1. OPNS 430 Professor Wuqin Lin
Lin/Operations/Strategy

2. Class Material + Grading
Course Pack 1 (Cases & Readings)
Course Pack 2 (Slides)
The Goal
Managing Business Process Flows (MBPF)
The Course Web-Page
Group Assignments 20%, Midterm 30%, Final 40%, Class Participation 10%
Lin/Operations/Strategy

3. Topics – 6 Modules Module 1 : Operations Strategy (Shouldice, Wriston)
Module 2 : Process Analysis (CRU-Pizza Pazza, NCC)
Module 3 : Lean Operations (Toyota)
Module 4 : Supply Chain Management (Palu Gear)
Module 5 : Services (The BAT case)
Module 6 : Quality (Quality Wireless, FlyRock)
Lin/Operations/Strategy

4. Introduction & Strategy Module
Goals and Key Paradigms of Course
Strategic role of Ops
Process view of Ops
A Strategic Framework for Ops
Strategy: Product attributes and the Competitive Product Space
Ops: Capabilities and Processes
Aligning strategy and operations:
Focus
Relationship between process choice and strategy
Shouldice Hospital
Wriston Manufacturing
Notes:
Lin/Operations/Strategy
Lin/Operations/Strategy

5. What do you mean by “Operations”?
Lin/Operations/Strategy

6. What Is Meant by “Operations”?
“New York-based Merrill, the world's largest brokerage firm and a major investment bank, has been overhauling operations …”
“Microsoft splits into five groups in reorganization”
Microsoft announced a long-awaited reorganization, dividing the company to five major groups and naming two veteran executives to head its online operations.
Lin/Operations/Strategy

7. Goals of this course
Introduction to operations as a managerial integration function
Evaluation and Improvement
We will adopt two paradigms
Lin/Operations/Strategy

8. Key Paradigm of Course: 1. The Strategic Role of Ops
“A company’s operations function is
either a competitive weapon or
a corporate millstone.
It is seldom neutral.” [Skinner ’69]
Lin/Operations/Strategy
Lin/Operations/Strategy

9. The Strategic Role of Ops…
Most operational decisions have strategic impact
IT at Walmart
Strategic decisions impact operations
FedEx-USPS
Lin/Operations/Strategy
Lin/Operations/Strategy

10. Key Principle of Course: 2. The Process View of Ops
Chicago Tribune reported: By rethinking the IBM Austin assembly plant and introducing cells,
distance traveled by a card was cut from 1.5 miles to 200 yards
floor space was reduced to half
production tripled with about the same number of workers.
[Chicago Tribune, July 1992.]
Lin/Operations/Strategy
Lin/Operations/Strategy

11. 1. What is a Process?
Lin/Operations/Strategy

12. Operations & the Process View: What is a Process?
Inputs
Outputs
Goods
Services
Labor & Capital
Information
structure
Network of
Activities and Buffers
Flow units
(customers, data,
material, cash, etc.)
Resources
Process
Management
Lin/Operations/Strategy
Lin/Operations/Strategy

13. Advantages of Adopting a Process View of Organizations
Properties:
Applies to any organization
Service operations (health care), manufacturing operations
Applies at any level
1 activity, 1 clinical service group, 1 hospital, 1 health care supply chain
Is always “customer aware” and focused on outcomes
Key Property: focus on flows rather than snapshots
Lin/Operations/Strategy
Lin/Operations/Strategy

14. What is Operations Management?
Management of business processes
How to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs.
What is appropriate?
Lin/Operations/Strategy
Lin/Operations/Strategy

15. 2. What is a “good” Process?
Lin/Operations/Strategy

16. What defines a “good process”? Performance: Financial Measures
Absolute measures:
revenues, costs, operating income, net income
Net Present Value (NPV) =
Relative measures:
ROI, ROE
ROA =
Survival measure:
cash flow
Lin/Operations/Strategy
Lin/Operations/Strategy

17. What defines a “good process”
What defines a “good process”? All organizations compete on delivered value
Delivered value of process =
benefit to process customers – total process cost
Benefit driven by customer value
Variety V
(flexibility)
Quality Q:
of product or outcome
of service
Time T:
Rapid, reliable delivery
New product development
Price p (Cost)
Example: patient value priorities for
Emergency care
Lin/Operations/Strategy
Lin/Operations/Strategy

18. A Strategic Framework for Process Design and Improvement:Three questions
competitive
strategy
What is our strategic position: how do we compete & provide value in the market?
What is the value proposition to our customers?
Rank (p, T, Q, V)
Given our strategic position, what must operations do particularly well?
Which competencies must ops develop?
Rank (c, T, Q, Flex)
Given needed competencies, how should operations processes be structured to develop competencies that support strategy?
Process choice (structure) and management
operations
strategy
Process
structure & mgt
Lin/Operations/Strategy
Lin/Operations/Strategy

19. Representation of Strategy: Current Position and Strategic Directions of Movement in the competitive product space
Price
Responsiveness B A
High
Low
Lin/Operations/Strategy
Lin/Operations/Strategy

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
High
Low
Lin/Operations/Strategy
Lin/Operations/Strategy

21. Shouldice Hospital
Lin/Operations/Strategy
Lin/Operations/Strategy

22. Question 1: Representation of Strategy: Strategic Position in customer value space
Price
Variety in care B A
High
Low
Lin/Operations/Strategy
Lin/Operations/Strategy

23. Question 2: Need competencies to deliver value proposition
Customer value
proposition
Price
Variety
Shouldice
High
Low
Cost
Flexibility B A
Needed Process
Competencies
Lin/Operations/Strategy
Lin/Operations/Strategy

24. Question 3: what is the best process design that has the right process competencies to deliver customer value proposition?
Cost efficiency
Flexibility
(responsiveness)
World-class
Emergency Room
specialty non-emergency
Shouldice Hospital
One general
hospital
Productivity frontier = current state of best practice
Needed competencies for a given patient type/segment
A focused process attempts to deliver one specific and narrow customer value proposition (i.e., its priority ranking is clear and constant for all patients)
It is optimized to deliver the needed competencies for one narrow patient segment
Focus does not imply standardization: ER is focused on providing timeliness and flexibility to patient needing emergency care
Lin/Operations/Strategy
Lin/Operations/Strategy

25. Wriston Manufacturing
Lin/Operations/Strategy
Lin/Operations/Strategy

26. Wriston’s HED Division Plant Network Exhibit 2A
Total Burden Rates
(total overhead cost / direct labor cost) 1 2 3 4 5 6 7
Free capacity and Throughput $0
$50
$100
$150
$200
Sandusky, OH
Essex,
Canada
Detroit, MI
Saginaw,
Lima,
Lebanon, PA
Tiffin,
Fremont,
Maysville, KY
Lin/Operations/Strategy
Lin/Operations/Strategy

27. Classification of Processes by process architecture
Project
Job Shop
Batch
Line Flow
Continuous Flow
Job Shop
Flow Shop
Lin/Operations/Strategy
Lin/Operations/Strategy

28. Characteristics of Processes: Comparison of Process Types
Q: what are the typical managerial challenges in JS vs FS?
Lin/Operations/Strategy
Lin/Operations/Strategy

29. Matching Process Choice with Strategy: Product-Process Matrix
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
High
Lin/Operations/Strategy
Lin/Operations/Strategy

30. Learning Objectives Operations & Strategy
What is operations?
What makes a good operations?
Two key paradigms of course
Link between business strategy, operations strategy, and operations structure
Product Attributes / Operational Capabilities/Operations structure
Strategy vs. Operational Effectiveness
Trade-offs:
Operational Focus
Process Classification and Relationship with strategy
Lin/Operations/Strategy
Lin/Operations/Strategy