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Ko ç Un iversity Graduate School of Business MBA Program. OPSM 501: Operations Management. Session 3 &4 : Strategic F it Process selection. Zeynep Aksin zaksin @ku.edu.tr. Shouldice Hospital Video Case wrap-up. On what product attributes does Vestel Elektronik compete?.

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opsm 501 operations management

Koç University Graduate School of Business

MBA Program

OPSM 501: Operations Management

Session 3&4:

Strategic Fit

Process selection

Zeynep Aksin

zaksin@ku.edu.tr

firms compete on product attributes this requires process capabilities
Firms compete on product attributes. This requires process capabilities.
  • Price (Cost) P
  • Quality Q
    • Customer service
    • Product quality
  • Time T
    • Rapid, reliable delivery
    • New product development
  • Variety V
    • Degree of customization

“order winners”

To deliver we need “capabilities”

strategic operational audit

Existing

Desired

Measures

Product Attributes

P, T, Q, V

Feasible

Business Strategies

Desired

Business Strategy

Strategy Gap?

Capability Gap?

Desired

Capabilities

Existing

Capabilities

Marketing, …,

Financial Strategy

Operations Strategy

Process Attributes

C, T, Q, Flex

Operational Structure:

Processes & Infrastructure

Desired Oper’l Structure:

Processes & Infrastructure

Process Gap?

Strategic Operational Audit
classification of processes by customer interface
Classification of Processes: by Customer Interface

Raw Material

Components

Semifinished

Finished

Make-to-Stock

Assemble-to-Order

SUPPLIER

CLIENT

Make-to-Order

Engineer-to-Order

Order

Forecast

competing on variety requires flexibility
Competing on variety requires flexibility
  • Europe’s number 1, world’snumber 2. OEM TV producer! 6% of World TV production.
  • Daily capacity: 50.000 TVs (average production 35.000/day)
  • 20 parallel assembly lines
  • Flexibility to produce 40 differentbrands-modelsin a day
  • 60% of orders for quantities less than 200
  • Direct deliveries to some chain stores in Europe
industrialization 1 standardizing
Industrialization 1: Standardizing

Product

High

Customization

Some

Customization

High

Stardardization

Process

Flexible

Job Shop

Batch Flow

Rigid

Line Flow

industrialization 2 flexibility
Industrialization 2: Flexibility

Product

High

Customization

Some

Customization

High

Stardardization

Process

Flexible

Job Shop

Batch Flow

Rigid

Line Flow

strategic value gained
Strategic Value Gained

Product

High

Customization

Some

Customization

High

Stardardization

Process

Flexible

Job Shop

Batch Flow

Rigid

Line Flow

classification of processes by process architecture
Classification of Processes by process architecture
  • Project
  • Job Shop
  • Batch
  • Line Flow
  • Continuous Flow

Job Shop

Flow Shop

the job shop process
The Job Shop Process
  • Process Layout
  • One of a Kind Build
    • (To Customer Order)
  • Absence of Rigid Flow Pattern
  • Usually High Product Mix
process layout
Process Layout

Lathe#1

Lathe#2

Drill Press #1

Paint Machine

Lathe#3

Packaging Machine #1

Finish

Production

Drill Press #2

Lathe#4

Packaging Machine #2

Product #1735B: Start of Production

the flow line process
The Flow Line Process
  • Product Layout
  • Discrete Parts
  • Rigid Flow Pattern
  • Product Mix of Standard Products
product layout
Product Layout

Product #1735B

Start Production

Drill

Press #1

Lathe

Packaging Machine #2

Drill

Press #2

Paint Machine

Finish Production

zara business concept
Zara Business Concept

Integrated fashion delivery: Fashion at low cost

Low Cost

  • Focus on getting it approximately correct
  • Define a fast process
  • Solve the material constraint
  • Constrain designers
  • Optimize the offer
  • Offer follow-up (next batch) and create customer flows

Fashion

  • Store experience
  • Copy fashion
  • Involve the customers and his group
  • Create a network/brand
zara customer offer product process attributes
Zara Customer Offer:Product/Process Attributes
  • Cost:
    • Low monetary cost
    • Low time cost “The Zara experience”
  • Quality:
    • Raw Material: poor/OK
    • Knit: poor
    • Look: grand
    • Customer satisfaction: fashion at low price
  • Time:
    • Fast copying of leading styles
    • Fast delivery in own stores
    • Limited editions
  • Variety/Flexibility:
    • Limited product variety: only what is on display
    • Every customer is participating in the process
    • Customer defines the next batch
classical textile business process 12 month lead time
Classical textile business process:12 month lead time

Design

Purchase

RM

Mfg

Dist

Sell

Discount

zara business process 5 day lead time
Zara Business Process: 5 day lead time

.

1.Scan

fashion

shows

2.Simplify hits

&

Library of designs

Purchase

RM

3.Final design of

Next batch

Mfg

Dist

Shopping

Experience

2.Shoppers and store mgrs.

PULL next design

Designers adapt

the design process
The design process

Creative design

Preliminary

designs

Final product

design

Traditional

Creative design

Preliminary

designs

Final product

design

Zara

Outsource

And scan

Copy and

simplify

Adapt and

optimize

why is profitability in textile so low when margins are so high
Why is profitability in textile so low, when margins are so high?

Perfect forecast

Excess demand

Excess stock

Expected demand

Actual demand

accurate response
Accurate Response
  • Improving Forecasts

Total Sales

Initial Forecast

slide29

Accurate Response

  • Improving Forecasts

Total Sales

Updated Forecast, Incorporating 20% of Sales Data

slide30

Accurate Response

  • Improving Forecasts

Total Sales

Updated Forecast, Incorporating 80% of Sales Data

zara a approach to demand uncertainty
Zara’a Approach to Demand uncertainty

Excess stock and unmet demand are avoided by

stopping production when market saturates

Expected demand

Actual demand

Small batches

disrupti ve technological change
Disruptive Technological Change

Performance

Zara Quality

Freshness

Zara

M&S

Time

industrialization 1 standardizing1
Industrialization 1: Standardizing

Product

High

Customization

Some

Customization

High

Stardardization

Process

Flexible

Job Shop

Batch Flow

Rigid

Line Flow

industrialization 2 flexibility1
Industrialization 2: Flexibility

Product

High

Customization

Some

Customization

High

Stardardization

Process

Flexible

Job Shop

Batch Flow

Rigid

Line Flow

strategic value gained1
Strategic Value Gained

Product

High

Customization

Some

Customization

High

Stardardization

Process

Flexible

Job Shop

Batch Flow

Rigid

Line Flow

key learnings from operations strategy module
Key learnings from Operations Strategy module
  • Business model: customer segment and selected processes to match those segments’ needs
  • Product-process attributes: P, Q, T, V (C, Q, T, Flex) (what?)
  • Operating effectiveness (how well?)
  • Product-process matrix
  • Lean enterprise: focus, which allows clear value proposition, perfection (optimization), elimination of waste, and focus on customer flows
  • Process competition: Shouldice, Vestel Elektronik, M&S, Zara
announcements
Announcements
  • We will play the house building game, see instruction slides that follow
  • Start reading The Goal
  • Course TA: Beliz Keçelerli; Office Hours T-Th 11-12:30 or by appointment CAS Z52 bkecelerli@ku.edu.tr
keep desks clear
KEEP DESKS CLEAR!
  • Only need a pen or pencil.
  • Please keep desks and aisles clear of notebooks, PCs, backpacks etc.
  • Please do not disturb materials!
housebuilding com manufacturing operations
HouseBuilding.com: Manufacturing Operations

Production Control

(color sheets, log sheets, scissors)

Base Punch

(scissors)

Roof

Base Form

(scissors)

Base Weld

(stapler)

Final Assembly

(tape)

Quality Control

Customer

production control operating procedures
Production Control Operating Procedures
  • Prepare a batch of 4 units.
    • Cut each sheet (one at a time) into two: roof and base.
    • Write the batch number on the roof and the base. All items in the same batch have the same number. The numbers have to match in assembly.
    • Repeat
    • 4 times, which yields one batch
  • When 4 units (one batch) are complete, “release” the batch.
    • Put the batch in your out-basket: it’s ready for pickup by the trucker.
    • Record release time for each batch.
  • Release one batch each minute.
truckers operating procedures
Truckers Operating Procedures
  • Truckers are responsible for transporting work in process inventory between production steps.
  • You can carry only one batch of 4 roofs or 4 bases at a time. Not both!

Production Control

(color sheets, log sheets, scissors)

Base Punch

(scissors)

Roof

Base Form

(scissors)

(scissors)

Base Weld

(stapler)

Final Assembly

(tape)

Quality Control

Customer

roof operating procedures
Roof Operating Procedures
  • Cut the roof along double lines, one at a time.
  • Fold roof along dotted line at top. Think quality!
  • Work in batches of 4 units.
  • When a batch is ready, call the trucker and send to Final Assembly.
  • Ask trucker for inputs when needed.
base punch cut operating procedures
Base Punch (Cut) Operating Procedures
  • Cut the base along double lines, one at a time. Think quality!
  • Work in batches of 4 units
  • When a batch is ready, call the trucker and send to Base Form.
  • Ask trucker for inputs when needed.
base form operating procedures
Base Form Operating Procedures
  • Fold the lines on the base (4 folds).
  • Work in batches of 4 units
  • When a batch is ready, call the trucker to send them to Base Weld.
  • Ask trucker for inputs when needed
base weld operating procedures
Base Weld Operating Procedures
  • Staple base on top and bottom about 0.5 cm from the edge.
  • Work in batches of 4 units.
  • When a batch is ready, call the trucker to send them to Final Assembly.
  • Ask trucker for inputs when needed.
final assembly operating procedures
Final Assembly Operating Procedures
  • Tape the roof to the base (2 tapes).
  • Work in batches of 4 units.
  • When a batch is ready, send them to QA. (No trucker required.)
  • Ask trucker for inputs when needed.
quality assurance operating procedures
Check each batch if they conform to quality standards!

If the house conforms to quality standards, put it on the market. Once on the market no more rework!

Customers can reject houses

Quality Standards

Batch numbers must match.

Folds and cuts should be along appropriate lines.

Folds should be crisp and cuts should be straight.

Roof should be centered and door should be visible.

Top of base should be flush with roof.

Staples and tape should be centered and parallel to the ground.

Not too much tape. About 1 cm

Staples about 0.5 cm from edge.

Quality Assurance Operating Procedures
house game overview
Quality Standards

Batch numbers must match.

Folds and cuts should be along appropriate lines.

Folds should be crisp and cuts should be straight.

Roof should be centered and door should be visible.

Top of base should be flush with roof.

Staples and tape should be centered and parallel to the ground.

Not too much tape. About 1 cm.

Staples about 0.5 cm from edge.

House Game Overview

Production Control

(color sheets, log sheets, scissors)

Base Cut

(scissors)

Roof

Base Form

(scissors)

(scissors)

Base Weld

(stapler)

Final Assembly

(tape)

Quality Control

Customer

housebuilding com operational performance
HouseBuilding.com: Operational Performance

Flow time T

Input

Ri

Output

Ro

Inventory

I

Sales

R

Quality

Q = R/ Ro

Team

(color)

House # 1

To - Ti = T

House # 16

To - Ti = T