Exploring Operations Management: Kellogg's Case Study

1. 1 Introduction to Operations Management

2. Learning Objectives • Define the term operations management • Identify the three major functional areas of organizations and describe how they interrelate • Compare and contrast service and manufacturing operations • Describe the operations function and the nature of the operations manager’s job

3. Learning Objectives • Differentiate between design and operation of production systems • Describe the key aspects of operations management decision making • Briefly describe the historical evolution of operations management • Identify current trends that impact operations management

4. Kellogg’s Company Maker of popular cereal, breakfast, and snack products, such as Kellogg’s Corn Flakes, Rice Krispies, Raisin Bran, Pop-Tarts, Eggo Waffles, and Nutri-grain bars Founded in 1906 in Battle Creek, Michigan, by W. K. Kellogg. Adhere to strong quality standards and developing new technologies, such as Waxtite wrappers to keep cereal fresh for long periods of time.

5. Figure 1.1: Kellogg’s 2006 Sales Around the World (in $ billions)

6. Kellogg’s Company The supply chain consists of 27 manufacturing plants in the United States and 19 plants in 15 countries around the world, including Australia, Mexico, India, Brazil, and Japan. Key operations decisions must be made throughout Kellogg’s network of plants.

7. Kellogg’s Company • The product mix to manufactured at each plant must decided – example should every plant make every product or should plants be specialized and focus • Is it better for Kellogg's to work with smaller, local suppliers for each plant or with larger, national or international suppliers? • Inventory decisions and policies must be set for each plant, each distribution center, and each retailer that Kellogg's’ runs, works with, or sells to.

8. Operations Management • Operations Management is: The management of systems or processes that create goods and/or provide services • Operations Management affects: • Companies’ ability to compete • Nation’s ability to compete internationally

9. Organization Finance Marketing Operations The Organization Figure 1.1 The Three Basic Functions

10. Value added Inputs Outputs Transformation/ Land Goods Conversion Labor Services process Capital Feedback Control Feedback Feedback Value-Added Process Figure 1.2 The operations function involves the conversion of inputs into outputs

11. Value-Added and Product Packages • Value-added elements make the difference between the cost of inputs and the value or price of outputs. • Product packages are a combination of goods and services. • Product packages can make a company more competitive.

12. The Goods–Service Continuum Figure 1.3 Goods Service Surgery, teaching Song writing, software development Computer repair, restaurant meal Automobile repair, fast food Home remodeling, retail sales Automobile assembly, steel making

13. Canned vegetables Metal sheets Making cans Water Cutting Energy Cooking Labor Packing Building Labeling Equipment Food Processor Table 1.2 Outputs Inputs Processing Raw vegetables Cleaning

14. Doctors, nurses Examination Treated patients Hospital Surgery Medical supplies Monitoring Equipment Medication Laboratories Therapy Hospital Table 1.2 Inputs Processing Outputs

15. Tangible Act Manufacturing or Service?

16. Production of Goods vs. Delivery of Services • Production of goods – tangible output • Delivery of services – an act • Service job categories • Government • Wholesale/retail • Financial services • Healthcare • Personal services • Business services • Education

17. Key Differences 1. Customer contact 2. Uniformity of input 3. Labor content of jobs 4. Uniformity of output 5. Measurement of productivity

18. Key Differences 6. Production and delivery 7. Quality assurance 8. Amount of inventory 9. Evaluation of work 10.Ability to patent design

19. Goods vs. Service Table 1.3

20. Scope of Operations Management • Operations Management includes: • Forecasting • Capacity planning • Scheduling • Managing inventories • Assuring quality • Motivating and training employees • Locating facilities • Supply chain management • And more . . .

21. Operations Examples Goods Producing Farming, mining, construction , manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, financial advising, renting or leasing Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and TV newscasts, telephone, satellites Types of Operations Table 1.4

22. Key Decisions of Operations Managers • What What resources/what amounts • When Needed/scheduled/ordered • Where Work to be done • How Designed/Resources allocated • Who To do the work

23. Overlap of Business Functions Figure 1.5 Operations Finance Marketing

24. Legal Public Relations Operations Accounting Personnel/ Human resources MIS Operations Interfaces Figure 1.6

25. Historical Summary of Operations Management • Industrial revolution (1770s) • Scientific management (1911) • Mass production • Interchangeable parts • Division of labor • Human relations movement (1920–60) • Decision models (1915, 1960–’70s) • Influence of Japanese manufacturers