Operations Management PDF

Preview

Summary

Cours operation management...

Description

OPERATIONS MANAGEMENT – GLOBALIZATION Overview on Globalization of Markets • Globalization and technological advances have altered the international business landscape more than any other trends. • In this class, globalization refers to the interconnectedness of national economies and the growing interdependence of buyers, producers, suppliers, and governments around the world. • Globalization allows firms to view the world as one large marketplace for goods, services, capital, labor, and knowledge. Phases on globalization

The death of distance

Growth of world trade

the world economy 1970 to 2017

Reasons to Globalize • Improve the supply chain • Reduce costs and exchange rate risks • Improve operations • Understand markets • Improve products • Attract and retain global talent Dimensions of Market Globalization • •

Worldwide reduction of barriers to trade and investment Market liberalization and adoption of free trade (e.g., in China, former Soviet Union countries, and elsewhere)

• • • •

Offshoring and the flight of jobs Inequalities between high-income and lowincome countries Effect on the natural environment Effect on national culture

• • • • • • • • • • • • • • • •

•

• •

•

Industrialization, economic development, and modernization Integration of world financial markets Advances in technology Integration and interdependence of national economies Rise of regional economic integration blocs Growth of global investment and financial flows Convergence of buyer lifestyles and preferences Globalization of production activities Globalization of services Countless new business opportunities for internationalizing firms New risks and intense rivalry from foreign competitors More demanding buyers who source from suppliers worldwide Greater emphasis on proactive internationalization Global value chains Rapid spread of financial or monetary crises from one country to another Loss of national sovereignty Integration and interdependence of national economies. Results from firms’ collective international activities. Governments contribute by lowering trade and investment barriers. Rise of regional economic integration blocs. Blocs formed by two or more countries to reduce or eliminate barriers to trade and investment, such as the NAFTA and MERCOSUR. Treaty of Rome creates the European Union Worldwide reduction of barriers to trade and investment. Over time, national governments have greatly reduced trade and investment barriers. The trend is partly facilitated by the World Trade Organization (WTO), an organization of some 150 member nations. Market liberalization and adoption of free markets. Free market reforms in China, India, and other nations opened about a third of the world to freer trade.

•

•

•

•

•

•

•

•

•

Growth of global investment and financial flows. Associated with rapid growth in foreign direct investment (FDI), currency trading, and global capital markets. Convergence of buyer lifestyles and preferences. Facilitated by global media, which emphasize lifestyles found in the USA, Europe and elsewhere. Firms market standardized products. Globalization of production. To cut costs, firms manufacture in low labor-cost locations such as Mexico and Eastern Europe. Firms also source services from abroad. Globalization of services. Banking, hospitality, retailing, and other service industries are rapidly internationalizing. Firms outsource business processes and other services in the global value chain to vendors overseas. In a new trend, many people go abroad to take advantage of low-cost services, e.g., Health Tourism. Industrialization, economic development, and modernization. These trends transformed many developing economies from producers of lowvalue to higher-value goods, such as electronics and computers. Simultaneously, rising living standards have made such countries more attractive as target markets for sales and investment. Integration of world financial markets. Enables firms to raise capital, borrow funds, and engage in foreign currency transactions wherever they go. Banks now provide a range of services that facilitate global transactions. Advances in technology. Reduces the cost of doing business internationally, by allowing firms to interact cheaply with suppliers, distributors, and customers worldwide. Facilitates the internationalization of companies, including countless small firms.

Digital Disruption •

Profound advances have occurred in computers, digital technologies, telephony, and the Internet.

• • •

MNEs leverage digital technologies to optimize their performance, managing operations around the world. Digital technologies opened the global marketplace to firms that historically lacked the resources to internationalize. Declining Cost of Global Communication and Growing Number of Internet Users

Manufacturing and Transportation Technologies •

•

•

Revolutionary developments facilitate low-scale and low- cost manufacturing; firms can make products cost- effectively even in short production runs. Online platforms are increasing the productivity of business and industrial activity. In transportation, key advances include fuel-efficient jumbo jets, giant ocean-going freighters, and containerized shipping. The cost of international transportation has declined substantially, spurring rapid growth in global trade. Collectively, technological advances have greatly reduced the costs of doing business internationally.

Global Value Chains • • • •

The most significant implication of market globalization for companies is that a purely domestic focus is no longer viable in most cases. Market globalization compels firms to internationalize their value chains and access the benefits of international business. Value chain: The sequence of value-adding activities performed by the firm in the process of developing, producing, and marketing a product or a service. Globalization allows the firm to internationalize its value chain, leading to various advantages.

The truly international firm configures its sourcing, manufacturing, marketing, and other value-adding activities on a global scale. Rational: • cost savings • increase efficiency, productivity, and flexibility of value chain activities • access customers, inputs, labor, or technology • benefit from foreign partner capabilities Culture and Ethical Issues • Social and cultural behavior differs • International laws, agreements, codes of conduct for ethical behaviors • Despite cultural and ethical differences, we observe extraordinary mobility of capital, information, goods, and people

Mission Statement

Societal Consequences of Globalization •

•

•

•

Loss of National Sovereignty. MNE activities can interfere with governments’ ability to control of their own economies and social-political systems. Some firms are bigger than the economies of many nations (e.g., Walmart, Total). However, some argue that global competition in the context of global free trade makes MNE s less powerful The US auto industry declined as foreign rivals from Japan and Europe entered the US market. Someday, Walmart may be overtaken by a giant Chinese retailer like Alibaba. Offshoring and the Flight of Jobs. Jobs are lost as firms shift production of goods and services abroad, in order to cut costs and obtain other advantages. Firms benefit, communities and industries are disrupted. However, some MNEs undertake reshoring-returning production to the

•

• • • •

•

home country to benefit from homebased advantages. Effect on low-income countries: while globalization usually creates jobs and raises wages, it also tends to disrupt local job markets. MNEs may pay low wages, and many exploit workers or employ child labor Globalization’s benefits are not evenly distributed. Many workers south of the border make low wages. Effect on Sustainability and the Natural Environment. Globalization harms the environment by promoting industrialization and other activities that generate pollution, habitat destruction, and other environmental harm. As China and India industrialize, air and water pollution have become major hazards.

OPERATION MANAGEMENT – SUPPLY CHAIN MANAGEMENT Supply Chain Management (SCM) is the design and management of flows of products, information, and funds throughout the supply chain. Supply Chain Stages A typical supply chain may involve many different trading partners, called stages Stages may include: – Suppliers – Producers – Wholesalers/Distributors – Retailers – Customers SCM activities include: • Coordination: coordinate the movement of goods, services, and funds through the supply chain • Information Sharing: share forecasts, point-of-sale data, planned promotional campaigns, and inventory levels • Collaboration: jointly plan, operate, and execute business decisions as one entity Managing Flows Products, Information, and Funds: • Flow of Products - from the beginning to the final customer - Reverse Logistics • Flow of Information - simplified supply chains utilize data from point-of-sale back to suppliers - real time information reduces uncertainty and inventory levels • Flow of Funds - funds are transferred in both directions along the supply chain - supply chain compression The Bullwhip Effect Fluctuation and distortion of information increases as it moves up the supply chain • each stage of the chain carries progressively more inventory • the longer the supply chain, the greater the opportunity for the Bullwhip Effect. • sharing point-of sale information with all members of the supply chain can combat the Bullwhip Effect Customer Focus The final customer is the driving force of the supply chain products are "pulled" through the supply chain

The Service Supply Chain

Service Supply Chains • focus more on the interaction between the customer and provider • often rely on customers as the supplier of inputs • tend to be shorter than manufacturing supply chains • are often more like hubs than chains • do not have inventory as a buffer The Boundary-Spanning Nature of SCM SCM spans and integrates functions within and between enterprises of the supply chain through: Intra – Organizational Integration • Marketing links the organization to its customers • Operations organizes the transformation of raw materials into finished products and services • Sourcing links the organization to its suppliers • Logistics is responsible for moving and positioning inventory throughout the supply chain • company-wide integration supplants “silo” mentality Cross – Enterprise Integration • various supply chain organizations functioning as a single entity to satisfy the final customer Keys: - information technology as an enabler - relationship management - collaborative planning - sharing of risks and rewards - Win/winstrategy Characteristics of a Competitive Supply Chain - Responsiveness: The ability to move quickly to meet customer demands, agility, short supply chains, demand, driven rather than Forecast - Reliability: uncertainty is the main reason why companies carry safety stock resulting in higher costs, visibility improves reliability in supply chains, sharing of real-time data and information through information technology improves visibility and therefore supply chain reliability. - Relationship Management: SCM is primarily about the management of relationships across networks of companies Outsourcing • Outsourcing - hiring a third party to perform a set of tasks for a fee • Increased Competitive Pressure - forces companies to focus on what they do best and outsource other activities • Core Competencies - create superior value by managing core competencies better than competitors

Technology Information Technology can be viewed as an enabler of SCM Supply Chain Security The study of ways to protect security while maintaining efficiency is now a key issue • Government Regulations • Customs-Trade Partnership Against Terrorism (CTAT) • Container Security Initiative (CSI) - Theft and Product Tampering - Electronic Seals - RFID and GPS Sustainability and the "Green" Supply Chain • Environmental Concerns – climate change, energy use, environmental contamination, resource depletion • Sustainable Supply Chains – design processes to use environmentally friendly inputs and create outputs that can be recycled and that do not contaminate the environment The Financial Supply Chain There is a trend to redesign entire supply chains and search for less costly sources of supply • Strategies – Global Sourcing – Production Outsourcing – Outsourcing Noncore Activities • “Order-to-Cash Cycle” – the time it takes to convert an order into cash

Managing the Bullwhip Effect

OPERATION MANAGEMENT – FORECASTING What is Forecasting? • Process of predicting a future event • Underlying basis of all business decisions • Production Inventory • • Personnel • Facilities Forecasting Time Horizons 1. Short-range forecast • Up to 1 year, generally less than 3 months Purchasing, job scheduling, workforce levels, job assignments, production levels 2. Medium-range forecast • 3 months to 3 years Sales and production planning, budgeting 3. Long-range forecast • 3+ years New product planning, facility location, capital expenditures, research and development Distinguishing Differences 1. Medium/long range forecast s deal with more comprehensive issues and support management decisions regarding planning and products, plants and processes 2. Short-term forecasting usually employs different methodologies than longer-term forecasting 3. Short-term forecast tend to be more accurate than longer-term forecasts Types of Forecasts 1. Economic forecasts - Address business cycle - inflation rate, money supply, housing starts, etc. 2. Technological forecasts - Predict rate of technological progress - Impacts development of new products 3. Demand forecasts - Predict sales of existing products and services Strategic Importance of Forecasting • Supply Chain Management – Good supplier relations, advantages in product innovation, cost and speed to market • Human Resources – Hiring, training, laying off workers • Capacity – Capacity shortages can result in undependable delivery, loss of customers, loss of market share

Seven Steps in Forecasting 1. Determine the use of the forecast 2. Select the items to be forecasted 3. Determine the time horizon of the forecast 4. Select the forecasting model(s) 5. Gather the data needed to make the forecast 6. Make the forecast 7. Validate and implement the results Forecasting Approaches Qualitative Methods - Used when situation is vague and little data exist - New products - New technology - forecasting sales on Internet Quantitative Methods - Used when situation is ‘stable’ and historical data exist - Existing products - Current technology - Involves mathematical techniques - forecasting sales of color televisions

OPERATION MANAGEMENT – DESIGN OF GOODS & SERVICES

Components Of the Market Offering

Product Levels: The Customer-Value Hierarchy

Product Classifications - Durability - Tangibility - Use

Durability and Tangibility - Nondurable goods - Durable goods - Services

Consumer-Goods Classification - Convenience - Shopping - Specialty - Unsought

Consumer-Goods Classification - Convenience - Shopping - Specialty - Unsought

Product Differentiation • Form • Features • Performance quality • Conformance quality • Durability • Reliability • Repairability • Style • Customization Design The totality of features that affect the way a product looks, feels, and functions to a consumer - Is emotionally powerful - Transmits brand meaning/positioning - Is important with durable goods - Makes brand experiences rewarding - Can transform an entire enterprise - Facilitates manufacturing/distribution - Can take on various approaches

Environmental Issues Environmental issues are also playing an increasingly important role in product design and manufacturing Product Systems and Mixes • Product system • Product mix/assortment – Width – Length – Depth – Consistency

Product Hierarchy

Product Life Cycle Phases Introductory Phase Fine tuning may warrant unusual expenses for 1. Research 2. Product development 3. Process modification and enhancement 4. Supplier development Growth Phase • Product design begins to stabilize • Effective forecasting of capacity becomes necessary • Adding or enhancing capacity may be necessary Maturity Phase • Competitors now established • High volume, innovative, production may be needed • Improved cost control, reduction in options, paring down of product line Decline Phase • Unless product makes a special contribution to the organization, management must plan to terminate offering New-Product Options • Buy other companies • Buy patents from other companies • Buy a license or franchise from another company • New-to-the-world items • Improve existing products Challenges in New-Product Development • The innovation imperative – Continuous innovation is a necessity • New-product success – Incremental innovation vs. disruptive technologies

New-Product Failure • Fragmented markets • Social, economic, and government constraints • Development costs • Capital shortages • Shorter development time • Poor launch timing • Shorter Product Life Organizing New-Product Development • New-product development concepts Generating Ideas • Interacting with employees • Interacting with outsiders • Studying competitors • Adopting techniques that stimulate creativity Ways to Find New-Product Ideas • Informal customer • Sessions • Time off for technical • people to putter • Customer brainstorming • Survey your customers • research • Set up an idea vault

Adopting creative techniques

Factors Influencing Product Design • Modular design: Products designed in easily segmented components; Adds flexibility to both production and marketing; Improved ability to satisfy customer requirements • Computer-aided design and manufacturing: Using computers to design products and prepare engineering documentation; Shorter development cycles, improved accuracy, lower cost • Virtual Reality technology: Allows people to ‘see’ the finished design before a physical model is built • Value analysis: Focuses on design improvement during production • Sustainability: Meeting the needs of the present population without compromising the ability of future generations to meet their needs • Produce Life Cycle Assessment: formal evaluation of the environmental impact of a product

OPERATION MANAGEMENT – MANAGING QUALITY

Two ways quality improves profitability

The flow of activities

Costs of Quality • Many companies spend significant time, effort, and expense on systems, training, and organizational changes to improve the quality and performance of processes. • Defect - Prevention costs Costs associated with preventing defects before they happen - Appraisal costs Costs incurred when the firm assesses the performance level of its processes - Internal Failure costs Costs resulting from defects that are discovered during the production of a service or product - External Failure costs Costs that arise when a defect is discovered after the customer receives the service or product - Ethical Failure costs Societal and monetary cost associated with deceptively passing defective services or products to internal or external customers such that it jeopardizes the well-being of stockholders, customers, employees, partners, and creditors Defining Quality An operations manager’s objective is to build a total quality management system that identifies and satisfies customer needs The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or impli...