operations and reduce costs/prices.

Quality, Service and Cost Challenges Contd Cost – Cost-cutting measures being used include: Moving production to low-labor-cost countries Negotiating lower labor rates with unions and workers Automating processes to reduce the amount of labor needed, particularly processes that are labor intensive.

Growth of Service Sector A robust service sector helps support the manufac-turing sector. There is much opportunity for quality improvement in US service firms. Many operations managers are being employed in services. Planning, analyzing, and controlling approaches from manufacturing are being adapted to service systems. The US service sector, like the manufacturing sector, must streamline and improve operations if it is to survive.

Social-Responsibility Issues Environmental Impact Product-Safety Impact Employee Impact

Social-Responsibility Issues Environmental Impact Concerns about the global environment include: Landfill waste reduction Recycling Energy conservation Chemical spills Acid rain Radioactive waste disposal … and more

Social-Responsibility Issues Product-Safety Impact Harm to people or animals that results from poor product design can: Damage a company’s reputation Require a large expense to remedy Cause governments to impose more regulations

Social-Responsibility Issues Employee Impact Employee benefits and policies include: Safety and health programs Fair hiring and promotion practices Day-care Family leave Health care Retirement benefits Educational assistance … and more

Developing Operations Strategy Corporate Mission Business Strategy Product/Service Plans Competitive Priorities Operations Strategy Assessment of Global BusinessConditionsAssessment BusinessConditionsDistinctiveCompetenciesorWeaknessesDistinctiveCompetenciesorWeaknesses

Competitive Priorities Low Production Costs Definition Unit cost (labor, material, and overhead) of each product/service Some Ways of Creating –Redesign of product/service –New technology –Increase in production rates –Reduction of scrap/waste –Reduction of inventory

Competitive Priorities Delivery Performance Definition a) Fast delivery b) On-time delivery Some Ways of Creating a) larger finished-goods inventory a) faster production rates a) quicker shipping methods b) more-realistic promises b) better control of production of orders b) better information systems

Competitive Priorities High-Quality Products/Services Definition Customers’ perception of degree of excellence exhibited by products/services Some Ways of Creating Improve product/service’s –Appearance –Performance and function –Wear, endurance ability After-sales service

Competitive Priorities Customer Service and Flexibility Definition Ability to quickly change production to other products/services. Customer responsiveness. Some Ways of Creating Change in type of processes used Use of advanced technologies Reduction in WIP (work in process) through lean manufacturing Increase in capacity

Operations Strategy Operations strategy is a long-range game plan for the production of a company’s products/services, and provides a road map for the production function in helping to achieve the business strategy.

Elements of Operations Strategy Positioning the production system Product/service plans Outsourcing plans Process and technology plans Strategic allocation of resources Facility plans: capacity, location, and layout

Positioning the Production System Select the type of product design Standard Custom Select the type of production processing system Product focused Process focused Select the type of finished-goods inventory policy Produce-to-stock Produce-to-order

Product/Service Plans As a product is designed, all the detailed characteristics of the product are established. Each product characteristic directly affects how the product can be made. affects how the product can be made. How the product is made determines the design of the production system. the design of the production system.

Stages of a Product’s Life Cycle Introduction Growth Maturity Decline Internet TV B777 I phone 4S T. Corolla

Outsourcing Plans Outsourcing refers to hiring out or subcontracting some of the work that a company needs to do. This strategy is being used more and more as companies strive to operate more efficiently. Outsourcing has many advantages and disadvantages. Companies try to determine the best level of out-sourcing to achieve their operations & business goals. More outsourcing requires a company to have less equipment, fewer employees, and a smaller facility.

Outsourcing Plans A company might outsource any of the following manufacturing related functions: Designing the product Purchasing the basic raw materials Processing the subcomponents, subassemblies, major assemblies, and finished product Distributing the product

Outsourcing Plans Many companies even outsource some service functions such as: Payroll Billing Order processing Developing/maintaining a website Employee recruitment Facility maintenance

Process and Technology Plans An essential part of operations strategy is the determination of how products/services will be produced. The range of technologies available to produce products/services is great and is continually changing.

Strategic Allocation of Resources For most companies, the vast majority of the firm’s resources are used in production/operations. Some or all of these resources are limited. The resources must be allocated to products, services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives.

Facility Plans How to provide the long-range capacity to produce the firm’s products/services is a critical strategic decision. The location of a new facility may need to be decided. The internal arrangement (layout) of workers, equipment, and functional areas within a facility affects the ability to provide the desired volume, quality, and cost of products/services.

Competitive Priorities for Services The competitive priorities listed earlier for manufacturers apply to service firms as well Low production costs Fast and on-time delivery High-quality products/services Customer service and flexibility Providing all the priorities simultaneously to customers is seldom possible.

Positioning Strategies for Services Type of Service Design Standard or custom products Amount of customer contact Mix of physical goods and intangible services Type of Production Process Quasi manufacturing Customer-as-participant

Positioning Strategies for Services Example: – McDonald’s Highly standardized service design Low amount of customer contact Physical goods dominating intangible services Quasi-manufacturing approach to back-room production process

THANK YOU! Ahmed BELAFQUIH