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Increasing Competitive Advantage & Sustainability through Processes. Professor Mellie Pullman Week 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

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increasing competitive advantage sustainability through processes

Increasing Competitive Advantage & Sustainability through Processes

Professor Mellie Pullman

Week 1

where does operations management fit into a business
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
what is a process
What is a process?
  • A sequence of activities that is intended to achieve some result.
  • A process perspective:
    • Links together all necessary activities and increase one’s understanding of the entire system, rather than focusing on only one small part.
a process

Input

Output

A Process

Transformation

(Conversion)

Process

conversions include
Conversions include:
  • Physical: manufacturing
  • Location: transportation
  • Exchange: retailing
  • Storage: warehousing or disk
  • Physiological: health care
  • Informational: insurance, telecommunications, etc.
inputs outputs and feedback

Energy

Materials

Labor

Goods or

Services

Capital

Information

Feedback information for

control of process inputs

and process technology

Inputs, Outputs, and Feedback

Transformation

(Conversion)

Process

process boundary can change perspective
Process Boundary can change perspective
  • How many liters of water does it take to make 1 Liter bottle of Coke?
water use for coke
Water Use for Coke
  • In bottle itself:
    • Roughly 1 liter of water
  • Add Bottling plant operations, cleaning, cooling, and other needs
    • Roughly 2.7 liters of water for 1 liter of Coke
  • Add raw materials: the growing of Sugar Cane, one of the thirstiest crops in the world
    • Roughly 250 liters of water to make 1 liter of Coke.
process changes to address this issue
Process Changes to address this issue:

“Water is to Coca-Cola as clean energy is to BP… We need to mange this issue (fresh water availability and use) or it will manage us.”

Jeff Seabright, VP of Environment and Water Resources, Coca-Cola Corporation

Actions: influence the process

  • Local targets established to improve water efficiency and energy use
  • Commitment to rainwater harvesting
slide12

A Café Latté

Lid = 2.5 L

Water = .5 L

Cup = 5.5 L

Sugar = 7.5 L

Milk = 49 L

Energy

Coffee = 143 L

208 L Water

per Cup

what is managed inside the box
What is managed inside the box?

Parts, Data &

Equipment

People

Processes

Planning &

Scheduling

Buildings or Facilities

discussion breakout
Discussion Breakout
  • Think of a company that you believe has a sustainability focus:
    • What activities have they done any of the 5 P’s to improve their sustainability?
      • People
      • Parts & Equipment
      • Processes
      • Plants or Facilities (Buildings)
      • Planning & Scheduling (Measuring/Monitoring)
    • Is there an area where they are particularly weak? Why?
strategy getting a competitive advantage through operations

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 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
operations strategy model

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)

business strategy versus mission
Business Strategy versus Mission
  • How is the business strategy different from the mission statement?
  • Southwest airlines?
business strategy
Business Strategy

Southwest Airlines Co. ("Southwest") is a major domestic airline that provides primarily short haul, high-frequency, point-to-point, low-fare service.

the mission of southwest airlines
The Mission of Southwest Airlines
  • The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.
distinctive competence
Distinctive competence
  • What does Southwest do better than most (if not all) of their competitors?
  • Southwest
    • has the lowest operating cost structure in the domestic airline industry,
    • consistently offers the lowest and simplest fares,
    • has one of the best overall Customer Service records.
common competitive priorities
Common competitive priorities

These dimensions of value enable firms to win customers:

  • Cost (Price)
    • 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
  • Delivery Time
    • faster delivery or consistent on-time delivery can support a price premium
  • Flexibility (variety)
    • highly customized products or choice flexibility can support a price premium
  • Innovation or Sustainability:
    • products that connect with consumers on social, environmental, and other values.
can do all those well simultaneously hot lips pizza

QUALITY & DESIGN FLEXIBILITY

QUALITY

Fresh, Natural Ingredients

Toppings & Crust Choice

Expensive Ingredients

Slow to Cook

Low Volume Ovens

COST

TIME

VOLUME FLEXIBILITY

Can do all those well simultaneously?Hot Lips Pizza
operations strategy the tactics
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
major decision responsibilities of operations netflix
Major Decision Responsibilities of Operations (Netflix)
  • Policies about
    • Process
      • How to produce & deliver
    • Quality
      • Criteria, measurement & process for achieving
    • Capacity
      • Physical facilities (where, size, activities) & labor (what kind, how many, when)
    • Inventory
      • What, when & how much?
summary
Summary
  • Process Mindset
  • Operations
    • fit with the strategy of an organization
    • as a competitive advantage
    • as the key to addressing sustainability