Operations Management & Foundation Dr. Mellie Pullman MBA Class 1
Where does operations management fit into a business? • How are we going to _________ the product or service? • Other functional areas: • Marketing • Accounting • Finance • Human Resources • Information Systems
Operations Management and the big picture. • The operations function is that part of the organization that exists primarily to generate and produce the organization’s products or services. • OM provides a systematic way of looking at organizational processes. • Concepts and tools of OM are widely used in managing other functions of a business.
Input Output Operations as a Process Transformation (Conversion) Process
Conversions include: • Physical: manufacturing or haircut • Location: transportation • Exchange: retailing • Storage: warehousing • Physiological: health care • Informational: telecommunications
Energy Materials Labor Goods or Services Capital Information Feedback information for control of process inputs and process technology Operations as a Process Transformation (Conversion) Process
Process Boundary is Important! • How many liters of water does it take to make 1 Liter bottle of Coke?
What is managed inside the box? 5 Ps Parts & Equipment People Processes Planning & Scheduling Plants or Facilities
Discussion Breakout • Think of a local company that has a sustainability focus: • What activities have they done for each of the 5 P’s to improve their sustainability? • People • Parts & Equipment • Processes • Plants or Facilities (Buildings) • Planning & Scheduling (Measuring/Monitoring) • Alternatively, think of a company that you believe does “green-washing”, where are there particular problems with any of the 5 Ps?
Strategy!Getting a Competitive Advantage through Operations “Strategy without tactics is the slowest route to victory; Tactics without strategy is the noise before defeat.” Sun Tzu (2001)
The Role of Business Strategy • The firm’s long-range plan based on an understanding of the marketplace • Defines how a company intends to differentiate itself from competitors • Individual employees & functional units use the strategy to align their efforts with each other to accomplish the overall game plan
Business strategy Internal analysis External analysis Consistent pattern of decisions Results Operations Strategy Model Corporate strategy Functional strategies in marketing, finance, engineering, human resources, and information systems Operations Strategy Mission Distinctive Competence Objectives (cost, quality, flexibility, delivery, etc) Policies (process, quality systems, capacity, and inventory)
Distinctive competence • What does Southwest do better than most (if not all) of their competitors?
Operations Strategy is generally based on 5 Common objectives or competitive priorities • They include: • Cost: low production costs enables the company to price its product below competitors • Quality: higher performance or a more consistent product can support a price premium • Time: faster delivery or consistent on-time delivery can support a price premium • Flexibility: highly customized products or volume flexibility can support a price premium • Sustainability: products that connect with consumers on social, environmental, and other values. Example Movie: Castaway
QUALITY & DESIGN FLEXIBILITY QUALITY Fresh, Natural Ingredients Toppings & Crust Choice Expensive Ingredients Slow to Cook Low Volume Ovens COST TIME VOLUME FLEXIBILITY Can simultaneously do all those well?Hot Lips Pizza
Operations Strategy & the “tactics” • The long-range plan for the design & use of the operations function to support the overall business strategy: • The location, size, & type of facilities • The worker skills & talents required • The technology & processes to be used • How product & service quality will be controlled
Linking Operations to Business Strategies • Business strategy alternatives • Product imitator • Operations must focus on keeping costs low. (generic drugs) • Product innovator • Operations must maintain flexibility in processes, labor and suppliers. (Rubbermaid)
Distinguish Order Qualifiers from Order Winners • Order Qualifiers: • Competitive priorities that a product must meet to even be considered for purchase • Generally, represented by features shared by all competitors in a given market niche • Order Winners: • Competitive priorities that distinguish the firm’s offerings from competitors & ultimately win the customer’s order
Examples of Operations Distinctive Competence • Skills of employees • Proprietary equipment or processes • Rapid continuous improvement • Well developed partnerships • Location • Organizational knowledge • Proprietary information or control systems
Summary • Process Mindset • How Operations fits into the strategy of an organization • Operations as a competitive advantage • Operations as the key to addressing sustainability