Pearson Education Ltd. Arnos Design Chapter 1 Operations management Pearson Education Ltd. Arnos Design

Key operations questions In Chapter 1 – Operations management – Slack et. al. identify the following key questions: What is operations management? Why is operations management important in all types of organization? What is the input–transformation–output process? What is the process hierarchy? How do operations processes have different characteristics? What are the activities of operations management?

Operations management defined Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.

Slack et al.’s model of operations management Operation’s performance Operations strategy Transformed resources Materials Information Customers Operations strategy Design Improvement Input resources Output products and services Operations management Customers Planning and control Transforming resources Facilities Staff

Operations management is fashionable! The consultancy services market – % of world revenues of 40 largest consultancy firms Marketing/sales 2 Operations and process management 31 Corporate strategy 17 IT strategy Benefits/Actuarial 16 Organizational design 11 Financial 6

Operations management at IKEA Design a store layout which gives smooth and effective flow Design elegant products which can be flat-packed efficiently Ensure that the jobs of all staff encourage their contribution to business success Continually examine and improve operations practice Site stores of an appropriate size in the most effective locations Maintain cleanliness and safety of storage area Arrange for fast replenishment of products Monitor and enhance quality of service to customers

They are all operations Back office operation in a bank Kitchen unit manufacturing operation Take-out / restaurant operation

Operations are everywhere The best way to start understanding the nature of ‘Operations’ is to look around you. Everything you can see around you (except the flesh and blood) has been produced by an operation. Every service you consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation. Operations Managers create everything you buy, sit on, wear, eat, throw at people and throw away.

Product / Service Development The three basic functions of enterprises Product / Service Development Digital Stock Marketing Operations Pearson Education Ltd. Lord and Leverett Ford Motor Company

Product/service development function Interfunctional relationships between operations and other functions Engineering/ technical function Accounting and finance function Human resources function Information technology (IT) function Marketing function Product/service development function Operations function Understanding of the capabilities and constraints of the operations process New product and service ideas Analysis of new technology options Understanding of process technology needs Financial analysis for performance and decisions Provision of relevant data Understanding of the capabilities and constraints of the operations process Market requirements Recruitment development and training Understanding of human resource needs Provision of systems for design, planning and control, and improvement Understanding of infrastructural and system needs

Prêt a Manger ‘High-end’ sandwich and snack retailer Use only ‘wholesome’ ingredients All shops have their own kitchens where fresh sandwiches are prepared every day Fresh ingredients are delivered early every morning Same staff who serve you at lunch made the sandwiches that morning ‘We don’t work nights, we wear jeans, we party…’

The three basic functions at Prêt a Manger Nutritional ‘mechanical’ and aesthetic design of the sandwiches and snacks Product/ Service development Operations Marketing Design, location and management of stores and in-store processes and the network that supplies them Promotional activities, market research, etc.

Operations management in all types of organization Automobile assembly factory – Operations management uses machines to efficiently assemble products that satisfy current customer demands

Operations management in all types of organization (Continued) Physician (General practitioner) – Operations management uses knowledge to effectively diagnose conditions in order to treat real and perceived patient concerns

Operations management in all types of organization (Continued) Management consultant – Operations management uses people to effectively create the services that will address current and potential client needs

Operations management in all types of organization (Continued)  Disaster relief charity – Operations management uses ours and our partners’ resources to speedily provide the supplies and services that relieve community suffering

Operations management in all types of organization (Continued)  Advertising agency – Operations management uses our staff’s knowledge and experience to creatively present ideas that delight clients and address their real needs

Operations management uses… machines to efficiently assemble products to treat real and perceived patient concerns diagnose conditions knowledge to effectively people effectively services that will address current and potential client needs to create supplies and services that relieve community suffering ours and our partners’ resources to speedily provide ideas that delight clients and address their real needs our staff’s knowledge and experience to creatively present

Operations management is changing The business environment is changing, for example: Prompting operations responses, for example: Increased cost-based competition Higher quality expectations Demands for better service More choice and variety Rapidly developing technologies Frequent new product/service introduction Increased ethical sensitivity Environmental impacts are more transparent More legal regulation Greater security awareness Globalization of operations networking Information-based technologies Internet-based integration of operations activities Supply chain management Customer relationship management Flexible working patterns Mass customization Fast time-to-market methods Lean process design Environmentally sensitive design Supplier ‘partnership’ and development Failure analysis Business recovery planning

Transformation process All operations are input–transformation–output processes Inputs Outputs Transformation process

Operations input resources and outputs Transformed resources Materials Information Customers Input resources Output products and services Transformation process Customers Transforming resources Facilities Staff Outputs are products and services that add value for customers

Inputs and outputs at Prêt a Manger Transformed resources Ingredients Packaging Customers Input resources Served and satisfied customers Customers Transforming resources Equipment Fittings Staff

Most operations produce products and services Pure products –Outputs that are exclusively tangible Crude oil production Acme Whistles Aluminium smelting Specialist machine tool production Mixture of products and services – Outputs that are a mixture of the tangible and intangible Prèt a Manger Restaurant IKEA Information systems provider Management consultancy Pure services – Outputs that are exclusively intangible Mwagusi Safari Lodge Psychotherapy clinic

Operations can be analyzed at three levels Flow between operations The level of the supply network The level of the operation Flow between processes The level of the process Flow between resources

Operations can be analyzed at three levels (Continued) Operations management is concerned with the flow of transformed resources between operations, processes, where Flow between operations Flow between processes External operations interact with internal processes to form the external supply network Processes form an internal ‘supply network’ and become each others customers and suppliers Flow between resources

Example of analysis at three levels The supply network – Flow between operations Broadcasting company Promotion agency Studios Casting agency Creative agency A programme and video supply network Programme/video maker The programme and video operation The operation – Flow between processes

Example of analysis at three levels (Continued) The supply network – Flow between operations Programme and video maker The programme and video operation The operation – Flow between processes Production unit Set and props manufacture Engineer-ing Marketing and sales Finance and accounting Post production

Example of analysis at three levels (Continued) The supply network – Flow between operations Programme and video maker The operation – Flow between processes Set and props manufacture Set design Props acquisition Set construction Set finishing The ‘Set and props manufacturing’ process

Programme and video maker The television and video company divided into two ‘end-to-end’ business processes Programme and video maker End-to-end process for programme production Programme set and props manufacture Engineering Programme marketing and sales Programme production unit Programme finance and accounting Programme post production End-to-end process for music video production Music video set and props manufacture Music video marketing and sales Music video production unit Music video finance and accounting Music video post production

Pearson Education Ltd. Naki Kouyioumtzis All functions use processes to provide service Any organization Human resources Operations Marketing Information systems Finance Sales Every part of any organization uses processes to produce products or (usually) services for external or (usually) internal customers Pearson Education Ltd. Naki Kouyioumtzis

Differences within sectors are often greater than the differences between sectors Financial services An account management centre at a large retail bank Financial analyst advising a client at an investment bank Pearson Education Ltd. MindStudio Furniture manufacturing Mass production of kitchen units Craft production of reproduction ‘antique’ furniture Pearson Education Ltd. Rob Judges Hotels Value-for-money hotel Lobby of an international luxury hotel Photodisc. Life File. Emma Lee Photodisc. Photolink. Jack Star

A typology of operations and processes The 4 Vs High Volume Low Variety High Low Variation in demand High Low Visibility High Low

A typology of operations and processes (Continued) The implications of high and low Volume in operations and processes Implications Low repetition Each staff member performs more of each task Less systemization High unit costs Implications High repeatability Specialization Capital intensive Low unit costs Low Volume High High

A typology of operations and processes (Continued) The implications of high and low Variety in operations and processes Implications Flexible Complex Match customer needs High unit costs Implications Well defined Routine Standardized Regular Low unit costs High Variety Low High

A typology of operations and processes (Continued) The implications of high and low Variation in operations and processes Implications Changing capacity Anticipation Flexibility In touch with demand High unit costs Implications Stable Routine Predictable High utilization Low unit costs Variation in demand High Low High

A typology of operations and processes (Continued) The implications of high and low Visibility in operations and processes Implications Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs Implications Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs High Visibility Low High

A 4 Vs profile of two operations Low Volume High Mwagusi Safari Lodge Formule 1 Hotel High Variety Low High Variation Low High Visibility Low Important to understand how different operations are positioned on the 4 Vs. Is their position where they want to be? Do they understand the strategic implications?

The Concept Design Services Case Study Questions Why is operations management important in CDS? Draw a 4 Vs profile for the company’s products and services What would you recommend to the company if they asked you to advise them in improving their operations?