Frédéric Kröger Operations Management - Summary
Operations Management – Summary
❖ Introduction to Operations Management (Chap 1)
o OPERATIONS MANAGEMENT
▪ Operations Management ➔ Business function responsible for planning,
coordinating, and controlling resources needed to produce a company’s GaS
o Characteristics
▪ Management function
▪ Organization’s core function
▪ In every organization (small/large, service/manufacturing, for-profit/not-for-profit)
o Typical Organization Chart
▪ All businesses are managed through 3 major functions
• Finance
• Marketing
• Operations management (management function)
▪ Other business functions support these 3 major functions
(Accounting, Purchasing, Human Resources, Engineering)
o Role of OM
▪ OM transforms inputs to outputs (Transformation Process)
• Inputs → HR, facilities and processes, materials, technology, information
• Outputs → Finished goods and services (FG)
▪ Transformation Process
• Value added process
▪ Net increase of value btw output product and input material
▪ The greater the value added → The more productive the business is
• Efficient transformation
▪ Efficiency ➔ Performing activities well and at lowest possible cost
o MANUFACTURING vs SERVICE ORANIZATIONS
o Manufacturers vs Services
o Remarks
▪ Manufacturing can provide services
▪ Services can provide tangible goods
▪ Companies can be blend of service/manufacturing/quasi-manufacturing
• Quasi-manufacturing
▪ Low customer contact
▪ Capital intensive
▪ 80% of jobs are in Service producing
▪ 20% of jobs are in Goods producing
1
,Frédéric Kröger Operations Management - Summary
o DECISIONS BY OPERATIONS MANAGERS
o All organizations follow a similar path when making decisions
▪ Strategic decisions → Tactical decisions (They must align)
o Strategic and Tactical Decisions Relationship
Strategic decisions give
a direction
Tactical decisions
provide feedback
o MAJOR HISTORICAL DEVELOPMENTS
▪ Product used to be unique and was created by a single craftsman
o Historical Milestones
▪ Industrial Revolution – Late 1700s
• Steam engine, Division of labor, Interchangeable parts
▪ Scientific management (Taylorism) – Early 1900s
• Moving assembly line → Mass production (Henry Ford)
▪ Human Relations management – 1930s
• Hawthorne effect ➔ Productivity increases if workers are given attention
• Factors other than money contribute to productivity
▪ Job enlargement ➔ Doing a larger portion of total task
▪ Job enrichment ➔ Having a greater role in the planning
▪ Management Science
• Quantitative decision-making tools (Ex. Inventory models, forecasting models,
scheduling, statistical quality control)
• Developed to support military logistics during World War 2
o Trends since 1980s
▪ Just-in-time philosophy (JIT)
• Achieve high-volume production with minimal inventory through
elimination of waste and continuous process improvement
▪ Total Quality management (TQM)
• Improve quality by eliminating causes of product defects and making
quality a responsibility of everyone
▪ Economic Globalization
• Increasing international movement of GaS, capital, technology, and info
o Trends since 1990s
▪ Business process Reengineering (BPR)
• Redesigning the processes to increase efficiency, quality, and reduce costs
▪ Responding to changing demand and customer expectations
• Competition based on flexibility (Ex. Mass customization) and time
▪ Supply Chain management (SCM)
• Managing flow of materials and info from suppliers and buyers of raw
materials (RM) to final customer
o Trends since 2000s
▪ Sustainability
• Reduce waste, recycle and reuse products and parts
▪ E-commerce
• Use of Internet for conducting business activities
▪ Outsourcing
• Focus on core activities, obtain other GaS from external provider
2
, Frédéric Kröger Operations Management - Summary
❖ Strategy and Productivity (Chap 2)
o ROLE OF OPERATIONS STRATEGY
o Business Strategy ➔ Long-range plan, based on understanding of the marketplace,
which defines how a company intends to differentiate itself from competitors
▪ Derive your business strategy from
• Environmental Scanning ➔ Trends, threats, and opportunities
• Mission Statement ➔ What, Who, and How
• Core Competencies ➔ Strengths able to win the market
o Translation to Business Functions
o Operations Strategy vs Operations Efficiency
▪ Operations Strategy ➔ Ensures tasks performed are right ones to compete
▪ Operations Efficiency ➔ Means that all tasks are performed well
o DEVELOPMENT OF BUSINESS STRATEGY
▪ Operations strategy focuses on specific capabilities to create advantage
o Competitive Priorities
▪ Costs
• High-volume products, Limited product range, Efficient processes, High
productivity, Automation, …
Four key operations priorities
• Low cost does not imply low quality
▪ Quality
• Definition of quality is subjective
• Two major quality dimensions
▪ High-performance design ➔ Product Quality
Ex. Superior features, High durability, Customer service
▪ Product and service consistency ➔ Process Quality
Ex. Error-free products, close tolerance, design specifications
▪ Time
• Rapid delivery
• On-time delivery (Deliver exactly when expected)
▪ Flexibility
• Product flexibility
▪ Easily switch production from one item to another
▪ Easily customize products or services to meet specific requirements
• Volume flexibility
▪ Ability to ramp production up and down to match market demands
▪ Innovation and Sustainability
o Tradeoff btw these priorities should be made (Focus on order qualifiers & order winners)
R/ Today’s order winners
▪ Order qualifiers ➔ Competitive priorities a company has to meet in order to
may become order qualifiers survive in a particular market (features shared by all competitors in market)
in the future ▪ Order winners ➔ Competitive priorities that create a competitive advantage
o Translating Competitive Priorities into Production Requirements
▪ Structure Decisions ➔ Related to the production process
Ex. Facilities used, Selection of appropriate technology, Flow of GaS
▪ Infrastructure Decisions ➔ Related to planning and control systems
Ex. Organization of operations function, Skill/pay of workers, Quality control methods
3
, Frédéric Kröger Operations Management - Summary
o STRATEGIC ROLE OF TECHNOLOGY
▪ Technology = Strategic decision
• Support competitive priorities
• Requires changes to strategic plans and operations strategy
• Requires large investments + Risk of overestimating the benefits
o Three types of technology applications
▪ Product technology ➔ New technology
▪ Process technology ➔ Improve process
▪ Information technology ➔ Enables communication, processing, info storage
o PRODUCTIVITY AND MEASURES OF PRODUCTIVITY
o Productivity ➔ Measure of how efficiently inputs are converted to outputs
Productivity = Outputs / Inputs
▪ Total productivity ➔ Ratio of outputs to all inputs
▪ Partial productivity ➔ Ratio of outputs to a single input
▪ Multifactor productivity ➔ Ratio of outputs to multiple (not all) inputs
4
Operations Management – Summary
❖ Introduction to Operations Management (Chap 1)
o OPERATIONS MANAGEMENT
▪ Operations Management ➔ Business function responsible for planning,
coordinating, and controlling resources needed to produce a company’s GaS
o Characteristics
▪ Management function
▪ Organization’s core function
▪ In every organization (small/large, service/manufacturing, for-profit/not-for-profit)
o Typical Organization Chart
▪ All businesses are managed through 3 major functions
• Finance
• Marketing
• Operations management (management function)
▪ Other business functions support these 3 major functions
(Accounting, Purchasing, Human Resources, Engineering)
o Role of OM
▪ OM transforms inputs to outputs (Transformation Process)
• Inputs → HR, facilities and processes, materials, technology, information
• Outputs → Finished goods and services (FG)
▪ Transformation Process
• Value added process
▪ Net increase of value btw output product and input material
▪ The greater the value added → The more productive the business is
• Efficient transformation
▪ Efficiency ➔ Performing activities well and at lowest possible cost
o MANUFACTURING vs SERVICE ORANIZATIONS
o Manufacturers vs Services
o Remarks
▪ Manufacturing can provide services
▪ Services can provide tangible goods
▪ Companies can be blend of service/manufacturing/quasi-manufacturing
• Quasi-manufacturing
▪ Low customer contact
▪ Capital intensive
▪ 80% of jobs are in Service producing
▪ 20% of jobs are in Goods producing
1
,Frédéric Kröger Operations Management - Summary
o DECISIONS BY OPERATIONS MANAGERS
o All organizations follow a similar path when making decisions
▪ Strategic decisions → Tactical decisions (They must align)
o Strategic and Tactical Decisions Relationship
Strategic decisions give
a direction
Tactical decisions
provide feedback
o MAJOR HISTORICAL DEVELOPMENTS
▪ Product used to be unique and was created by a single craftsman
o Historical Milestones
▪ Industrial Revolution – Late 1700s
• Steam engine, Division of labor, Interchangeable parts
▪ Scientific management (Taylorism) – Early 1900s
• Moving assembly line → Mass production (Henry Ford)
▪ Human Relations management – 1930s
• Hawthorne effect ➔ Productivity increases if workers are given attention
• Factors other than money contribute to productivity
▪ Job enlargement ➔ Doing a larger portion of total task
▪ Job enrichment ➔ Having a greater role in the planning
▪ Management Science
• Quantitative decision-making tools (Ex. Inventory models, forecasting models,
scheduling, statistical quality control)
• Developed to support military logistics during World War 2
o Trends since 1980s
▪ Just-in-time philosophy (JIT)
• Achieve high-volume production with minimal inventory through
elimination of waste and continuous process improvement
▪ Total Quality management (TQM)
• Improve quality by eliminating causes of product defects and making
quality a responsibility of everyone
▪ Economic Globalization
• Increasing international movement of GaS, capital, technology, and info
o Trends since 1990s
▪ Business process Reengineering (BPR)
• Redesigning the processes to increase efficiency, quality, and reduce costs
▪ Responding to changing demand and customer expectations
• Competition based on flexibility (Ex. Mass customization) and time
▪ Supply Chain management (SCM)
• Managing flow of materials and info from suppliers and buyers of raw
materials (RM) to final customer
o Trends since 2000s
▪ Sustainability
• Reduce waste, recycle and reuse products and parts
▪ E-commerce
• Use of Internet for conducting business activities
▪ Outsourcing
• Focus on core activities, obtain other GaS from external provider
2
, Frédéric Kröger Operations Management - Summary
❖ Strategy and Productivity (Chap 2)
o ROLE OF OPERATIONS STRATEGY
o Business Strategy ➔ Long-range plan, based on understanding of the marketplace,
which defines how a company intends to differentiate itself from competitors
▪ Derive your business strategy from
• Environmental Scanning ➔ Trends, threats, and opportunities
• Mission Statement ➔ What, Who, and How
• Core Competencies ➔ Strengths able to win the market
o Translation to Business Functions
o Operations Strategy vs Operations Efficiency
▪ Operations Strategy ➔ Ensures tasks performed are right ones to compete
▪ Operations Efficiency ➔ Means that all tasks are performed well
o DEVELOPMENT OF BUSINESS STRATEGY
▪ Operations strategy focuses on specific capabilities to create advantage
o Competitive Priorities
▪ Costs
• High-volume products, Limited product range, Efficient processes, High
productivity, Automation, …
Four key operations priorities
• Low cost does not imply low quality
▪ Quality
• Definition of quality is subjective
• Two major quality dimensions
▪ High-performance design ➔ Product Quality
Ex. Superior features, High durability, Customer service
▪ Product and service consistency ➔ Process Quality
Ex. Error-free products, close tolerance, design specifications
▪ Time
• Rapid delivery
• On-time delivery (Deliver exactly when expected)
▪ Flexibility
• Product flexibility
▪ Easily switch production from one item to another
▪ Easily customize products or services to meet specific requirements
• Volume flexibility
▪ Ability to ramp production up and down to match market demands
▪ Innovation and Sustainability
o Tradeoff btw these priorities should be made (Focus on order qualifiers & order winners)
R/ Today’s order winners
▪ Order qualifiers ➔ Competitive priorities a company has to meet in order to
may become order qualifiers survive in a particular market (features shared by all competitors in market)
in the future ▪ Order winners ➔ Competitive priorities that create a competitive advantage
o Translating Competitive Priorities into Production Requirements
▪ Structure Decisions ➔ Related to the production process
Ex. Facilities used, Selection of appropriate technology, Flow of GaS
▪ Infrastructure Decisions ➔ Related to planning and control systems
Ex. Organization of operations function, Skill/pay of workers, Quality control methods
3
, Frédéric Kröger Operations Management - Summary
o STRATEGIC ROLE OF TECHNOLOGY
▪ Technology = Strategic decision
• Support competitive priorities
• Requires changes to strategic plans and operations strategy
• Requires large investments + Risk of overestimating the benefits
o Three types of technology applications
▪ Product technology ➔ New technology
▪ Process technology ➔ Improve process
▪ Information technology ➔ Enables communication, processing, info storage
o PRODUCTIVITY AND MEASURES OF PRODUCTIVITY
o Productivity ➔ Measure of how efficiently inputs are converted to outputs
Productivity = Outputs / Inputs
▪ Total productivity ➔ Ratio of outputs to all inputs
▪ Partial productivity ➔ Ratio of outputs to a single input
▪ Multifactor productivity ➔ Ratio of outputs to multiple (not all) inputs
4
