1/20 Operations Management Lecture 2 – Shouldice Hospital (Chapter 2 & 3) Dr. Ursula G. Kraus

2/20 Review Manufacturing Game Introduction Operations Management -Process View of Operations

3/20 Learning Objectives Understand the definition and scope of operations Show how operations affect organizational strategy and vice versa

4/20 Agenda Shouldice Hospital Introduction Operations Management -Product/Process Attributes -Process Characterization -Strategic Positioning

5/20 Operations Management Lecture 1 - Agenda Shouldice Hospital Introduction Operations Management -Process View of Operations -Product/Process Attributes -Process Characterization -Strategic Positioning

6/20 What is a Process? “ … a network of activities performed by resources that transform inputs to outputs” Inputs Outputs Goods Services Labor & Capital Information structure Network of Activities and Buffers Flow units (customers, data, material, cash, etc.) Resources Process Management Source: Managing Business Process Flows (1999)

7/20 Operations & the Process View: Shouldice Hospital Inputs …………….. Outputs ……………… …………………………….. Information structure Process Flow Chart Flow units …………… Resources Process Management

8/20 Product and Service Attributes CostTime QualityVariety Source: Operations Management, NPS 2003

9/20 From Product Attributes to Process Attributes CostTime QualityVariety Product AttributesProcess Attributes CostTime QualityFlexibility Source: Operations Management, NPS 2003

10/20 Classification of Processes by: I. Process Architecture Process Types Examples.  Project Construction, Consulting  Job Shop Machine Shop, Beauty Shop  Batch Bakery, Classroom  Line Flow Assembly Line, Cafeteria Line  Continuous Flow Paper mill, Central heating

11/20 Characteristics of Processes: Job Shop vs. Flow Shop Source: Managing Business Process Flows (1999) low medium high

12/20 Process Flexibility Jumbled Flow. Process segments loosely linked. Disconnected Line Flow/Jumbled Flow but a dominant flow exists. JOB SHOP (Commercial Printer, Architecture firm) BATCH (Heavy Equipment, Auto Repair) LINE FLOWS (Auto Assembly, Car lubrication shop) CONTINUOUS FLOW (Oil Refinery) Product Variety Low Low Standardization One of a kind Low Volume Many Products Few Major Products High volume High Standardization Commodity Products Connected Line Flow (assembly line) Continuous, automated, rigid line flow. Process segments tightly linked. Opportunity Costs Out-of-pocket Costs High Low High Matching Product with Process Choice: Product-Process Matrix Source: Managing Business Process Flows (1999)

13/20 Classification of Processes by: II. Positioning Strategy  Functional Focus: … grouping by resource type Job shop General purpose resources  Product Focus: … grouping by product Flow shop Specialized resources AB CD Product 1 Product 2 ADB CBA Product 1 Product 2 = resource pool (e.g., X-ray dept, billing) Source: Managing Business Process Flows (1999)

14/20 Classification of Processes by: III. Customer Interface  Make to Stock  Make to Order Source: Managing Business Process Flows (1999) For Mr. Foley

15/20 Self-service groceries Automobile Comparison of Goods and Services 100%75%50%25%0%100%75%50%25% Goods Services Installed carpeting Haircut Consulting services Fast-food restaurant Gourmet restaurant Auto maintenance

16/20 Characteristics of Services  Typically labor intensive - difficult to automate  Frequently individually processed - low scale economies  Often an intellectual task performed by professionals - expensive resources and variable output  Often difficult to evaluate for quality

17/20 A Strategic Framework for Operations –Businesses in which the corporation will participate –Acquisition & allocation of key corporate resources to each business Corporate Strategy Business Unit Strat. –Scope of business (product/market/ service segments) –Basis on which BU will achieve and maintain competitive advantage –What must operations do particularly well? Which capabilities must operations develop? –How should operations processes be structured to develop capabilities that support strategy? Operations Strategy Operations Structure Source: Based on Managing Business Process Flows (1999) Focus of course

18/20 Representation of BU Strategy: Current Position and Strategic Directions of Movement in the “Competitive Product Space” Price (or Cost) Responsiveness (Time) B A HighLow Source: Managing Business Process Flows (1999) slow fast

19/20 Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current positions in an industry Responsiveness Operations Frontier A B C Price HighLow Source: Managing Business Process Flows (1999) Low High

20/20 Focus and the Frontier In the health-care sector Cost efficiency Responsiveness World-class Emergency Room World-class (non-emergency) Hospital General Facilities Operations Frontier Source: Managing Business Process Flows (1999)