IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 1 IES 303 Operations Strategy Process Design Chapters 1-3 Week 2 Nov 17, 2005 Objective: Understand current business environment and strategic decisions in operations

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 2 Case Discussion: Starbuck’s & Cappuccino Express By integrating Starbuck’s successful stories with your own perceptions, discuss the followings:  What factor can be expected to have a major impact of the success of The Cappuccino Express? Explain.  What type of decisions must Vincent make daily and over the long run for his shops’ operations to run effectively?  Vincent would like to monitor the performance of each site manager. What measure(s) of performance should he use?

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 3 Operations Management as Function Figure 1.4

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 4 Types of Operations Management (OM) Decisions Strategic choices  ________________  ____________________ Operating Decisions  ___________________

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 5 Value Chain  An interrelated series of processes that produces a service or product  Each activity in a process should __________ to the preceding activities  Concept of value chain is important because ___ ________________

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 6 Core / Support Processes  ______________ A chain of activities that delivers value to external customers  ______________ A process that provides vital resources and input to the core processes and therefore is essential to the management of the business

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 7 Competitive Priorities Functional area strategies finance operations marketing others New Service/ Product Design design analysis development full launch Figure 2.1 Capabilities current needed planned Corporate strategy environmental scanning core competencies core processes global strategies Market analysis segmentation needs analysis Competitive priorities cost quality time flexibility

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 8 Competitive Priorities  Competing on cost ___________________  Competing on quality ___________________  Competing on Time ___________________  Competing on Flexibility ___________________ The critical dimensions that a process must possess to satisfy its internal or external customers, both now and in the future Provide some practical firms / organizations that can be categorized as above

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 9 New Service/Product Development Process Post-launch review Market promotions Sales personnel briefed Distribution processes activated Old services or products withdrawn Production of new offering and ramp-up Need to rethink the new offering or production processes Detailed specifications Process design Marketing program design Personnel training Testing and pilot runs Service or product not profitable Detailed review of market potential and production costs Figure 2.2 Development strategy Idea generation and screening Service package or product architecture formulation Production feasibility

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 10 Process Design  Process design includes ___________, ________, ________, and ________ that transform inputs into outputs.  Input selection: to be produced in-house, or Purchased (outsourcing), or subcontract. Proper mix of human skills and equipment

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 11 Process Design Process design decisions must be made when  A gap exit between ______________ and ______________  A new service/product/technology is being offered  Quality must be improved  Competitive priorities have changed  Demand is changing  Current performance is not adequate

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 12 Major Decisions for Effective Process Design Effective Process Design Vertical Integration In-house Outsource Capital Intensity Low automation High automation Customer Involvement Low involvement High involvement Resource Flexibility Specialized Enlarged Process Structure Customer-contact position (services) Product-process position (manufacturing) Strategy for Change Process Reengineering Process Improvement Figure

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 13 (1)(2)(3)(4)(5) One of a kindLow volume,MultipleFew majorHigh volume products, madelowproductsproducts,high to customer standardizationmoderate higherstandardization, ordervolumevolumecommodity products Process Characteristics Less Complexity, Less Divergence, More Line Flows Less Customization and Higher Volume Product Design Continuous process Project process Line process Batch process Job process (1) Complex and highly customized process, unique sequence of tasks (2) Jumbled flows, complex work with many exceptions (3) Disconnected line flows, moderately complex work (4) Connected line, routine work (5) Continuous flows, highly repetitive work Product-Process Matrix

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 14 Production and Inventory Strategies  ________________ Standard customers in anticipation of demand  ________________ Standard modules with added option  ________________ Design, produce, and deliver products or services to customer specifications Discuss about the impacts of these strategies on the production and inventory level.

IES 303 Engineering Management & Cost Analysis | Dr. Karndee Prichanont, SIIT 15 Next week: Discussion Assignment  Discussion Question 1 (pg 79) The onset of exponential growth in the development of information technologies has encouraged the birth of many “dot-com” companies. The Internet has enabled these companies to reach customers in very effective ways. Consider Amazon.com, whose web site enjoys millions of hits each day and put customers in touch with more that 18 million services and products. What are Amazon.com’s competitive priorities and what should its operations strategy focus on? In addition to Amazon.com, suggest one other dot-com company or website and discuss about its competitive priorities.