Operation's Management

Operation's Management

1. Definition: "The operations function of the organisation is the arrangement of those resources which are devoted to the production and delivery of its products and services.

2. Marketing: responsible for communicating the organisation's products to customers.

   • Operations: Fulfilling customer requests
     • Process innovation: New technologies and new management techniques.
       • Product innovation: Creating new products.
         • Product development cross between marketing and operation: what do customers want? what can we provide?
           • e.g Beverage. Marketing: Identify Needs Ensure Awareness. Operations: Buy materials brew and pack bee, distribute. Innovation: Develop new products.

3. Operations - Large proportion of costs in organisations. Major source of CA and organisational problems.

   • Historical Digression: Because over the years goal has become to keep operations simple and now techniques taught to managers are now embedded in software.
   • Strategic decisions in design of operations: - use of technology, management of quality, workforce, of relationships between organizations
     • Transformation Process Inputs -> Transformation Process -> Output. Environment around.
       • Types of transformation: Physical properties, location, storage, possession, information , physiological and psychological state.
   • Performance Obj's: Cost, Quality, Flexibility, Sustainability
     • Strategic importance: Must be better on these fronts than competitors.

4. Lean Operation

   • Automation/Robotics. Computer schedule production. Technical specialists to determine best methods (taylorism). MANAGERS FACILITATE RATHER THAN DIRECT
   • Dominant current approach to operations in manufacturing and services.
   • Toyota Kanban System - Card attached item only be worked on if operator has a card authorising production.
     • Heijunka - DemandSmoothing. Number and mix of card produced each day was same. Demand for components and owrkloads and machines consistent.
     • Jidoka - When faults detected process was stopped until fixed. Use of andon: buttons to stop processes.
     • Quality circles - Co-workers met regularly in their own time. Agreed on a problem to be tackled. One at a time.
       • When done in western europe and northern america results dissapointing.
   • Taiichi Ohno's 7 Wastes
     • Overproduction and early production
       • Idle Time
         • Transportation handling more than once, delays, unnecessary moving or handling
           • Inventory - Unnecessary raw materials in store.
             • Motion - Movement of equipment and people adding no value.
               • Over processing - unnecessary procedures.
                 • Producing defective units or reworking scraps.
   • 4 elements of lean productions: Customer based demand triggers, synchronised flow, Involvement behaviour, Waste elimination

5. Paradigms of Planning and Control

   • Developing of plans for how resources/processes will be used in the future to ensure that resources are available.
     • Uncertainity - Identify sources and manage them/remove them.
       • Sources of uncertainity: scrap, variable achieved lead times, variations in demand.
         • Accommodated by: built in safety stocks, use pessimistic lead times estimates and estimates of scrap.
     • Enterprise Resources Planning
       • Planning in industries beyond manufacturing.
         • integration of financial planning and control systems.
           • issues:
             • Dissatisfied users
             • No one understand how system really behaves
             • Users like to mix and match modules from various vendors but vendors like to lock customers in
             • Difficult to compare alternative packages
       • Can implement by:
         • Adapt standard modules to suits operational practices
           • Costly, Complex to maintain, Embedding poor practices?
         • Change practices to fit standard software
           • Vendors claim their modules represent best practice, Implementation may require significant operational changes
       • Effectiveness of ERP will depend upon of accuracy of data
   • Before computers when there was automatic reorder level = High inventories, poor use of resources, poor use of information.
     • Developers of computer systems saw production planning as a problem amenable to computerisation.
       • Need Materials Requirement Planning: Known orders and forecast demand: Master production Schedule.
         • Structure of components going into independent demand items: Bill of Materials
           • Data on current inventory and items on order (WIP)
             • Data about each part
         • Capacity
           • Type 1 MRP doesnt take into account capacity therefore cannot assess if plan is feasible.
             • Type 2 MRP (Materials resources planning) include assessment of capacity.
               • List of all operations needed for each part, Estimated time for each operation, Estimated capacity for each resource.

6. Supply Chain Management and Outsourcing

   • Products or serices will be bought in if producing internally is inefficient and there is competitive market amongst possible suppliers.
     • Orthodox Model of Purchasing
       • Market assumed to keep vendors efficient - Focus on price, Spot buying.
         • Alternative Partnership procurement model
           • Long term partnership, smaller number of vendors, wider ranges of contacts.
             • Underpins interorganisational colloboration in supply chain management
               • Facilitates outsourcing of processes which firms previously preferred to keep in house.
     • How does purchaser avoid being exploited in a partnership?
       • Process of vendor accreditation - Assess v's resources, financial status, Service level agreements, Vendor rating (periodic report card on quality reliability et, Term negotiation.
     • Partnership: Supply chain management, Business process outsourcing.
       • Non integrated supply chain: manufacturer -> wholesaler -> retail.
         • Integrated supply chain: Manufacturer - Third party logistics (distributio) -> Retail stores
           • Growth of outsourcing - Focus on core processes has advantages rather than economies of scale existing. Outsourcing allows oragnisations to concentrate on their core processes.
             • Therefore emergence of specialist outsourcing firms. E.g EMS Electronic Manufacturing Services. -Carrying out electronics assembly. These firms specialise in thier own core processes, but are able to fit in with the need of customers.

7. Process of Innovation

   • New processes, products, business models needed.
     • Closed Innovation: Develop products internally and make and market them yourself.
       • Open Innovation - Chesbrough's Open Innovation Model
       • Nintendo DS
   • Agile Development +Living Tabs =Lean Start Up
     • Ries claims that startups can shorten their product development cycles by adopting a combination of business-hypothesis-driven experimentation, iterative product releases, and what he calls "validated learning".
       • Ries' overall claim is that if startups invest their time into iteratively building products or services to meet the needs of early customers, they can reduce the market risks and sidestep the need for large amounts of initial project funding and expensive product launches and failures.[

8. Risk

   • Quality managament is increasingly a subset of risk management not maximising performance.
   • Management system model
     • Rational to avoid system failure: Develop procedures, review and keep records.
   • EFQM Business Excellence Model - Tells us that customer satisfaction employee satisfaction are achieved through leadership which drives the policy and strategy leading to excellence in business results. 9 elements.
   • K weick: high reliability, managing the unexpected
     • draws on studies of failures, tracks failures, resists oversimplification, remain sensitive to operations, maintain capabilites for resilience.
   • norrmativity v reflexivity
     • normative: avoid failures by specifying procedures
       • reflexive: avoid failures by forcing people to reflect on possible failure as seen in high reliability orgs.
   • Operational risk management: identify possible failures, measure probability of occurence, develop systems to reduce probability. Develop procedures to mitigate failures and limit damage.
     • Leads to proceduralisation and use of auditable risk management systems.
       • Michael Power- Leads to secondary risk management

9. Operations Strategy

   • "Operations strategy is the total pattern of decisions and actions which set the role, objectives and activities of the operation so that they contribute to and support the organization's business strategy"- Slack
     • 4 stages: 1, internally neutral - avoid operations causing problem. 2. externally neutral - operations follow competitiors, 3. internally supportive - operations support the company's strength, 4. externally supportive - operations integrated into business strategy.
       • Value chain
       • How do customers see us? Customer perspective What must we excel at? Internal perspective Can we continue to improve and create value? Innovation and learning perspective How do we look to shareholders? Financial perspective
         • TRENDS IN OPERATIONS STRATEGY
           • Focus: Limit variety of process, product volume, technology, demand type (outsource non core operations).
             • Internal markets: Create departments as semi-autonomous operations selling their services internally.
   • Should be inline with business strategy.
     • Degree of integration of the two will depend on environment and competition.

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