Operations Management Part 1

Operations Management Part 1

1. Design, operation and improvement of the systems that create and deliver the organization's goods and services

   • Purpose: Efficiency and effectiveness of individual processes.
     • Importance: Managing people, assets, expenditure -> changing rapidly
       • P. Objectives
         • Cost
         • Speed
         • Reliability
         • Flexibility
         • Quality
         • Trade-offs!
           • Order qualifiers + winners

2. OM + other functions

   • Engineering (process tech, analysis)
   • HR (recr, dev, train)
   • Finance (prov. of data, fin. report)
   • Marketing ( + & -, market req.)
   • IT (systems)

3. Processes

   • Input -> Transformation process -> Output
   • Transforming inputs into outputs using entities to achieve transformation
     • Activities + flows of resources
       • Activity, collaboration -> GOAL
   • Why take a process view?
     • From task persp. -> goal orientation
     • What to do to satisfy customer
     • Highlight links and gaps between sections & depm.
   • Manufacturing process types
     • Project
       • low vol. + high customization
     • Workcentre
       • variety + low volume
     • Manufacturing cell
       • wide range of vol. & variety combos
     • Assembly line
       • high vol. of stand. products
     • Continuous process
       • very high vol. of stand. product but continuous!
   • Service process types
     • Professional
       • high var., low vol.
     • Service shop
       • medium both
     • Mass service
       • low var., high vol.
     • Service processes (input -> service transformation process -> output)
       • Input (staff, equipm.)
       • Trans. process (activity, process)
       • Output (service, satisf/dissatisf.)
       • Service characteristics
         • Intangible
         • Can't be stored
         • Variable
         • Consumed in process of production
       • Service-goods continuum (e.g. restaurants)
       • Service classification (based on extent of custom. involvement)
         • Difficulty of control -> degree of contact
         • Equipment/people focus
           • Equipm. vs. contact staff, e.g. vending machines vs. mgmt consultants
         • Customer contact time per transaction
           • Transaction = hours, days..., e.g. lawyer service vs. contact service
         • Degree of customization
           • Suit custom. needs or standardised
         • Degree of discretion
           • Altering service with or without authorisation from superiors
         • Value added front office / back office
           • Small or large prop. of front-office staff
             • Front-office focused
               • Customer experience is significant!
                 • Most value added in front office (e.g. consultant working with client)
                   • Relatively small back office
             • Back-office focused
               • Minimal customer experience
                 • Value added in back-office (e.g. prep of food in restaurant)
         • Product / process focus
           • What custom. buys vs. how the service is deliv. (e.g. haircut vs. gym)
     • Service package
       • How to design a service
         • Service package: Bundle of goods & services prov. in some environ.
           • Five elements
             • Supporting facility (physical resources to prov. service)
             • Facilitating goods (mat. purchased or consumed by buyer or items prov. by customer)
             • Explicit services (benefits readily observed by senses)
             • Implicit services (psych benefits sensed by customers)
             • Information (to enable elements of service to be delivered)
           • Alternative view of service package
             • Physical items (facilitating goods - changing hands)
             • Sensual benefits (explicit intangibles)
             • Psychological benefits (implicit intangibles)
   • Manufacturing situation
     • Customer order decoupling point
       • Lead time (time to reach custom.)
         • Make-to-stock
           • Product from inventory
         • Assemble-to-order
           • Preassembled modules but together at custom. order
         • Make-to-order
           • Made from raw mat. at custom. order
         • Engineer-to-order
           • Work w/ custom. design + purchased mat
   • Process map
     • Flow of work -> events to produce end result
       • Identify bottlenecks, repetition & delays -> effectiveness & responsibilities
         • Effective visual com, problem-solving, easy to follow (steps + symbols), detailed, show process from beg. to end

4. Strategy (widespread, env, long-term goals)

   • OP strategy approaches
     • Strategy hierarchy (top-down)
       • 1. Corporate (what businesses to be in)
         • 2. Business (tactics for com. adv.)
           • 3. Functional (methods to impl. tactics)
             • Op strategy -> support goals of business strat / business strat. -> + & - of operarions
     • Bottom-up
       • 1. Day-to-day act. + learning
         • 2. Emerging sense of strategy
           • 3. Cons. into formal strategy
     • Op. resources + market req. (reconciliation)
       • Op. resources (market-driven)
         • What you have (capabilities) + what you do (maintain them)
       • Market req. (market-led)
         • What you need (compete) -> what you want (from op.)
     • Three levels
       • Fit (alignment of resources w/ goals)
         • Sustainability (comp. advantage)
           • Risk (uncertainty)
   • Competitve factors and p. objectives
     • low cost -> cost
     • fast del. -> speed
     • high quality -> quality
     • Innovation -> flexibility
     • reliable deliv -> reliability
   • Involves dec. about capabilities, processes, tactical activities -> create & deliver products (customer needs)
   • Measures of performance (comp. with self or benchmarking)
     • Productivity
       • Measure of how effectively inputs are transformed into outputs (tot inputs / tot outputs)
         • e.g. units of output per labour hour

5. Operations Process Analysis

   • Steps of analysing a process
     • How many customers / hour?
       • Productivity
     • How long will service take per customer?
       • Cycle time: Average time of process
         • Process terminology in multistage processes
           • Buffering (storage between stages -> stages op. independently)
             • Blocking (activities stop; nowhere to store item)
               • Starving (activities stop; no work / waiting)
                 • Bottleneck (process stage with smallest throughput rate /longest cycle time)
                   • Operation time (setup time + run time)
                     • Setup time: Time to prep machine for part. item
                     • Run time: Time to produce batch of parts
                   • Throughput time: Average time for unit to move through system
                     • Little's Law (analysing process performance)
                       • Throughput time = WIP x cycle time
                         • WIP (work-in-progress): No. of items within process at any point in time
                     • Throughput efficiency: Work content of process as a percentage of its throughput time
         • Utilization: Prop of time that resources perform useful work
     • How much does the process cost?
     • What change is needed in the process to expand capacity?