Summary - Operations Management, Midterm Exam Review and Notes PDF

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Operations Management Midterm Exam Review and Notes...

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Operations Management Midterm Study Guide Chap. 1 -Operations management: the systematic design, direction and control of processes that transform inputs into services and products for internal, as well as external customers -Study it so that companies can learn the best, cheapest, most efficient ways to make customers happy -To provide products and/or services with The Right 6: with right level of quality, to right customer, at right time, at right place, in right quantity, for right cost or price A Process View -Process: any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers -Operation: a group of resources performing all or part of one or more processes Shows the role of operations in an organization -coordination among different business functions is necessary and key to developing a common strategy

-Supply Chain: an interrelated series of processes within and across firms that produce a service or product to the satisfaction of customers -Supply Chain Management: the synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services, and information with customer demand -all processes have inputs and outputs and then provide outputs to customers -ex. Of a firm, dept., small group or even and individual -circles=operations through which services, products or customers pass and where processes are performed -arrows=flows -dotted line= participation by customers and information on performance from both internal and external sources -Nested Processes: a process within a process -Customer-Supplier Relationships in terms of: -External Customers: customer who is either an end user or intermediary (financial institutions, manufacturers, retailers) buying the firm’s finished services or products

-Internal Customers: one or more employees or processes that rely on inputs from other employees or processes in order to perform their work -External Suppliers: the businesses or individuals who provide the resources, services, products and materials for the firm’s short term and long term needs -Internal Suppliers: employees or processes that supply important information or materials to a firm’s processes -Two Major Processes -Services and Manufacturing -Differ: -the nature of their output- manufacturing gives physical products and can be produced, stored, and transported, services are intangible and perishable -the degree of customer contact- services much higher and customers have an active role -manufacturing: capital intensive, quality easily measured, long response time -services: labor intensive, quality not easily measured, have short response time -Similar: -service providers don’t just offer services and manufacturing providers don’t just offer products ex. Restaurant- good food and good service wanted -do keep inventory The Supply Chain View

-Core Processes: a set of activities that delivers value to external customers -Supplier-Relationship Process: selects the suppliers of services, materials, and information and facilitates the timely and efficient flow of these items into the firm ex. Negotiating fair prices -New Service/Product Development Process: designs and develops new services or products from inputs received from external customer specifications or from the market in general through the customer relationship process -Order Fulfillment Process: a process that includes the activities required to produce and deliver the service or product to the external customer -Customer Relationship Process: identifies, attracts and builds relationships with external customers, and facilitates the placement of orders by customers, marketing could be a part of this process -Support Process: a process that provides vital resources and inputs to the core processes and therefore is essential to the management of the business, allow core processes to function ex. Budgeting, recruiting, scheduling -Operations Strategy: the means by which operations implements the firm’s corporate strategy and helps to build a customer-driven firm, links long and short term operations decisions to corporate strategy and develops the capabilities the firm needs to be competitive -translates service or product plans and competitive priorities for each market segment into decisions affecting the supply chains that support those market segments, -the pattern of decisions that have been made for a company’s processes and supply chains

-any gap between a competitive priority and the capability to achieve that priority must be closed by and effective operations strategy -Corporate Strategy: coordinates the firm’s overall goals with its core processes, specifies businesses it will pursue, isolates threats, and identifies growth objects -4 considerations: -Environmental Scanning: process by which managers monitor trends in the environment for potential opportunities or threats in order to stay ahead of competition ex. Economic trends, new entrants into the market, social changes, political conditions -Developing Core Competencies: unique resources and strengths that and organization’s management considers when formulating strategy, reflects the collective learning of the organization-how to coordinate processes and integrate technologies -Workforce -Facilities -Market and Financial Know-How -Systems and Technology -Developing Core Processes: should drive its core processes-customer relationship, new service/product development, order fulfillment, and supplier relationship- some companies have all 4 while others focus on only a few; want to provide the greatest competitive strength -Global Strategies: ex. Buying foreign services or parts, combating threats from foreign competitors, planning ways to enter markets beyond traditional national boundaries, -strategic alliance: an agreement with another firm that may take one of 3 forms: -collaborative effort: arises when one firms has core competencies that another needs but is unable to duplicate -joint venture: 2 firms agree to produce a service or product jointly-often to gain access to foreign markets -technology licensing: one company licenses its service or production methods to another -locate abroad in another country- must recognize customs, preferences, and economy in other countries -Market Analysis: divides the firm’s customers into market segments and then identifies the needs of each segment -Market Segmentation: process of identifying groups of customers with enough in common to warrant the design and provision of services or products that the group wants and needs, must determine characteristics that clearly differentiate each segment and then can develop a sound marketing program -Needs Assessment: identifies the needs of each segment and assesses how well competitors are addressing needs, then incorporates needs into design of product or service -service or product needs: price, quality, degree of customization -delivery system needs: delivery availability, convenience, courtesy, safety, accuracy, speed, reliability, dependability -volume needs: high or low volume, variability, degree of predictability -other needs: ex. Reputation and number of years in business, legal services, ability to invest in international financial markets Competitive Priorities and Capabilities -Competitive Capabilities: the cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver -Competitive Priorities: the critical dimensions that a process or supply chain must possess to satisfy its internal or external customers, both now and in the future, to be successful, changes and evolves over time along with changing business conditions and customer preferences

-Time-Based Competition: a strategy that focuses on the competitive priorities of delivery speed and development speed Capability Priority Definition Example Cost

Low-Cost Operations

Quality

Top Quality Consistent Quality

Time

Flexibility

Delivering a service or a product at the lowest possible cost to the satisfaction of the external or internal customers of the process or supply chain Delivering an outstanding product or service Producing services or products that meet design specifications on a consistent basis

Delivery Speed

Quickly filling a customer’s order

On-Time Delivery

Meeting delivery time promises

Development Speed Customization

Quickly introducing a new service or product Satisfying the unique needs of each customer by changing service or product designs Handling a wide assortment of services and products efficiently

Variety

Volume Flexibility

Accelerating or decelerating the rate of production of services or products quickly to handle large fluctuations in demand

Costco designs all processes for efficiency so it is low cost Rolex delivering precision time pieces McDonald’s standardizes work methods and training processes to achieve consistent products and quality at all sites Dell delivers reliable and inexpensive computers in short times UPS-uses logistics and expertise in warehousing to deliver large volume shipments on time Zara brings fashionable clothing designs from the runway to market quickly Ritz Carlton customizes to individual guest preferences Amazon.com uses information technology and customer relationships and order fulfillment processes to reliably deliver a variety of items USPS has severe demand peak fluctuations at large facilities where processes are flexibly designed for sending mail to numerous locations

-Order Winner: a criterion consumers use to differentiate the services or products of one firm from those of another ex. Price, quality, time, flexibility, reputation, after sale support -derived from the considerations customers use when deciding which firm to purchase from in a given market segment -Order Qualifier: minimal level required from a set of criteria for a firm to do business in a particular market segment, doesn’t ensure competitive success, only positions firm to compete in the market Trends in Operations -Productivity: basic measure of performance, the value of outputs (services and products) produced divided by the values of input resources (wages, costs of equipment) -2 approaches Productivity= Outputs -Labor Productivity: an index of the output per hour worked Inputs ex. #sq. yards installed/hour, machine productivity denominator=# of machines -Multifactor Productivity: index of the output provided by more than 1 of the resources used in production-want it high ex. Value of output/labor+materials+overhead cost -Global Competition -Firms can increase their market penetration by locating in foreign countries because it gives them a local presence that reduces customer aversion to buying imports -allows firms to balance cash flows from other regions of the world when economic conditions are less robust in home country

-5 developments have stimulated the need for sound global strategies -improved transportation and communications technologies -loosened regulations on financial institutions -increased demand for imported services and goods -reduced import quotas and other international trade barriers due to formulation of regional trade blocks ex. NAFTA -comparative cost advantages ex. In China (known for manufacturing) and India (known for service, software companies, technology companies) cheaper cost of labor -Disadvantages of globalization -political risks -nationalization-government may take over a firm’s assets without paying compensation -may have to relinquish proprietary technology -employee skills may be lower -Ethical, Workforce Diversity and Environmental Issues -ethical dilemmas have been intensified by increased global presence and rapid technology change -some countries are more sensitive to conflicts of interests, bribery, discrimination against minorities and women, unsafe workplaces -need to be environmentally conscious, taking sustainability initiatives Operations Management as a Set of Decisions -Strategic decisions: development of new and maintenance of existing capabilities, supply chain, cost and quality, support firms goals and objectives -Tactical decisions: support strategic, process improvement and performance measurement, managing and planning projects, generating productions and staffing plans, managing inventory and scheduling resources Service Package -Supporting Facilities: physical resources wherein services are produced and consumed by customers -Facilitating Goods: physical products that are provided during the consumption of services by customer -Information -Explicit Services: observable, tangible benefits customers expect to receive as part of service -Implicit Services: psychological benefits customers sense as part of service Noodles and Company Example Supplement A -Breakeven quantity: volume at which total revenues equal total cost -Breakeven analysis: the use of the breakeven quantity; it can be used to compare processes by finding the volume at which 2 different processes have equal total costs F=fixed cost Q= F P= revenue per unit sold P–C C= variable costs -Sensitivity Analysis: a technique for systematically changing parameter in a model to determine the effects of such changes Chap. 3

Process Strategy: the pattern of decisions made in managing processes so that the processes will achieve their competitive priorities -processes need to add customer value -3 important principles: -Key to successful process decisions is to make choices that fit the situation and that make sense together; they should not work at cross-purposes, with one process optimized at the expense of other processes, a more effective process is one that matches key process characteristics and has a close strategic fit -Individual processes are building blocks that create the firm’s whole supply chain -Whether processes in the supply chain are performed internally or by outside suppliers and customers, management must pay particular attention to the interfaces between processes; dealing with these interfaces underscores the need for cross functional coordination -Supply chain processes: business processes that have external customers or suppliers -4 common process strategies -Process Structure: determines the process type relative to the kinds of resources needed, how resources are partitioned between them, and their key characteristics -Layout: physical arrangement of operations created from the various processes- puts these decisions into tangible form -Customer Involvement: reflects the ways in which customers become a part of the process and the extent of their participation -Resource Flexibility: the ease with which employees and equipment can handle a wide variety of products, output levels, duties and functions -Capital Intensity: the mix of equipment and human skills in a process, the greater the relative cost of equipment, the greater the capital intensity Process Structure in Services -Nature of Service Processes (dimensions of Customer Contact: extent to which the customer is present, is actively involved, and receives personal attention during the service process) High Contact Low Contact -Physical Presence Present Absent -What is Processed People Possessions or Information -Contact Intensity Active, Visible Passive, out of site -Personal Attention Personal Impersonal -Method of Delivery Face-to-Face Regular mail or email (moment of truth) -Elements of Customer-Contact Matrix -Customer Contact and Customization -Horizontal dimension- represents the service provided to customers in terms of customer contact and competitive priorities (a key one is how much customization is needed) -Left side: high customer contact and highly customized services, customer is present and active and receives personal attention, process more visible to customer -Right side: low customer contact, passive involvement, less personalized attention, process out of customer’s sight -Process divergence and flow -Vertical dimension

-Process divergence: extent to which the process is highly customized with considerable latitude as to how its tasks are performed, if the process changes with each customer, every performance of the service is unique ex. High- law, architecture, low- standardized telephone services -Flow: how the customer, object, or information being processed flows through the service facility -Flexible flow: the customers, materials or information move in diverse ways, with the path of one customer or job often crisscrossing the path that the next one takes- goes with high process divergence -Line flow: the customer, materials, or information move linearly from one operation to the next, according to a fixed sequence

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-3 process structures a. Front Office: process with high customer contact where the service provider interacts directly with the internal or external customer, high divergence and flexible flow b. Hybrid Office: process with moderate levels of customer contact and standard services with some options available c. Back Office: a process with low customer contact and little service customization, standardized and routine work, line flows, low divergence Process Structure in Manufacturing -Manufacturing processes convert materials to goods that have a physical form -Elements of Product-Process Matrix -Volume: depends on first and foremost  horizontal (both) -Product Customization- higher customization means lower volumes

-Process Characteristics

-Vertical: still process divergence and flow

-4 Process Structures (form a continuum) a. Job Process: process with the flexibility needed to produce a wide variety of products in significant quantities, with considerable divergence in the steps performed, customization high, volume for any one product is low b. Batch Process: most common, a process that differs from the job process with respect to volume, variety, and quantity, volumes a little higher c. Line Process: process that lies between batch process and continuous processes on the continuum; volumes are high and products are standardized, which allows resources to be organized around particular products, divergence and variability low d. Continuous Flow Process: the extreme end of high-volume standardized production and rigid line flows, with production not starting and stopping for long intervals -Production and Inventory Strategies -Make-to-order: strategy that makes products to customer specifications in low volumes, high divergence, job or small batch process -Assemble-to-order: strategy for producing a wide variety of products from relatively few subassemblies and components after the customer orders are received -Postponement: final activities in the provision are delayed until the orders are received -Mass Customization: uses highly divergent processes to generate a wide variety of customized products at reasonably low costs -Make-to-stock: strategy that involves holding items in stock for immediate delivery, thereby minimizing customer delivery times, has high volumes -Mass Production: line process that uses the make-to-stock strategy Layout -3 steps: 1. Gather information 2. Develop a block plan- allocates space and indicates placement of each operation 3. Design a detailed layout -Gather Information on: -space requirements -available space

-closeness factors- closeness matrix: gives a measure of the relative importance of each pair of operations being located close together Customer Involvement -Possible disadvantages -can be disruptive and less efficient -quality measurement can be difficult -requires interpersonal skills -may need to revise layout -multiple locations may be necessary -managing timing and volume of customer demands is more challenging -Possible Advantages -increased net value to the customer -can mean better quality, faster delivery, greater flexibility, and lower cost -may reduce product, shipping and inventory costs -may help coordinate across the supply chain -processes may be revised to accommodate th...