Operations Management Flashcards

Introduction to Operations Management

What is Operations Management?

• Operations Management is the systematic design, direction, and control of processes that transform inputs into services and products for internal and external customers.

What is Supply Chain Management?

• Supply Chain Management is 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.

The Role of Operations in the Organization

• Integration between different functional areas of a business.
• Finance acquires financial resources and capital for inputs.
• Engineering translates materials and services into outputs.
• Marketing generates sales of outputs.
• Operations transforms materials and services into outputs.
• Sales revenue is generated.
• Support functions:
  • Accounting
  • Information Systems
  • Human Resources

Operations Management

• Science and art of ensuring that goods and services are created and delivered successfully to customers.
• Design of goods, services, and the processes that create them.
• Day-to-day management of those processes.
• Continual improvement of these goods, services, and processes.

Core Issues in Operations Management

• Efficiency
• Cost
• Quality

Key Activities of Operations Manager

• Forecasting
• Supply chain management
• Facility layout and design
• Technology section
• Quality management
• Purchasing
• Resource and capacity management
• Process design
• Job design
• Service encounter design
• Scheduling
• Sustainability

Understanding Goods

• Good: Physical product that a person can see, touch, or consume.
• Durable good: Product that does not quickly wear out and lasts at least three years.
• Non-durable good: Perishable and lasts for less than three years.

Understanding Services

• Service: Primary or complementary activity that does not directly produce a physical product.
• Similarities between goods and services:
  • Provides value and satisfaction to customers who purchase and use them.
  • Can be standardized or customized to individual wants and needs.

Differences between Goods and Services

• Goods are tangible, while services are intangible.
• Customers participate in many service processes, activities, and transactions.
• Demand for services is more difficult to predict than the demand for goods.
• Services cannot be stored as physical inventory.
• Service management skills are paramount to a successful service encounter.
• Service facilities need to be in close proximity to the customer.
• Patents do not protect services.

Service Management

• Integrates marketing, human resources, and operations functions to:
  • Plan
  • Create
  • Deliver goods and services
  • Deal with service encounters
    • Moments of truth: Episodes, transactions, or experiences in which a customer comes into contact with any aspect of the delivery system.

Customer Benefit Packages (CBP)

• Clearly defined set of tangible and intangible features that the customer recognizes, pays for, uses, or experiences.
• Combination of goods and services configured in a certain way to provide value to customers.
• Consists of a primary good or service, coupled with peripheral goods and/or services.

Customer Benefit Packages (CBP) Components

• Primary good or service:
  • Core offering that attracts customers and responds to their basic needs.
• Peripheral goods or services:
  • Core offering that are not essential to the primary good or service, but enhance it.
• Variant:
  • CBP attribute that departs from the standard CBP and is normally location- or firm-specific.

Processes

• Means by which goods and services are produced and delivered.
• Process: Sequence of activities that is intended to create a certain result.

Key Processes in Business

• Core processes: Focused on producing or delivering an organization’s primary goods or services.
• Support processes: Purchasing materials and supplies used in:
  • Manufacturing and installation
  • Managing inventory
  • Health benefits and day care on-site services
  • Technology acquisition and research and development
• General management processes: Accounting and information systems, human resource management, and marketing.

Operations Strategy

• Specifies the means by which operations implements corporate strategy and helps build a customer-driven firm.
• Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions.

Competitive Priorities and Capabilities

• 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.
• Competitive capabilities:
  • The cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver.

Order Winners and Qualifiers

• Order Winners:
  • The criterion customers use to differentiate the services or products of one firm from those of another.
• Order Qualifiers:
  • The minimum level required from a set of criteria for a firm to do business in a particular market segment.

Examples of Competitive Priorities

• Cost
  • Definition: Low-cost operations - Delivering a service or a product at the lowest possible cost.
  • Process Considerations: Processes must be designed and operated to make them efficient.
  • Example: Costco
• Quality
  • Top Quality
    • Definition: Delivering an outstanding service or product.
    • Process Considerations: May require a high level of customer contact and may require superior product features.
    • Example: Rolex
  • Consistent Quality
    • Definition: Producing services or products that meet design specifications on a consistent basis.
    • Process Considerations: Processes designed and monitored to reduce errors and prevent defects.
    • Example: McDonald’s
• Time
  • Delivery Speed
    • Definition: Quickly filling a customer’s order.
    • Process Considerations: Design processes to reduce lead time.
    • Example: Dell
  • On-Time Delivery
    • Definition: Meeting delivery-time promises.
    • Process Considerations: Planning processes to increase percent of customer orders shipped when promised.
    • Example: United Parcel Service (UPS)
  • Development Speed
    • Definition: Quickly introducing a new service or a product.
    • Process Considerations: Cross-functional integration and involvement of critical external suppliers.
    • Example: Zara
• Flexibility
  • Customization
    • Definition: Satisfying the unique needs of each customer by changing service or products designs.
    • Process Considerations: Low volume, close customer contact, and easily reconfigured.
    • Example: Ritz Carlton
  • Variety
    • Definition: Handling a wide assortment of services or products efficiently.
    • Process Considerations: Capable of larger volumes than processes supporting customization.
    • Example: Amazon.com
  • Volume Flexibility
    • Definition: Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand.
    • Process Considerations: Processes must be designed for excess capacity.
    • Example: The United States Postal Service (USPS)

Relationship of Order Qualifiers to Competitive Priorities

• Sales ($) vs Achievement of competitive priority
• Order qualifier threshold

Relationship of Order Winners to Competitive Priorities

• Sales ($) vs Achievement of competitive priority
• Order winner achievement

Sustainability

• Organization’s ability to:
  • Strategically address current business needs
  • Develop a long-term strategy that embraces opportunities and manages risk for:
    • Products, systems, supply chains, and processes to preserve resources for future generations.

Perspectives of Sustainability

• Environmental sustainability: Organization’s commitment to the long-term quality of the environment.
• Social sustainability: Organization’s commitment to maintain healthy communities and a society that improves the quality of life.
• Economic sustainability: Organization’s commitment to:
  • Address current business needs and economic vitality
  • Have agility and strategic management to:
    • Prepare successfully for future business, markets, and operating environments.

Data and Analytics

• Used to evaluate:
  • Operations performance
  • Quality
  • Order accuracy
  • Customer satisfaction
  • Delivery
  • Cost
  • Environment compliance

Data and Analytics in Business

• Business analytics: Process of transforming data into actions through analysis and insights in:
  • Context of organizational decision making and problem solving.