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Fundamentals of Operations Management BUS 3 – 140 Jan 29, 2008. Agenda. Week 1 Review Product & Service Design Location Planning Project Management. How Operations Interacts with Other Organizations. Key intersections with Sales & Marketing and with Finance. FINANCE & ACCOUNTING.

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agenda
Agenda
  • Week 1 Review
  • Product & Service Design
  • Location Planning
  • Project Management
key intersections with sales marketing and with finance
Key intersections with Sales & Marketing and with Finance

FINANCE & ACCOUNTING

  • Budgeting
  • Authorizing Capital spending
  • Authorizing major inventory buys
  • Cost accounting
  • Make vs. Buy decisions
  • Location planning
  • Managing international trade
  • Analyzing trade-off decisions
key intersections with sales marketing and with finance1
Key intersections with Sales & Marketing and with Finance

SALES & MARKETING

  • Forecasting Demand
  • Influencing demand
  • Committing supply
  • Negotiating schedules with customers
  • Providing competitive information
  • Requesting new products and services
  • Opening new markets
there are degrees of newness
There are degrees of “Newness”
  • Modify existing products and services
  • Expand and existing product line or service offering
  • Clone a competitor’s product or service
  • New product or service

There is usually some combination

taking place simultaneously

phases in product design development
Phases in Product Design & Development

Idea

Generation

Market

Test

Product

Specifications

Product

Introduction

Follow-up

Evaluation

Process

Specifications

Prototype

Development

Design

Review

Feasibility

Analysis

  • Supply Chain
    • Customers
    • Suppliers
    • Employees
    • Field Service
  • Competitors
    • “Me too” strategy
    • Reverse Engineering
  • Research and Development
    • Applied research has the objective of MAKING MONEY
    • Development takes the results of the applied research and finds places where they can be used (Applications)
phases in product design development1
Phases in Product Design & Development

Product

Specs.

Market

Test

Product

Introduction

Follow-up

Evaluation

Process

Specifications

Prototype

Development

Design

Review

Feasibility

Analysis

Idea

Generation

  • Start with the CUSTOMER
    • Understand what the customer wants (or demands)
    • Understand what the customer will PAY for
  • RESPOND to Opportunities and Threats
    • Customers not buying what you are selling
    • Customers buying what you are not selling
  • Acknowledge Cost imperatives
  • Defensive considerations
    • Product liability
    • Availability (possible shortages or cost issues) of Raw Material, components, labor
product life cycles
Saturation

Maturity

Decline

Demand

Growth

Introduction

Time

Product Life Cycles

Figure 4.1

definitions
Definitions

Price

What the seller is paid for goods and services provided

Cost

The expenses incurred in operating the enterprise,

making and buying materials, and converting the

materials to finished goods

Value

The difference between Price and Cost

target pricing is a key element in product specifications
Target Pricing is a Key Element in Product Specifications

Instead of adding profit and cost to establish a selling price, the organization

starts with the marketprice and required profit to establish a targetcost to

achieve the necessary profit.

Traditional:

Cost

Profit

Sales

Price

+

=

Target Pricing:

Sales

Price

(Market)

Profit

Cost

-

=

design phases leads to introduction and volume
Design Phases leads to Introduction and Volume

Product

Introduction

Market

Test

Product

Specifications

Follow-up

Evaluation

Process

Specifications

Prototype

Development

Design

Review

Feasibility

Analysis

Idea

Generation

  • Quality and Cost
  • Target pricing
  • Capital equipment
  • Time to market
  • Time to Volume
  • Postponement and “Mass Customization”
the standardization challenge
The Standardization Challenge

Standard parts are generally lower cost, more abundantly available,

provide the largest number of potential suppliers,

drive efficiencies in design, and provide other benefits

BUT…

Unique parts often differentiate products and performance,

and can provide competitive advantage to the seller

postponement and mass customization
Postponement and Mass Customization
  • Combine uniqueness and standardization
    • Delayed differentiation
  • Modular design
    • Many permutations from standard components (e.g Dell computer, Burger King, Subway, magazines)
  • Inventory Management
  • Forecasting
other design and spec considerations
Other Design and Spec Considerations
  • Decisions made EARLY affect Dollars spent LATER
  • Whenever possible it is recommended to re-use existing components when developing new products (rather than creating numerous new components whenever creating a new subassembly)
  • Partnering among Design, Marketing, Sales, and Suppliers during the Design process is a major opportunity to reduce both Time To Market and Cost
  • Product Portfolio
service design1
Service Design
  • Start with the Customer
    • Understand what the customer wants (or demands)
    • Understand what the customer will PAY for
  • Respond to Opportunities and Threats
    • Customers not buying what you are selling
    • Customers buying what you are not selling
  • Service Delivery Systems
    • Facilities
    • Processes
    • Skills
    • Technology
    • Service “blueprint”

These concepts also useful for Managing

Functions and Departments

challenges of service design
Challenges of Service Design
  • Variable requirements
  • Difficult to describe
  • High customer contact
  • The customer is a PARTICIPANT in the process
characteristics of well designed service systems
Characteristics of Well Designed Service Systems
  • Consistent with the organization mission
  • User friendly
  • Robust
  • Easy to sustain
  • Cost effective
  • Value to customers
  • Effective linkages between back operations
  • Single unifying theme
  • Ensure reliability and high quality
guidelines for successful service design
Guidelines for Successful Service Design
  • Define the service package
  • Focus on customer’s perspective
  • Consider image of the service package
  • Recognize that designer’s perspective is different from the customer’s perspective
  • Make sure that managers are involved
  • Define quality for tangible and intangibles
  • Make sure that recruitment, training and rewards are consistent with service expectations
  • Establish procedures to handle exceptions
  • Establish systems to monitor service
components of the service package
Components of the “Service Package”
  • Physical Resources
  • Accompanying goods that are purchased or consumed by the customer, or provided with the service
    • Bundling of like products
    • Service contracts
    • Insurance plans
    • Package deals
  • Explicit services
  • Implicit services
key elements of service operations management
Key Elements of Service Operations Management
  • Tangible – intangible
  • Services are created and delivered at the same time
  • Services cannot be inventoried
  • Services highly visible to customers
  • Services have low barrier to entry
  • Location important to service
  • Range of service systems
  • Demand variability
  • There is FUNGIBLE CAPACITY – you “use it or lose it”
  • Difficult to leverage and scale when people intensive
  • Turnover and attendance can be critical factors
objectives of location planning
Objectives of Location Planning
  • Strategic
    • Reduce costs
    • Add revenue
    • Both
  • Tactical
    • Explosive growth
    • Dramatic decline
  • Key customers
  • Mergers and acquisitions
four location options
Four Location Options
  • Expand existing facilities
  • Add new
  • Leave existing and find new
  • Do nothing
regional factors when making location decisions
Regional Factors when making Location decisions
  • Raw materials and components
  • New Markets
  • Labor
  • Tax relief and other incentives
characteristics of service and retail locations
Characteristics of Service and Retail Locations
  • Heavier emphasis on REVENUE than Manufacturing locations
    • Traffic volume and convenience most important
    • Demographics
      • Age
      • Income
      • Education
    • Location is CRITICAL
    • Good transportation
    • Customer safety
the nature of projects
Build A

A Done

Build B

B Done

Build C

C Done

Build D

Ship

JAN

FEB

MAR

APR

MAY

JUN

On time!

The Nature of Projects
  • Unique, one-time operations designed to accomplish a specific set of objectives in a limited time frame.

This Course and Semester are PROJECTS!

overview of project management from table 17 1
Overview of Project Management (from Table 17-1)
  • How is it different?
    • Limited time frame
    • Narrow focus, specific objectives
    • Less bureaucratic
  • Why is it used?
    • Special needs
    • Pressures for new or improves products or services
  • What are the Key Metrics?
    • Time
    • Cost
    • Performance objectives
  • What are the Key Success Factors?
    • Top-down commitment
    • Having a capable project manager
    • Having time to plan
    • Careful tracking and control
    • Good communications
overview of project management from table 17 1 continued
Overview of Project Management (from Table 17-1, continued)
  • What are the Major Administrative Issues?
    • Executive responsibilities
      • Project selection
      • Project manager selection
      • Organizational structure
    • Organizational alternatives
      • Manage within functional unit
      • Assign a coordinator
      • Use a matrix organization with a project leader
  • What are the tools?
    • Work breakdown structure
    • Network diagram
    • Gantt charts
    • Risk management
the work of the project manager
The Work of the Project Manager
  • Responsible for RESULTS achieved through:
    • Work
    • Human Resources
    • Communication
    • Schedule
    • Cost
    • Risk Management

Project Managers often must INFLUENCE team members

and others WITHOUT formal (Organizational Chart) authority

gantt charts
Gantt Chart

Locate new facilities

Interview staff

Hire and train staff

Select and order furniture

Remodel and install phones

Move in/startup

MAR

APR

MAY

JUN

JUL

AUG

SEP

OCT

NOV

DEC

Gantt Charts
an example of a gantt chart for this class
An example of a Gantt Chart for this Class

Complete

Final Draft

Write

First Draft

Compare

Book to Course

Read Book

25-Feb

4-Mar

11-Mar

18-Mar

25-Mar

01-Apr

In this example, you would know that you should start

reading by Feb 25 to complete the assignment by Apr 1

a project work plan and project life cycle
A Project Work Plan and Project Life Cycle

Feasibility

Planning

Management

Concept

Execution

Termination

The Key is to COMPLETE the work,

achieve the RESULTS,

and Move On

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