Operations Management

1. Operations Management Chapter 2 – Operations Strategy in a Global Environment PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e

2. Learning Objectives When you complete this chapter you should be able to: Define mission and strategy Identify and explain three strategic approaches to competitive advantage Identify and define the 10 decisions of operations management

3. Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there

4. Mission • Mission - where are you going? • Organization’s purpose for being • Answers ‘What do we provide society?’ • Provides boundaries and focus

5. Hard Rock Cafe Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success. Figure 2.2

6. Philosophy and Values Profitability and Growth Environment Mission Customers Public Image Benefit to Society Factors Affecting Mission

7. Strategy • Action plan to achieve mission • Functional areas have strategies • Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

8. Strategies for Competitive Advantage • Differentiation – better, or at least different • Cost leadership – cheaper • Response – rapid response

9. Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value • Safeskin gloves – leading edge products • Walt Disney Magic Kingdom – experience differentiation • Hard Rock Cafe – dining experience

10. Competing on Cost Provide the maximum value as perceived by customer. Does not imply low quality. • Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment • Wal-Mart – small overheads, shrinkage, distribution costs • Franz Colruyt – no bags, low light, no music, doors on freezers

11. Competing on Response • Flexibility is matching market changes in design innovation and volumes • Institutionalization at Hewlett-Packard • Reliability is meeting schedules • German machine industry • Timeliness is quickness in design, production, and delivery • Johnson Electric, Bennigan’s, Motorola

12. 10 Strategic OM Decisions • Goods and service design • Quality • Process and capacity design • Location selection • Layout design • Human resources and job design • Supply chain management • Inventory • Scheduling • Maintenance

13. Mass Customization Customization at high Volume (Dell Computer’s PC,cafeteria) Process-focused JOB SHOPS (Print shop, emergency room, machine shop, fine-diningrestaurant) High Moderate Low Repetitive (modular) focus ASSEMBLY LINE (Cars, appliances, TVs, fast-food restaurants) Variety of Products Product focused CONTINUOUS (steel, beer, paper, bread, institutional kitchen) Low Moderate High Volume Process Design

14. Issues In Operations Strategy • Research about effective operations management strategies • Preconditions for developing effective OM strategies • The dynamics of OM strategy development

15. Characteristics of High ROI Firms • High product quality • High capacity utilization • High operating efficiency • Low investment intensity • Low direct cost per unit From the PIMS program of the Strategic Planning Institute

16. Strategic Options to Gain a Competitive Advantage 28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service 14% - Good management 4% - Financial resources 3% - Other

17. Elements of Operations Management Strategy • Low-cost product • Product-line breadth • Technical superiority • Product characteristics/differentiation • Continuing product innovation • Low-price/high-value offerings • Efficient, flexible operations adaptable to consumers • Engineering research development • Location • Scheduling

18. Introduction Growth Maturity Decline Best period to increase market share R&D engineering is critical Practical to change price or quality image Strengthen niche Poor time to change image, price, or quality Competitive costs become critical Defend market position Cost control critical Company Strategy/Issues CD-ROMs Internet search engines Analog TVs Drive-through restaurants LCD & plasma TVs Sales iPods 3 1/2” Floppy disks Xbox 360 Product Life Cycle Figure 2.5

19. Introduction Growth Maturity Decline OM Strategy/Issues Product Life Cycle Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focus Enhance distribution Standardization Less rapid product changes – more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Figure 2.5

20. Mission Internal Strengths External Opportunities Analysis Internal Weaknesses External Threats Strategy SWOT Analysis

21. Environmental Analysis Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Determine Corporate Mission State the reason for the firm’s existence and identify the value it wishes to create. Form a Strategy Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines. Strategy Development Process Figure 2.6

22. Operations Management Chapter 3 – Project Management PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e

23. Learning Objectives When you complete this chapter you should be able to: • Create a work breakdown structure • Draw AOA and AON networks • Complete both forward and backward passes for a project • Determine a critical path

24. Learning Objectives When you complete this chapter you should be able to: • Calculate the variance of activity times • Crash a project • Use Microsoft Project software to create a project

25. Strategic Importance of Project Management • Microsoft Windows Vista Project: • hundreds of programmers • millions of lines of code • hundreds of millions of dollars cost • Hard Rock Cafe Rockfest Project: • 100,000 + fans • planning began 9 months in advance

26. Project Characteristics • Single unit • Many related activities • Difficult production planning and inventory control • General purpose equipment • High labor skills

27. Management of Projects • Planning - goal setting, defining the project, team organization • Scheduling - relates people, money, and supplies to specific activities and activities to each other • Controlling - monitors resources, costs, quality, and budgets; revises plans and shifts resources to meet time and cost demands

28. Project Planning • Establishing objectives • Defining project • Creating work breakdown structure • Determining resources • Forming organization

29. Project Organization • Often temporary structure • Uses specialists from entire company • Headed by project manager • Coordinates activities • Monitors schedule and costs • Permanent structure called ‘matrix organization’

30. Project OrganizationWorks Best When • Work can be defined with a specific goal and deadline • The job is unique or somewhat unfamiliar to the existing organization • The work contains complex interrelated tasks requiring specialized skills • The project is temporary but critical to the organization • The project cuts across organizational lines

31. The Role of the Project Manager Highly visible Responsible for making sure that: • All necessary activities are finished in order and on time • The project comes in within budget • The project meets quality goals • The people assigned to the project receive motivation, direction, and information

32. Project managers should be: • Good coaches • Good communicators • Able to organize activities from a variety of disciplines The Role of the Project Manager Highly visible Responsible for making sure that: • All necessary activities are finished in order and on time • The project comes in within budget • The project meets quality goals • The people assigned to the project receive motivation, direction, and information

33. Level • Project • Major tasks in the project • Subtasks in the major tasks • Activities (or work packages) to be completed Work Breakdown Structure

34. Level ID Level Number Activity 1 1.0 Develop/launch Windows Vista OS 2 1.1 Develop of GUIs 2 1.2 Ensure compatibility with earlier Windows versions 3 1.21 Compatibility with Windows ME 3 1.22 Compatibility with Windows XP 3 1.23 Compatibility with Windows 2000 4 1.231 Ensure ability to import files Work Breakdown Structure Figure 3.3

35. Project Scheduling • Identifying precedence relationships • Sequencing activities • Determining activity times & costs • Estimating material & worker requirements • Determining critical activities

36. Purposes of Project Scheduling • Shows the relationship of each activity to others and to the whole project • Identifies the precedence relationships among activities • Encourages the setting of realistic time and cost estimates for each activity • Helps make better use of people, money, and material resources by identifying critical bottlenecks in the project

37. Project Management Techniques • Gantt chart • Critical Path Method (CPM) • Program Evaluation and Review Technique (PERT)

38. Time J F M A M J J A S Design Prototype Test Revise Production A Simple Gantt Chart

39. Project Control Reports • Detailed cost breakdowns for each task • Total program labor curves • Cost distribution tables • Functional cost and hour summaries • Raw materials and expenditure forecasts • Variance reports • Time analysis reports • Work status reports

40. PERT and CPM • Network techniques • Developed in 1950’s • CPM by DuPont for chemical plants (1957) • PERT by Booz, Allen & Hamilton with the U.S. Navy, for Polaris missile (1958) • Consider precedence relationships and interdependencies • Each uses a different estimate of activity times

41. Six Steps PERT & CPM • Define the project and prepare the work breakdown structure • Develop relationships among the activities - decide which activities must precede and which must follow others • Draw the network connecting all of the activities

42. Six Steps PERT & CPM • Assign time and/or cost estimates to each activity • Compute the longest time path through the network – this is called the critical path • Use the network to help plan, schedule, monitor, and control the project

43. Questions PERT & CPM Can Answer When will the entire project be completed? What are the critical activities or tasks in the project? Which are the noncritical activities? What is the probability the project will be completed by a specific date?

44. Questions PERT & CPM Can Answer Is the project on schedule, behind schedule, or ahead of schedule? Is the money spent equal to, less than, or greater than the budget? Are there enough resources available to finish the project on time? If the project must be finished in a shorter time, what is the way to accomplish this at least cost?

45. A comes before B, which comes before C A C (a) B A B C A A A and B must both be completed before C can start (b) C C B B B B and C cannot begin until A is completed B A (c) A C C A Comparison of AON and AOA Network Conventions Activity on Activity Activity on Node (AON) Meaning Arrow (AOA) Figure 3.5

46. AON Example Milwaukee Paper Manufacturing'sActivities and Predecessors Table 3.1

47. Determining the Project Schedule Perform a Critical Path Analysis • The critical path is the longest path through the network • The critical path is the shortest time in which the project can be completed • Any delay in critical path activities delays the project • Critical path activities have no slack time

48. Activity Description Time (weeks) A Build internal components 2 B Modify roof and floor 3 C Construct collection stack 2 D Pour concrete and install frame 4 E Build high-temperature burner 4 F Install pollution control system 3 G Install air pollution device 5 H Inspect and test 2 Total Time (weeks) 25 Determining the Project Schedule Perform a Critical Path Analysis Table 3.2

49. Forward Pass Begin at starting event and work forward Earliest Start Time Rule: • If an activity has only a single immediate predecessor, its ES equals the EF of the predecessor • If an activity has multiple immediate predecessors, its ES is the maximum of all the EF values of its predecessors ES = Max {EF of all immediate predecessors}

50. Forward Pass Begin at starting event and work forward Earliest Finish Time Rule: • The earliest finish time (EF) of an activity is the sum of its earliest start time (ES) and its activity time EF = ES + Activity time