OPERATIONS MANAGEMENT Adi Djoko Guritno PROGRAM MAGISTER MANAJEMEN UNIVERSITAS GADJAH MADA
Objectives • Introducing the cross functional decision making within operations management’s strategy context • Discussing some new concepts in operations management • Creating ideas in operation management research • Problem-solving in case studies
R e f e r e n c e s 1 - Jacobs, F.B., Chase, R.B., and N.J. Aquilano, 2009, Operations and Supply Chain Management, McGraw Hill. 2 - Heizer, J. and B. Render, 2008, Operations Management, Prentice Hall. 3 - Finch, B.J. 2006. Operations Now: Profitability, Processes, Performance. McGraw Hill. 4 - Beckman, S.L. and D.B. Rosenfield, 2008. Operations Strategy. McGraw Hill.
Big Paper * • Abstrak • I. Pendahuluan: Latar Belakang; Rumusan Masalah; Batasan Penelitian; Tujuan Penelitian • II. Landasan Teori: Teori; Model Penelitian; Hipotesis • III. Metodologi: Objek; Populasi dan Sampel Penelitian; Uji Hipotesis (Formula dan Cara Uji Hipotesis); Flow Chart Penelitian • Referensi * Dikerjakan setiap kelompok yg dibentuk (abstrak dibagikan, hard copy dan soft copy paper). Urutan presentasi ditentukan saat pengumpulan paper.
Evaluation * Case & Quiz : 10% Group Presentation : 15% Big paper : 15% Class Participation + Discussion : 10% Mid Examination : 25% Final Examination : 25% * Negotiable
Lecturer in Supply Chain Management and Operations Management (Master of Management), Management Science and Management of Technology (Doctoral Program) • Lecturer in Advanced Operations Management - Post Graduate Program FE-UGM • Vice Dean of Finance, and Human Resources, Faculty of Agricultural Technology, UGM (2004 to present) • Permanent Lecturer at Department of Agro-Industrial Technology, Faculty of Agricultural Technology, UGM (1988 to present) • Temporary Lecturer in Supply Chain, Post Graduate Program of Industrial Engineering UII, UPN (private university), Jogjakarta Adi Djoko Guritno • Audit Committee Member of PT Timah Tbk (State Owned Company-Mining), Jakarta (2000 to 2007) • Head of Risk Management and Investment Committee of PT Timah (Persero) Tbk (2007-present) • Permanent Consultant in Business Development, PT MG Consult (Geological Survey) • Certified Professional in Risk Management (CPRM) ; Business Continuity Certified Planner (BCCP) • Member of CSCMP, POMS, APICS, EurOMA, IKAI, PATPI, BCMI • Journal Reviewer: International Journal of Business (IJB), Industrial Progress, Industrial Research, Agritech, Teknoin • Research interest: Industrial Management, Supply Chain Management and Strategic Management • Affiliation of research institutions: Green Symbiosis Japan, CIRDAI, PPA-UGM, PPE-UGM, ISTMI • Training experiences: PT. Combiphar, PT Pegadaian, PT BNI 1946, PT Geo Dipa Energi, PT Quick Tractors, PT Sari Husada, PT Pfizer-PCH, PT Timah, PT Telkom, PT Sriboga Raturaya, Department of Agriculture, Department of Trade and Industry, PT. Samator Group, PT. Perkebunan Nusantara • Chairman of ISTMI ; Chairman of RISPESCIA (Riset dan Pengembangan Supply Chain Indonesia) • Awards: Freezailah Research Award ITTO (Yokohama) ; Robert S McNamara Research Award (Washington) • E-mail : firstname.lastname@example.org ; email@example.com ; firstname.lastname@example.org • Blog : http://www.adidjoko.wordpress.com
Operations Management: Content, history, and current issues
Definition of Operations Management Operations is responsible for supplying the product or service of the organization. Operations managers make decisions regarding the operations function and its connection with other functions. The operations managers plan and control the production system and its interfaces within the organization and with the external environment.
New Paradigm Business Goal Setting Business Goal Getting
• Cost Efficiency • Quality • Delivery • Flexibility Competitive Dimension
Just In Time Eli Whitney Taichi Ohno Standardization Quality Assessment Gilbreth Motion Study Baldrige Theory of Constraints Goldratt
The Hard Rock Cafe • First opened in 1971 • Now – 110 restaurants in over 40 countries • Rock music memorabilia • Creates value in the form of good food and entertainment • 3,500+ custom meals per day • How does an item get on the menu? • Role of the Operations Manager
Major Decisions at Pizza USAA Framework for OM • Process • Quality • Capacity • Inventory
Cross-Functional Decision Making • Operations as the primary function • Other primary functions: • Marketing • Finance • Supporting functions • Major cross-functional decisions
Energy Materials Labor Capital Information Transformation (Conversion) Process Operations as a System Goods or Services Feedback information for control of process inputs and process technology
External Environment SOCIETY Human Resources Operations transformation system Accounting Engineering Marketing Finance MIS CUSTOMERS COMPETITORS GOVERNMENT Relation of Operations to its Environment Suppliers
New Challenges in OM FromTo • Local or national focus • Batch shipments • Low bid purchasing • Lengthy product development • Standard products • Job specialization • Global focus • Just-in-time • Supply chain partnering • Rapid product development, alliances • Mass customization • Empowered employees, teams
The Economic System Transforms Inputs to Outputs Inputs Process Outputs Land, Labor, Capital, Management The economic system transforms inputs to outputs at about an annual 2.5% increase in productivity (capital 38% of 2.5%), labor (10% of 2.5%), management (52% of 2.5%) Goods and Services Feedback loop
Fig. Ownership is family-based in Asia, except in Japan where it is widely held control over companies is seen today as a domain of professional managers, not owners.
Measurement Problems • Quality may change while the quantity of inputs and outputs remains constant • External elements may cause an increase or decrease in productivity • Precise units of measure may be lacking
Article: On theory in operations management
The terminology of the philosophy of science in OM • Law of variability • Law of bottlenecks • Law of science methods • Law of quality • Law of factory focus
Law of variability The greater the random variability, either demanded of the process or inherent in the process itself or in the processed, the less productive the process is
Law of bottleneck An operation’s productivity is improved by eliminating or by better managing its bottlenecks. If a bottleneck cannot be eliminated in some way, say by adding capacity, productivity can be augmented by maintaining consistent production through it.
Law of scientific methods The productivity of labor can be augmented in most instances by applying methods such as those identified by the scientific management movement
Law of quality Productivity can frequently be improved as quality is improved and as waste declines, either by changes in product design, or by changes in materials or processing. Various techniques of the quality movement can be responsible for these improvements
Law of factory focus Factories that focus on a limited set of tasks will be more productive than similar factories with a broader array of tasks.
The Theory of Swift, Even Flow Productivity for any process - be it labor productivity, machine productivity, materials productivity, or total factor productivity - rises with the speed by which material flow through the process, and it falls with increases in the variability associated with the demand on the process or with steps in the process itself.
DEMAND VARIABILITY High demand variability Low demand variability Low speed of materials through the process Job shops Batch operations SPEED OF FLOW Assembly lines High speed of materials through the process Highly productive continuous flow process Fig. A variant on the product-process matrix
Law of Trade-offs A manufacturing plant cannot simultaneously provide the highest levels among all competitors of product quality, flexibility, and delivery, at the lowest manufactured cost Law of Cumulative Capabilities Improvements in certain manufacturing capabilities e.g., quality are basic and enable improvements to be made more easily in other manufacturing capabilities e.g., flexibility.
The Theory of Performance Frontiers A production frontiers is defined as the maximum output that can be produced from any given set of inputs, given technical considerations.
Operating Frontier for B COST A B Operating Frontier for A Asset Frontier PERFORMANCE Fig. Operating and asset frontiers
Bettered Operating Frontier COST A Operating Frontier A1 A2 Asset Frontier PERFORMANCE Fig. Three operating states for a manufacturing plant
Law of Diminishing Returns As improvement moves a manufacturing plant nearer and nearer to its operating frontier or its asset frontier, more and more resources must be expended in order to achieve each additional increment of benefit. Law of Diminishing Synergy The strength of the synergistic effects predicted by the law of cumulative capabilities diminishes as a manufacturing plant approaches its asset frontier.
Korean Air Firm GEC Avionics Singapore Alenia AeroSpace Fuji Short Brothers CASA Aerospace Singapore Japan Ireland Korea Spain United Kingdom Country Australia Italy Wing flaps Landing gear Landing gear doors Landing gear doors Rudder Flap supports Ailerons Flight computers Parts Boeing Suppliers (777) Menasco Canada Landing gears Technologies Aerospace doors, wing section
Corporate Strategy Supply Chain Strategy Service Strategy Manufacture Strategy Distribution & Retailing Risk Management K P I Monitoring Fig. Flow of Supply Chain Strategy
A strategy must • Fit the existing and potential environment • Provide a linkage mechanism • Incorporate the activities of all major line functions • Extend into staff activities • Specify the performance required • Promote a culture of continual improvement
Steps in Developing a Manufacturing Strategy 1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements
A plan for being competitive Its not what you say, its what you do… Successful strategy ??? • The firm • Customers Operations Strategy
• Cost Efficiency • Quality • Delivery • Flexibility Competitive Dimension
Market Leadership Product Leadership Competitors Focus Customer Intimacy Customer Focus Operational excellence Company Focus Fig. Strategic Triangle
Cross Functional Corporate Strategy • Objectives • Cost • Quality • Delivery • Flexibility • Policies • Process • Quality • Capacity • Inventory Mission Distinctive Competence Int. & Ext. Analysis Consistent Pattern of Decision
Mission of FedEx FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction.
Mission of the Hard Rock Café 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.
Example: • Distinctive competencies of Japanese manufacturing • Low labour cost strategy – shortly after the war; • Scale-based strategy– high productivity and low unit cost; • Focused factory strategy– specialization for higher quality; • Flexible factory strategy – high quality with increased variety; • Lean production– reducing all waste