1. Todays Topic: Operations The Manufacturing, Logistics and Service functions, and their relationships to technical jobs -or- if you cant produce and deliver it, its unlikely that anyone will pay you any money

2. Course Schedule The Marketing Function (Lenovo) The Marketing Function (Lenovo) Sales & Sales Channels (GolfLogix) Sales & Sales Channels (GolfLogix) Internet-based Marketing (HubSpot) Internet-based Marketing (HubSpot) R&D: Product Development (Guidant) R&D: Product Development (Guidant) Operations (Crocs) Operations (Crocs) Product Launch (Invisalign) Product Launch (Invisalign) Final Exam on Product Launch (Emotiv) Final Exam on Product Launch (Emotiv)

3. Last Class & Final Exam Product launch: decisions upon launching a new product (Invisalign case); and summary of key learnings from the course Product launch: decisions upon launching a new product (Invisalign case); and summary of key learnings from the course Final exam: decisions on product launch Final exam: decisions on product launch (Emotiv case)…..Dec 20 th, 1 – 5pm (Emotiv case)…..Dec 20 th, 1 – 5pm

4. Operations The function of creating, delivering, and servicing a companys products and/or services….. includes all but designing, marketing and selling them

5. Learnings: Operations Operations functions: manufacturing, logistics & service Operations functions: manufacturing, logistics & service Characteristics of world-class operations processes Characteristics of world-class operations processes The Operations Balance The Operations Balance Impacts on operations: marketing, sales, R&D Impacts on operations: marketing, sales, R&D

6. The Operations Balance COGS Inventory Customer Service

7. The Basic Operations Flow Sales forecasts are given by sales (or marketing) to manufacturing…… Sales forecasts are given by sales (or marketing) to manufacturing…… Manufacturing produces products (finished goods)and spare parts (spares) ………and/or delivers the service (ops)…… Manufacturing produces products (finished goods)and spare parts (spares) ………and/or delivers the service (ops)…… Logistics (or distribution) handles physical distribution to end-customers and/or channels, and is responsible for delivery of spare parts and repair services….. Logistics (or distribution) handles physical distribution to end-customers and/or channels, and is responsible for delivery of spare parts and repair services….. and everyone blames Ops if anything goes wrong! and everyone blames Ops if anything goes wrong!

8. Operations: Short Term Issues Cost of Goods/Cost of Service Cost of Goods/Cost of Service Production scheduling Production scheduling Manufacturing yield/quality/cycle time Manufacturing yield/quality/cycle time Inventory management Inventory management Logistics efficiency/cost Logistics efficiency/cost Returns and repairs management Returns and repairs management Customer service quality Customer service quality

9. Operations: Longer Term Issues In-house or outsourced? In-house or outsourced? Capacity planning: building capacity (just) in advance of when it will be needed, with minimum capital Capacity planning: building capacity (just) in advance of when it will be needed, with minimum capital Investing in process technology Investing in process technology Building supporting IT systems Building supporting IT systems Regularizing the new product introduction (NPI) process Regularizing the new product introduction (NPI) process

10. Manufacturing Costs Depend on……. Capacity utilization Capacity utilization Capital costs (depreciation on capital) Capital costs (depreciation on capital) Process technology/yield Process technology/yield Cycle time, set-up intervals, run volumes Cycle time, set-up intervals, run volumes Product designs !! Product designs !! Materials costs (BOM) Materials costs (BOM) NPI process efficiency NPI process efficiency

11. Operations Challenge is to Balance…. COGS: COP and COS (cost of product manufacture, cost of service, and logistics expense) COGS: COP and COS (cost of product manufacture, cost of service, and logistics expense) Inventory (full-stream: materials, work-in- process, finished goods, spare parts) Inventory (full-stream: materials, work-in- process, finished goods, spare parts) Customer service (delivery/response intervals, and quality of services) Customer service (delivery/response intervals, and quality of services)

12. The Operations Balance COGS (COP,COS) Inventory Customer Service

13. Operations is impacted by inputs from……. Marketing Marketing Sales Sales R&D R&D and others (IT, finance, HR, … ) and others (IT, finance, HR, … )

14. Marketing: Inputs/Impacts Product line/model breadth Product line/model breadth Cost/COGS targets Cost/COGS targets Product quality targets Product quality targets New product strategy (big-bang or incremental/inch-up) New product strategy (big-bang or incremental/inch-up) Customer service requirements Customer service requirements Sales promotions/incentives Sales promotions/incentives Sales forecasts (long-run) Sales forecasts (long-run)

15. Sales: Inputs/Impacts Sales forecasts (short-run) Sales forecasts (short-run) Warranty/return management Warranty/return management Commitments to customers Commitments to customers Quality of installation/maintenance Quality of installation/maintenance Accuracy of customer orders Accuracy of customer orders Ability to level out sales volume Ability to level out sales volume

16. R&D: Inputs/Impacts Product designs (for cost and service) Product designs (for cost and service) Design changes/modifications Design changes/modifications Product materials/components Product materials/components Quality and timeliness of hand-offs Quality and timeliness of hand-offs Process engineering efforts (or not) Process engineering efforts (or not) Role in manufacturing engineering Role in manufacturing engineering Support for concurrent engineering Support for concurrent engineering

17. Readings Can Marketing and Manufacturing Coexist? -- read to understand the 8 issues listed in the articles Exhibit Can Marketing and Manufacturing Coexist? -- read to understand the 8 issues listed in the articles Exhibit Crocs: Revolutionizing an Industrys Supply Chain -- an example of the importance of Operations in the success of a business Crocs: Revolutionizing an Industrys Supply Chain -- an example of the importance of Operations in the success of a business

18. Assignment In what ways can technical people (R&D, technical sales, etc) assist with the resolution and/or minimization of the marketing-manufacturing issues cited in the first reading? Provide one thought/example for each of the 8 issues in the exhibit in the Coexist reading. In what ways can technical people (R&D, technical sales, etc) assist with the resolution and/or minimization of the marketing-manufacturing issues cited in the first reading? Provide one thought/example for each of the 8 issues in the exhibit in the Coexist reading. What are Crocs competitive advantages? Which of these are related to its operations function? What are Crocs competitive advantages? Which of these are related to its operations function? To what extent do each of these growth strategies leverage Crocs competitive advantages: (a) internal manufacturing of raw materials used in compounding, (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new customers? To what extent do each of these growth strategies leverage Crocs competitive advantages: (a) internal manufacturing of raw materials used in compounding, (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new customers?

19. Assignment: R&D Impacts on…? Capacity planning Capacity planning Production scheduling Production scheduling Logistics/distribution Logistics/distribution Quality assurance Quality assurance Breadth of product line Breadth of product line Costs (COGS: COP and COS) Costs (COGS: COP and COS) New Product Introduction New Product Introduction Customer service Customer service

20. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Capacity planning and long-range sales forecasting Why dont we have enough capacity? Why didnt we have accurate sales forecasts?

21. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Production scheduling and short- range sales forecasting We need faster response. Our lead times are ridiculous. We need realistic customer commitments and sales forecasts that dont change like wind direction

22. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Delivery and physical distribution Why dont we ever have the right merchandise in inventory? We cant keep everything in inventory

23. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Quality assurance Why cant we have reasonable quality at reasonable cost? Why must we always offer options that are too hard to manufacture and that offer little customer utility?

24. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Breadth of product line Our customers demand variety The product line is too broad – all we get are short, uneconomical runs.

25. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Cost control Our costs are so high that we are not competitive in the marketplace We cant provide fast delivery, broad variety, rapid response to change, and high quality at low cost.

26. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment New product introduction New products are our lifeblood Unnecessary design changes are prohibitively expensive.

27. Can Marketing and Manufacturing Coexist? Problem Area Typical marketing comment Typical manufacturing comment Adjunct services such as spare parts inventory support, installation, and repair Field service costs are too high. Products are being used in ways for which they werent designed.

28. Crocs case: questions What are Crocs competitive advantages? Which of these are related to its operations function? What are Crocs competitive advantages? Which of these are related to its operations function? To what extent do each of these growth strategies leverage Crocs competitive advantages: (a) internal manufacturing of raw materials used in compounding, (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new customers? To what extent do each of these growth strategies leverage Crocs competitive advantages: (a) internal manufacturing of raw materials used in compounding, (b) internal development of new products, (c) acquiring companies to get new products, and (d) acquiring companies to get new customers?

29. Core Competencies vs. Competitive Advantages Core Competencies Competitive Advantages - capability - process - skill - position

30. Crocs Supply Chain Characteristics Global manufacturing Global manufacturing Vertical integration Vertical integration Postponement (JIT production) Postponement (JIT production) Warehouses at production facilities Warehouses at production facilities Excess capacity and inventory Excess capacity and inventory Simple products (initially) Simple products (initially) Short lead times Short lead times Production throughout selling season Production throughout selling season

31. Growth Alternatives internal manufacturing of raw materials used in compounding internal manufacturing of raw materials used in compounding internal development of new products internal development of new products acquiring companies to get new products acquiring companies to get new products acquiring companies to get new customers acquiring companies to get new customers

32. Identifying Competitive Options Products Customers Current Position Current products Current target customers

33. Competitive Options Protect & defend current customer/product segment Protect & defend current customer/product segment Increase market share in current segment Increase market share in current segment Selectively extend (whole) product offerings Selectively extend (whole) product offerings Selectively extend target customer set Selectively extend target customer set Become a broad-line supplier Become a broad-line supplier

34. Our Last Assignment: Product Launch Invisalign A new technology ( ~ 2000) for aligning teeth

35. Product Launch Assignment: Align Technology in 2001 Invisalign straightens teeth via a series of clear plastic retainers designed and made specifically for each patient Invisalign straightens teeth via a series of clear plastic retainers designed and made specifically for each patient Higher price and higher COGS than traditional metal braces, but better Higher price and higher COGS than traditional metal braces, but better Product available for about 2 years Product available for about 2 years Annual revenues ~$50M but OI ~($100M) Annual revenues ~$50M but OI ~($100M) Adoption rate by orthodontists is insufficient to support future growth Adoption rate by orthodontists is insufficient to support future growth Arguably, the product needs to be re-launched Arguably, the product needs to be re-launched

36. Assignment for Next Week Which of the three end-customer (patient) segments identified should be Aligns target? Why? Which of the three end-customer (patient) segments identified should be Aligns target? Why? Which of the promotion and sales tasks (promotion, selling, fulfillment, service) should be done by Align? By the dentists? By the orthodontists? Which of the promotion and sales tasks (promotion, selling, fulfillment, service) should be done by Align? By the dentists? By the orthodontists? What are the orthodontists channel economics for Invisalign vs. standard braces? What are the orthodontists channel economics for Invisalign vs. standard braces? What barriers are preventing increased adoption of Invisalign by orthodontists? What barriers are preventing increased adoption of Invisalign by orthodontists? How should Invisalign be positioned with orthodontists? (write a positioning statement) How should Invisalign be positioned with orthodontists? (write a positioning statement) By what methods should Invisalign be promoted to dentists? To orthodontists? By what methods should Invisalign be promoted to dentists? To orthodontists?