Operations Management

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Operations Management

• HTM302

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Operations Management

• HTM302

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Questions from last weeks class
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Quiz chapter 1

• closed book closed notes open mind
• calculators are permissible
• not permitted during test
• computers (laptop hand-held etc.)
• smart friends
• cell phone calls to smart friends
• other wireless devices

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Operations Strategy Chapter 2
Jim Hamerly Ph.D. jhamerly_at_csusm.edu
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Operations

• Strategic View
• Process View

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Operations

• Assume we are in the Fast Food business
• Operations is the design planning operation
  and control of systems for the making serving
  of Fast Food to our customers
• We want to distinguish what we do for long-term
  planning from what we do on a day-to-day basis

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Fast Food

• Strategic View (longer-term)
• Will speed be our primary advantage
• If so is 20 faster than our competition good
  enough
• Will 20 faster compensate for being 10 more
  expensive
• Process View (day-to-day)
• What parts of the order-taking / food prep / food
  delivery can be improved and how
• How can we re-arrange our equipment to get the
  speed we need What new equipment might we need
  to buy
• What kind of training do our employees need

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The Strategic View of Operations

• A companys operations function is either
• a competitive weapon
• or
• a corporate millstone.
• It is seldom neutral. Skinner 69

Examples
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How Op Mgmt fits into a Companys Strategy

• Corporate strategy Which businesses will we
  engage
• Business strategy For each division what
  products will we build or services will we offer
  with what specifications how will we market the
  product or service how we achieve superior
  customer satisfaction
• Functional strategies Marketing Operations
  Finance etc.
• Operations strategy Develop the business
  processes that enable the firm to produce and
  deliver the product or service

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Strategic Process View
Example
Operational Structure Processes Infrastructure
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Representation of Strategy
Current Position and Strategic Directions of
movement in the competitive product space
Examples
High
Responsiveness
Low
High
Low
Price
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The Operations Frontier Retail
Minimal curve containing all current positions in
an industry
High
operations frontier
A
Responsiveness
B
C
Low
High
Low
Price
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The Operations Frontier Restaurants
Minimal curve containing all current positions in
an industry
High
operations frontier
A
B
Quality
C
Low
High
Low
Price
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The Operations Frontier Autos
Minimal curve containing all current positions in
an industry
High
Quality
Low
High
Low
Price
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The Operations Frontier Healthcare
operations frontier
Responsiveness
Cost efficiency
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Strategy Formulation

• Define the primary task of the firm
• Assess core or distinctive competencieshopefully
  sustainable competitive advantages
• Determine order qualifiers and winners
• Position the firm strategically by identifying
  those things you will do extremely well

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HTM 302 Teaching Strategy

• Define the primary task of the class
• Assess core or distinctive competencieshopefully
  sustainable competitive advantages
• Determine order qualifiers and winners
• Position the firm strategically by identifying
  those things you will do well

• Impart enough interest and knowledge about
  OMsuch that you will invest in learning
• Know subject matter have interesting examples
• Qualifier presented in material interesting
  wayWinner think about OM methods in everyday
  things
• Find simple applications that you will understand
  easily raise your interest enough to try and
  understand more complex aspects

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Product Strategy Wal-Mart versus Nordstroms
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Service Strategy Delta versus Southwest
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Sample Strategies Competing on...

• Cost
• Quality
• Flexibility
• Speed

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Competing on Cost

• Eliminate all waste
• Invest in
• Updated facilities equipment
• Streamlining operations
• Training development

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Competing on Cost

• Example

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Competing on Quality

• Please the customer
• Understand customer attitudes toward and
  expectations of quality
• Meet or exceed them
  

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Competing on Quality
Example
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Competing on Flexibility

• Produce wide variety of products
• Modify existing products quickly
• Respond to customer needs

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Competing on Flexibility
Example
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Competing on Speed

• Fast moves
• Fast adaptations
• Tight linkages

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Competing on Speed
Example
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Operations Role in Corporate Strategy

• Provide support for strategy
• Serve as firms distinctive competence

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Which Strategy

• Cost
• Quality
• Flexibility
• Speed

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Example 1 Operations Strategy at Wal-Mart
Provide value for our customers
Mission
Competitive Priority
Low prices everyday
Low inventory levels Short flow times
Operations Strategy
Operations Structure
Fast transportation system
Linked communicationsbetween stores
Enabling Process and Technologies
EDI/satellites
Cross-docking
Focused locations
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Example 1 Operations Strategy at Wal-Mart

• Operations tracks
• every stock-keeping unit (SKU)
• every day
• every store
• Able to respond almost immediately to customer
  demand
• Operations coordinates ordering from all stores
  to more than 10000 suppliers

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Example 1 Operations Strategy at Wal-Mart

• Resulting benefits
• Inventory at retail stores turned over twice a
  week (Industry averages once every two weeks)
• Sales per square foot increased 40 at a time
  when industry average was 8

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Cross Docking

• Traditional warehouse goods received from
  vendors are stored in pallet racks or shelving. 
  When a retail outlet requests an item workers
  pick it from the shelves and send it to the
  destination. 
• Crossdock warehouse goods arriving from the
  vendor already have a customer assigned so
  workers need only move the shipment from the
  inbound trailer to an outbound trailer bound for
  the appropriate destination.   Shipments
  typically spend less than 24 hours at the
  facility sometimes less than an hour.
• The already part should make you think of
  information system requirements--a chief obstacle
  to implementing crossdocking successfully.

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A Crossdock Warehouse
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A cross dock warehouse does all of the following
except

• Reduce inventory storage times
• Increase storage efficiency
• Reduce labor requirements
• Increase warehouse throughput
• Reduce dependency on IT

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Demo!
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Example 2 Strategy and the Internet

• Create a distinctive business strategy (eBay)
• Strengthen existing competitive advantages (Dell)
• Integrate new activities with traditional (Bank
  of America)

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Strategy and the Internet

• Strategies that have worked
• Business-to-business
• Online activities with added value to consumer
• Amazon
• eTrade

• Strategies that havent worked well
• Brick-and-mortar businesses simply grafting an
  online presence to their traditional offerings
• Static websites
• Using brick-and-mortar processes for online
  orders

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Quick review before moving on

• Ebays acquisition of PayPal (electronic payment
  system) can be considered to be done for
• strategic reasons
• process reasons

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Quick review before moving on

• Toyotas heavy investment in hybrid technology
  was done for
• strategic reasons
• process reasons

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Quick review before moving on

• In N Outs order-taking improvement (employee in
  parking lot with wireless device) in the
  drive-thru line was done for
• Cost
• Quality
• Flexibility
• Speed

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Products Processes

• Make-to-order
• Made to customer specifications after order
  received
• Make-to-stock
• Made in anticipation of demand
• Assemble-to-order
• Add options according to customer specification

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Products Processes

• Project
• One-time production of product to customer order
• Batch production
• Process many jobs at same time in batch
• Mass production
• Produce large volumes of standard product for
  mass market
• Continuous production
• Very high volume commodity product

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Product-Process Matrix
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• Product-process film

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Product-Process Matrix Beverages
Coca Colabottling plant
High
bottled water
individually bottled wine
Volume
Batch Production
mixed drink
Low
Low
High
Standardization
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Service-Process Matrix Autos
remanufactured carburetors
High
used car resellers
dealer service
Volume
car detailing
Professional Service
Low
Low
High
Standardization
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The Changing Corporation
20TH CENTURY 21ST CENTURY CHARACTERISTIC CORPORAT
ION CORPORATION
Source of strength Stability Change Reach Domestic
Global Financials Quarterly Real-time Inventories
Months Hours Strategy Top-down Bottom-up Leadersh
ip Dogmatic Inspirational Improvements Incremental
Revolutionary Quality Affordable best No
compromise
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For next week

• Read chapter 2 Operations Strategy
• Homework due Evaluate the offering of this
  course HTM 302 as a delivered product
• Identify the inputs outputs and transformation
  processes in a figure or chart.  
• What are its (HTM 302s) major competitors 
• Who are the customers and what attributes do
  they consider important 
• What other operational aspects of giving this
  course do you consider important

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Informal feedback

• Write a 2 minute journal to be handed in
  immediately
• The journal should briefly summarize
• Major points learned
• Areas not understood or requiring clarification