1. Welcome MGT329

2. Operations Management: MGT329
Lecture: Monday and Wednesday
9:30 AM - 10:45 AM
11:00 AM – 12:15 PM
Professor: Jeff Street
Office: BA 434
Phone: X4184
Cell: (770)

3. Course Books
Operations Management For Competitive Advantage, 11th Edition, by Richard B. Chase, F. Robert Jacobs and Nicholas J. Aquilano.
The Goal, by Eliyahu M. Goldratt and Jeff Cox

4. Grading The grade received in the course will be based on:
Participation/Homework (25%)
Exam I (25%)
Exam II (25%)
Final Exam (25%)

5. Some questions to be addressed in this course include:
How does the customer fit into operations strategy?
How is globalization affecting business and operations strategies?
What effect are new technologies having on the utilization of an organization’s resources?

6. Some questions to be addressed in this course include:
How has the concept of quality management changed, and how does it affect operations?
Why is continuous improvement in the operations management function necessary for an organization to remain competitive?

7. Why Study Operations Management?
Systematic Approach
to Organizational
Processes
Operations
Business Education
Career Opportunities
Management
Cross-Functional
Applications 3

8. Development of OM as a Field
Scientific
Management
Moving Assembly
Line
Hawthorne
Studies
Operations
Research
Historical
Underpinnings
Computers
(MRP)
JIT/TQC &
Automation
Manufacturing
Strategy
Service Quality
and Productivity
TQM & Quality
Certification
Business Process
Reengineering
Electronic
Enterprise
Global Supply
Chain Mgmt.
OM's Emergence
as a Field 13

9. Current Issues
Speeding up the time it takes to get new products and services into production.
Developing flexible production systems to enable mass customization of products and services.
Managing global production/supply networks.
Developing and integrating new production technologies into existing production systems. 14

10. Current Issues
Achieving high quality quickly and keeping it up in the face of restructuring.
Managing a diverse workforce.
Conforming to environmental constraints, ethical standards, and government regulations. 15

11. Overview: Introduction to Operations Management
What is Operations Management
Why Study Operations Management?
Operations Decision Making
Managing Transformations
Service or Good?
Closed vs. Open System Perspectives
Development of OM as a Field
Current Issues 2 2

12. What is Operations Management?
Operations Management is a functional area of business devoted to the management of an organization's resources to create products or services.
The set of resources includes an organization's know-how, facilities, work-force, materials, and equipment.
Operations Management issues permeate all levels of an organization's decision making from the long-term strategic to the tactical to the day to day operations.

13. Operations management is concerned with the design, operation, and improvement of the production system that creates the firm’s primary products and services.
[Even Elmer’s, ISU, and Portneuf Medical Center are production systems]

14. Operations Decision Making
Marketplace
Corporate Strategy
Finance Strategy
Operations Strategy
Marketing Strategy
Operations Management
People
Plants
Parts
Processes
Materials &
Customers
Input
Products &
Services
Output
Planning and Control
Production System 5

15. Managing Transformations “The Production System”
Micro View
Input
Transformation
Process
(Value Adding)
Output
People
Plants
Parts
Processes
Planning and Control
Transformation is
enabled by The 5 Ps of OM:
[A.K.A. The 5 Ms…Man,
Machines, Materials, Methods,
And Management] 6

16. Transformations Physical--manufacturing Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications 7

17. Competitive Priorities
Quality (including Service)
Price (or production cost)
Delivery (speed)
Flexibility
V =
f (Q,T) C
Our Value Equation 11

18. Core Services Definition
Core services are basic things that customers want from products (or services) they purchase. 11

19. Core Services Performance Objectives (Competitive Priorities)
Quality
“made correctly”
Operations
Flexibility
“customized”
Delivery Speed
“on-time”
Management
Price (or cost
Reduction)
“Competitively”

20. Value-Added Services Defined
Value-added services (or features) differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way. (i.e. increase “switching costs”) 12

21. Value-Added Service Categories
Problem Solving
“close gaps”
Operations
Information
“educate customer”
Sales Support
“flex to demands”
Management
Field Support
“grow utility”

22. Value-Added Factory Services
Information - provide critical data to market
Problem Solving – troubleshooting ability
Sales Support – demonstrate the offering
Field Support – replace/replenish stock, spares 12

23. Service or Good?
“If you drop it on your foot, it won’t hurt you.” (Good or service?)
“Services never include goods and goods never include services.” (True or false?) 8

24. What about McDonald’s? Service or Manufacturing?
The company certainly manufactures tangible products
Why then would we consider McDonald’s a service business? 9

25. Front and Back Office Service Provider Customer Back Office
Front Office
Customer 10

26. Standard execution time 2 minutes
                     
How would an Operations Management focus apply here?
Standard execution time 2 minutes
Verbalize
Order
Enter Order
Prepare
Food
Collect
payment
30 seconds
15 seconds
60 seconds
15 seconds
Fail
point
Front Office
Correct
Order
Materials
(e.g., food, paper)
20 seconds
Line of visibility
Not seen by customer
but necessary to
performance
Select and
purchase supplies
Back Office

27. Operations Strategy and Competitiveness
Chapter 2

28. Operations Strategy and Competitiveness - Overview
A Framework for Operations Strategy in Manufacturing
Operations Strategy in Services
Meeting the Competitive Challenge
Productivity Measurement 2

29. Processes, Infrastructure, and Capabilities
Operations Strategy
Customer Needs
Corporate Strategy
Alignment
Competitors
Core
Competencies
Operations Strategy
Decisions
Processes, Infrastructure, and Capabilities 3

30. Strategy Process Forced-Choice Model Environmental Assessment
Organization’s Position
Broad economic assumptions
Statement of mission
Key government and regulatory issues
Interrelated set of financial and nonfinancial objectives
Major technological forces
Statement of strengths and weaknesses
Significant market opportunities and threats
Forecast of operational needs
Explicit strategies of competitors
Major future programs
Strategic options
Requirements for implementing options
Contingency plans

31. Strategy Process Example Customer Needs More Product
Corporate Strategy
Increase Org. Size
SBU Operations Strategy
Increase Production Capacity
Decisions on Processes
and Infrastructure
Build New Factory

32. Hierarchy of Strategy Process
Customers
Environment
Corporate Strategic
Planning
SBU #1
SBU #2
SBU #3
Marketing
Operations
Mgt
Engineering
Capabilities
Progress
Potential Problems/Changes
Vision
Type of Value delivered
Specific Market
Corporate Values
Core competencies
Performance metrics
Strategic
Business
Units
Functional
Areas
Finance

33. Operations Strategy --Formulation
Customers
Get to know; team up with next and
final customer.
Continual, rapid improvement in
lead time, quality, cost, flexibility
and variability.

34. Operations Strategy --Formulation
Company
Achieve unified purpose via information;
team involvement in planning and
implementing change.

35. Operations Strategy --Formulation
Competitors
Get to know the competition and
world-class leaders.

36. Operations Priorities
Cost
Quality
Delivery Speed
Flexibility
Service
Delivery Reliability
Coping with Changes in Demand
Flexibility and New Product Introduction Speed
Traditional
Competitive Priorities 4

37. A Framework for Manufacturing Strategy
Customer Needs
New product : Old product
Competitive
dimensions & requirements
Quality, Cost, Delivery, Flexibility, and Service
Enterprise capabilities
Operations and Supplier Capabilities
Operations & Supplier capabilities
R&D Technology Systems People Distribution
R&D
Technology
Systems
People
Distribution
Support Platforms
Financial management
Human resource management
Information management 8

38. Processes, Infrastructure, and Capabilities
Operations Strategy
Customer Needs
Corporate Strategy
Alignment
Competitors
Core
Competencies
Operations Strategy
Decisions
Processes, Infrastructure, and Capabilities 3

39. Capabilities:Enterprise, Operations, Suppliers
Customer Needs
New Products Current Products
New Product
Development
Performance priorities
and requirements
Order fulfillment
after sales service
Quality Delivery Flexibility
Price Service
Technology Systems People
R & D Distribution
CIM JIT TQM
Finance Human Resources Information
MGT
Capabilities:Enterprise, Operations, Suppliers

40. competitive priorities
Quality
Flexibility
Service
Cost
Lead Times
Variability

41. Dealing with Trade-offs
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.
For example, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less effective at dealing with commonly occurring problems.
Cost
Quality
Delivery
Flexibility 5

42. World-Class Manufacturing
World-class manufacturers [i.e. operations] no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs.
They have become order qualifiers.
What are the order winners in
today’s market?
Distinctive Competency 6

43. Distinctive competency
“A strength that sets a business apart from its competition”
McDonald’s
Disney World or Disney Land
Delta Airlines
Intel Corporation
UPS

44. Strategy Begins with Priorities
Consider the case of a personal computer manufacturer.
1. How would we segment the market according to product group?
Personal use
Small business
Large Corporations
2. How would we identify product requirements, demand patterns, and profit margins for each group? 9

45. How do we identify order winner and order qualifiers for each group?
quality
cost
delivery
flexibility
service
Personal use
Small business
Large Corporations
What would be the winner for each market group?

46. How do we convert order winners into specific performance requirements?Us
(Distinctive
Competencies)
Competition
(Them)
Differentiation 10

47. Service can be an “order winner”
Travel
Planning
Warranty
Leases
Roadside
Assistance
Loaner
Vehicles
Car Dealership 7 7

48. Again, What is Operations Management?
Operations Management is the functional area of business devoted to the management of an organization's resources to create products or services.

49. What is Productivity?
A measure of the effective use of resources, usually expressed as the ratio of output to input.
Output
Productivity = Input

50. What factors affect the productivity of a business?
work methods
capital
quality
training
technology
management

51. What methods can be used to improve productivity?
develop productivity measures
measurement is necessary to control the operation
look at overall productivity
develop methods for achieving productivity improvements
establish reasonable goals for improvement
measure and communicate improvements to both customers and employees

52. Total Measure Productivity
Total measure Productivity = Outputs
Inputs or
= Goods and services produced
All resources used
[Productivity versus Throughput] 17

53. Partial Measure Productivity
Partial measures of productivity =
Output or Output or Output or Output Labor Capital Materials Energy

54. Multifactor Measure Productivity
Multifactor measures of productivity =
Output
Labor Capital Energy or
Labor Capital Materials

55. Example of Productivity Measurement
You have just determined that your service employees have used a total of 2400 hours of labor this week to process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms.
Which productivity measure should be used?
Answer: Could be classified as a Total Measure or Partial Measure.
Is productivity increasing or decreasing?
Answer: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 = So, productivity is decreasing slightly.

56. Example What is the labor productivity? 10,000 Units Produced
Sold for $10/unit
500 labor hours
Labor rate: $9/hr
Cost of raw material: $5,000
Cost of purchased material: $25,000
What is the
labor productivity? 18

57. Example--Labor Productivity
10,000 units/500hrs = 20 units/hour
(10,000 unit*$10/unit)
(500hrs*$9/hr) What do these calculations tell us?
More importantly -- What don’t they tell us?
= $22.22 19

58. Applying Productivity Figures
You’ve just told your boss that the plant labor productivity is better than that of a plant in a related business. What does this really mean? 20

59. Productivity measures
need to be tracked over time
need to include all possible inputs
are difficult to compare between companies or industries
do not (directly) include measures of timeliness or quality
[th********] [sc*** and re****]

60. Solution for Problem #1 Labor Productivity – dollars Model Output
in Dollars
Input
Productivity
(Output/Input)
Deluxe Car
4,000($8000)=
$32,000,000
20,000($12.00)=
$240,000
133.33
Limited Car
6,000($9500)=
$57,000,000
30,000($14.00)=
$420,000
135.71

61. Solution to Problem #2

62. Solution to Problem #2

63. Lasik Vision

64. Lasik Vision What was Lasik Vision’s competitive priority?
High volume – low cost
Other priorities?
Flexibility?
Delivery?
Quality?

65. Lasik Vision Is this the appropriate approach in this industry?
Is standardization more difficult in health care?
What repercussions, actual or perceived might occur with this priority?

66. Lasik Vision
Given that a company has chosen this priority, what needs to be done to achieve success?

67. Lasik Vision -- Update
January 15, 2001 – Icon Laser Eye Centers proposes takeover of Lasik Vision
March, 2001 – takeover complete
April 4, 2001 – Lasik Vision in bankruptcy
April 23, 2001 – Dr. Hugo Sutton and others purchase assets of Lasik Vision. Clinic reopens as Lasik Eye Centres