1. 1 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. C OMPETING WITH O PERATIONS 1 For Operations Management, 9e by Krajewski/Ritzman/Malhotra © 2010 Pearson Education Homework: 4, 7 Instructor: David Weltman Website: http://www.uta.edu/faculty/weltman/http://www.uta.edu/faculty/weltman/ E-mail: dweltman@uta.edudweltman@uta.edu Office: 517

2. 1 – 2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Operations Management The systematic design, direction, and control of processes that transform inputs into services and products for internals, as well as external, customers Processes can be linked together to form a supply chain – interrelated processes within a firms and across different firms that produce a service or product to the satisfaction of the customers

3. 1 – 3 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. A Process View External environment Information on performance Internal and external customers Processes and operations 1 2 3 4 5 Inputs Workers Managers Equipment Facilities Materials Land Energy Outputs Goods Services Figure 1.2

4. 1 – 4 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Supply Chain View Support Processes External suppliers External customers Supplier relationship process New service/ product development Order fulfillment process Customer relationship management Figure 1.4

5. 1 – 5 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Supply Chain View Core processes are sets of activities that deliver value to external customers 1.Supplier relationship process 2.New service/product development process 3.Order fulfillment process 4.Customer relationship process Support processes provide vital resources and inputs to the core processes

6. 1 – 6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Support Processes TABLE 1.1 | EXAMPLES OF SUPPORT PROCESSES Capital acquisitionThe provision of financial resources for the organization to do its work and to execute its strategy BudgetingThe process of deciding how funds will be allocated over a period of time Recruitment and hiringThe acquisition of people to do the work of the organization Evaluation and compensationThe assessment and payment of people for the work and value they provide to the company Human resource support and developmentThe preparation of people for their current jobs and future skills and knowledge needs Regulatory complianceThe processes that ensure that the company is meeting all laws and legal obligations Information systemsThe movement and processing of data and information to expedite business operations and decisions Enterprise and functional managementThe systems and activities that provide strategic direction and ensure effective execution of the work of the business

7. 1 – 7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Career Opportunities  Operations Analyst  Inventory Management  Forecasting  Purchasing  Quality  Industrial Engineering  Logistics  Distribution  Project Management

8. 1 – 8 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Operations Strategy Specifies the means by which operations implements corporate strategy and helps build a customer-driven firm Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions

9. 1 – 9 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Operations Strategy Figure 1.5 Corporate Strategy Environmental scanning Core competencies Core processes Global strategies Market Analysis Market segmentation Needs assessment Competitive Priorities Cost Quality Time Flexibility New Service/ Product Development Design Analysis Development Full launch Operations Strategy Decisions Managing processes Managing supply chains Competitive Capabilities Current Needed Planned Performance Gap? No Yes

10. 1 – 10 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Corporate Strategy Environmental scanning Developing core competencies 1.Workforce 2.Facilities 3.Market and financial know-how 4.Systems and technologies Developing core processes Global strategies

11. 1 – 11 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Market Analysis Market segmentation Needs assessment  Service or product needs  Delivery system needs  Volume needs  Other needs

12. 1 – 12 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Competitive Priorities TABLE 1.2 |DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES COSTDefinitionProcess ConsiderationsExample 1.Low-cost operations Delivering a service or a product at the lowest possible cost Processes must be designed and operated to make them efficient Costco QUALITY 2.Top qualityDelivering an outstanding service or product May require a high level of customer contact and may require superior product features Ferrari 3.Consistent quality Producing services or products that meet design specifications on a consistent basis Processes designed and monitored to reduce errors and prevent defects McDonald’s TIME 4.Delivery speedQuickly filling a customer’s order Design processes to reduce lead time Dell 5.On-time delivery Meeting delivery-time promises Planning processes to increase percent of customer orders shipped when promised United Parcel Service (UPS) 6.Development speed Quickly introducing a new science or a product Cross-functional integration and involvement of critical external suppliers Li & Fung

13. 1 – 13 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Competitive Priorities TABLE 1.2 |DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES FLEXIBILITYDefinitionProcess ConsiderationsExample 7.CustomizationSatisfying the unique needs of each customer by changing service or products designs Low volume, close customer contact, and easily reconfigured Ritz Carlton 8.VarietyHandling a wide assortment of services or products efficiently Capable of larger volumes than processes supporting customization Amazon.com 9.Volume flexibility Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand Processes must be designed for excess capacity The United States Postal Service (USPS)

14. 1 – 14 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Using Competitive Priorities Customer relationship  Top quality  Consistent quality  Delivery speed  Variety New service development  Development speed  Customization  Top quality At an airline

15. 1 – 15 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Using Competitive Priorities Order fulfillment  Low-cost operations  Top quality  Consistent quality  On-time delivery  Variety At an airline

16. 1 – 16 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Using Competitive Priorities Supplier relationship  Low-cost operations  Consistent quality  On-time delivery  Variety  Volume flexibility At an airline

17. 1 – 17 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Operations Strategy TABLE 1.3 | OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS Competitive PriorityMeasureCapabilityGapAction Low-cost operations  Cost per billing statement  $0.0813  Target is $0.06  Eliminate microfilming and storage of billing statements  Weekly postage  $17,000  Target is $14,000  Develop Web-base process for posting bills Consistent quality  Percent errors in bill information  0.90%  Acceptable  No action  Percent errors in posting payments  0.74%  Acceptable  No action Delivery speed  Lead time to process merchant payments  48 hours  Acceptable  No action Volume flexibility  Utilization  98%  Too high to support rapid increase in volumes  Acquire temporary employees  Improve work methods

18. 1 – 18 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Trends in Operations Management Productivity improvement Global competition Ethical, workforce, and environmental issues

19. 1 – 19 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Country Productivity

20. 1 – 20 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Productivity Indicies P Labor P  Something (output or dollars) per hour  Typically units / hr or $ / hr MFP  Output (value $) divided by several resources in a process  Labor, Materials, OH ($)

21. 1 – 21 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Productivity Improvement EXAMPLE 1.1 Calculate the productivity for the following operations: a.Three employees process 600 insurance policies in a week. They work 8 hours per day, 5 days per week.

22. 1 – 22 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Productivity Improvement EXAMPLE 1.1 Calculate the productivity for the following operations: b.A team of workers makes 400 units of a product, which is sold in the market for $10 each. The accounting department reports that for this job the actual costs are $400 for labor, $1,000 for materials, and $300 for overhead. SOLUTION a.Multifactor productivity = Value of output Labor cost + Materials cost + Overhead cost

23. 1 – 23 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2 Natalie Attire makes fashionable garments. During a particular week employees worked 360 hours to produce a batch of 132 garments, of which 52 were “seconds” (meaning that they were flawed). Seconds are sold for $90 each at Attire’s Factory Outlet Store. The remaining 80 garments are sold to retail distribution at $200 each. What is the labor productivity ratio of this manufacturing process (in dollars per hour)?

24. 1 – 24 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. PFSWeb

25. 1 – 25 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Our Philosophy PFSweb is an outsourcing solutions design firm with an extensive offering of world-class logistics, fulfillment, customer care and technology infrastructure that can be leveraged to create unique, client-specific business solutions. Our philosophy is not to fit your business model into our pre-existing infrastructure, but rather to develop our infrastructure around your unique needs. We are flexible, scalable, and adaptable so we can keep pace with your ever-changing needs, whether you are adding new sales channels, marketing initiatives, vendor managed inventory (VMI) programs or special projects. We realize that no two clients face the exact same challenges, and for that reason, we are always extending our technology and operations capabilities based directly on client needs. Our philosophy is that there is absolutely no favorable argument for you to consider outsourcing with PFSweb unless we can execute at a greater performance level than what you could achieve in-house or through an alternative partner.

26. 1 – 26 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Our Philosophy PFSweb is an outsourcing solutions design firm with an extensive offering of world-class logistics, fulfillment, customer care and technology infrastructure that can be leveraged to create unique, client-specific business solutions. Our philosophy is not to fit your business model into our pre-existing infrastructure, but rather to develop our infrastructure around your unique needs. We are flexible, scalable, and adaptable so we can keep pace with your ever-changing needs, whether you are adding new sales channels, marketing initiatives, vendor managed inventory (VMI) programs or special projects. We realize that no two clients face the exact same challenges, and for that reason, we are always extending our technology and operations capabilities based directly on client needs. Our philosophy is that there is absolutely no favorable argument for you to consider outsourcing with PFSweb unless we can execute at a greater performance level than what you could achieve in-house or through an alternative partner.

27. 1 – 27 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

28. 1 – 28 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.

29. 1 – 29 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2

30. 1 – 30 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 2-30

31. 1 – 31 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. 2-31

32. 1 – 32 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Competitiveness How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. Competing Using Operations  Product and service design  Cost  Location  Quality  Quick response  Flexibility  Inventory management  Supply chain management  Service and service quality

33. 1 – 33 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Strategy  Mission  The reason for existence for an organization  Mission Statement  States the purpose of an organization  Goals  Provide detail and scope of mission  Strategies  Plans for achieving organizational goals  Tactics  The methods and actions taken to accomplish strategies

34. 1 – 34 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.  Operations strategy – The approach, consistent with organization strategy, that is used to guide the operations function.

35. 1 – 35 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2

36. 1 – 36 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem 2