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Operations Management & Performance Modeling. Operations Strategy Class 1a: Introduction to Operations Introduction & Administrative Key Principles of Course Strategic role of Ops Process view of Ops Strategies, Capabilities and Operation Drivers Wal-Mart Process Analysis Lean Operations

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Ompm

Operations Management & Performance Modeling

  • Operations Strategy

    • Class 1a: Introduction to Operations

      • Introduction & Administrative

      • Key Principles of Course

        • Strategic role of Ops

        • Process view of Ops

      • Strategies, Capabilities and Operation Drivers

        • Wal-Mart

  • Process Analysis

  • Lean Operations

  • Supply Chain Management

  • Capacity Management in Services

  • Quality Management

  • Business Process Reengineering

OM&PM/Class 1a


Key principle of course 1 the strategic role of ops
Key Principle of course: 1. The Strategic Role of Ops

“A company’s operations function is

either a competitive weapon

or

a corporate millstone.

It is seldom neutral.” [Skinner ‘69]

OM&PM/Class 1a


Key principle of course 2 the process view of ops
Key Principle of Course: 2. The Process View of Ops

  • By rethinking the IBM Austin assembly plant and introducing cells,

    • distance traveled by a card was cut from 1.5 miles to 200 yards

    • floor space was reduced to half

    • production tripled with about the same number of workers.

      [Chicago Tribune, July 1992]

OM&PM/Class 1a


Operations the process view what is a process

Operations

Management

Feedback

for control

Transformation

Process

Inputs

Outputs

Goods

Services

Flow Units

(RM, people,

information, etc.)

Labor & Capital

Resources

Operations & the Process View: What is a Process?

OM&PM/Class 1a


What is operations management
What is Operations Management?

  • Management of business processes

  • How to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs.

    • What is appropriate?

OM&PM/Class 1a


What are appropriate capabilities an example a supply chain

Service

Outputs

Service Delivery System

Production

Distribution

Market

What are “appropriate capabilities”? An example: A Supply Chain

The market + your strategy

determine criteria for appropriate.

OM&PM/Class 1a


What defines a good process performance financial measures
What defines a “good process”? Performance: Financial Measures

  • Absolute measures:

    • revenues, costs, operating income, net income

    • Net Present Value (NPV) =

  • Relative measures:

    • ROI, ROE

    • ROA =

  • Survival measure:

    • cash flow

OM&PM/Class 1a


Firms compete on product attributes this requires process capabilities
Firms compete on product attributes. This requires process capabilities.

  • Price (Cost)

  • Quality

    • Customer service

    • Product quality

  • Time

    • Rapid, reliable delivery

    • New product development

  • Flexibility

    • Variety or volume flexibility

“order winners”

“capabilities”

OM&PM/Class 1a


Process capabilities are affected by process drivers levers
Process Capabilities are affected by Process Drivers/Levers

  • Process structure/architecture

    • jobs

    • activities & storage/inventories: quantity & location

    • resources: capacity & throughput

    • routes: information and product flow

    • positioning (product/process focus)

    • capabilities (technology, “real” investment)

  • Operations Planning & Control

  • Organization

OM&PM/Class 1a


Linking the strategic role process view strategic operational audit
Linking the strategic role & process view: Drivers/Levers Strategic Operational Audit

Business Strategy

compatible?

Desired Capabilities

. . .

Marketing Strategy

Operations Strategy

Financial Strategy

p, Q, t, flexibility

Operations Structure:

Processes & Resources

OM&PM/Class 1a


A strategic framework for operations
A Strategic Framework for Operations Drivers/Levers

  • Corporate Strategy

    • businesses in which the corporation will participate

    • acquisition & allocation of key corporate resources to each business

  • Business Unit Strategy

    • scope of the business (product/market/service segments)

    • basis on which BU will achieve and maintain competitive advantage

  • Operations Strategy (and mkt strat, fin strat ...)

    • What must operations do particularly well? Which capabilities must ops develop?

  • Operations Structure

    • How should operations processes be structured to develop capabilities that support strategy?

OM&PM/Class 1a


Wal mart
Wal-Mart Drivers/Levers

Corporate Strategy

(Gain competitive advantage by) providing customers access to quality goods, when and where needed, at competitive prices

  • Operations Structure

    • Cross docking

    • EDI

    • Fast transportation system

    • Focused locations

    • Communication between retail stores

  • Operations Strategy

    • Short flow times

    • Low inventory levels

OM&PM/Class 1a


Wal mart resulting benefits
Wal-Mart (Resulting Benefits) Drivers/Levers

  • Inventory at retail stores turned over twice a week (Industry averages once every two weeks)

  • Improved targeting of products to markets

  • Sales per square foot increased from $102 in 1985 to $140 in 1991 (Industry average increased from $102 to $110)

OM&PM/Class 1a


Historical development of om
Historical Development of OM Drivers/Levers

  • Craft guilds & Cottage Industry

  • 1765: Factory System(Adam Smith, James Watt)

  • 1810: American System of Mfg(Whitney’s interchangeable parts)

  • 1890s: Bicycle boom (sheet metal stamping, electrical resistance welding)

    * Scientific Management >> Time & motion studies (Frederick Taylor 1900s)

  • April 1, 1913: Mass Production(Henry Ford’s Moving Assembly Line)

  • 1927: Flexible Mass Production (Alfred Sloan & GM)

    * Statistical Quality Control (Walter Shewhart at Bell Labs, 1930s)

    Hawthorn Studies (Elton Mayo at Western Electric, 1930s)

  • 1970: Toyota Production System (Taiichi Ohno)

  • 1980s-now: Ops in the spotlight

    • Manufacturing Strategy Paradigm (HBS)

    • Lean Ops: JIT, CAD/CAM, CIM, FMS, TQM, business reengineering

OM&PM/Class 1a


Class 1a learning objectives
Class 1a Learning Objectives Drivers/Levers

  • An operation as a transformation process

  • Product Attributes / Operational Capabilities

  • Process Drivers / Operations structure

  • Link between business strategy, operations strategy, and operations structure

OM&PM/Class 1a


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