Chapter 1 Competing with Operations Foundations of Operations

Chapter 1 Competing with Operations Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc.

What Is a Process? • Process – Activities that transform inputs, add value and generate output(s) • Example: Furniture Manufacturing – Primary Process • Cutting or staining wood – Non-Manufacturing Process • Controlling Inventory Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 2

Processes & Operations Internal and external customers Inputs • • Workers Managers Equipment Facilities Materials Services Land Energy Figure 1. 1 Processes and operations 1 Outputs 3 5 2 • Services • Goods 4 Information on performance Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Nested Processes at a Large Bank BANK Operations Retail Products Wholesale Cash Management Loan operations Trading operations Others Distribution Compliance Finance Human resources Auto Finance Cards Mortgages Others Trading Loan administration Leasing Others ATM support Customer transactions Service quality Others Teller line transactions Track branch sales ATM hotline Others Credit applications Manage retail products Originate lease portfolio Others Fund management Market making spot Dealer support Others Maintain cards Research problems Site analysis Others Process deposits Cash checks Safe deposit boxes Others Loan documentation Review credit standing Obtain manager approval Others Prepare reports Attend meetings Input funds deals Others Figure 1. 2 Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

What Is Operations Management? • Efficiently using processes to transform inputs into valuable outputs • Successful operations management results from careful allocation of: – Human Resources – Capital – Information – Materials Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 5

Operations Management as a Function Figure 1. 3 Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Operations Management As a Function Skill Areas • • Quantitative methods Organizational behavior General management Information systems Economics International business Business ethics and law Figure 1. 3 Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Trends & New Challenges in Operations Management • Growth of the Service Sector • Intense Productivity pressures • Global Competition • Firms can no longer hide behind borders • Ethics, Diversity & Environmental Issues • Conflicting business protocol • Cultural dilemmas Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 8

Strategic Considerations • Business Environment – Continuous Environmental Scanning is necessary • Flexibility – Capacity to meet ever-changing client demands • Core Competencies – Using the firm’s unique strengths to seize opportunities Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 9

The Importance of Market Analysis • Market Segmentation – identify groups or sub-groups of clients • Needs Assessment – identify the requirements of each group • Product or service needs • Delivery system needs • Volume needs Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 10

Selecting Competitive Priorities Corporate strategy • goals • core competencies • environmental responses • new products/services • global strategies Competitive Priorities Cost 1. Low-cost operations Quality Market analysis 2. High-performance design • segmentation 3. Consistent quality • needs assessment Time 4. Fast delivery 5. On-time delivery 6. Development speed Flexibility 7. Customization 8. Volume flexibility Figure 1. 5 Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Selecting Competitive Priorities Corporate strategy • goals • core competencies • environmental responses • new products/services • global strategies Market analysis • segmentation • needs assessment Competitive priorities Operations Marketing • cost • quality Finance • time • flexibility Others Figure 1. 5 Capabilities • current • needed • plans Functional area strategies • finance • marketing • operations • others Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Strategy and Decisions Corporate strategy Market analysis Competitive priorities Figure 1. 8 Operations strategy Services • Standardized services • Assemble-to-order • Customized services Manufacturing • Make-to-stock • Assemble-to-order • Make-to-order Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Examples of Service Strategies • Standardized services – Canada Post • Assemble-to-order – Cable companies (pre-arranged packages) • Customized services – Health clinics Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 14

Health Clinic Process D R T Figure 1. 6 D: R: T: B: P: P B Doctor (examination rooms) Radiology (X-ray) Triage (assess severity of illness) Blood (lab test) Pharmacy (fill prescriptions) Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Health Clinic Process Physical exam D R T Figure 1. 6 D: R: T: B: P: P B Doctor (examination rooms) Radiology (X-ray) Triage (assess severity of illness) Blood (lab test) Pharmacy (fill prescriptions) Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Health Clinic Process Physical exam Broken arm Figure 1. 6 D R T D: R: T: B: P: P Broken arm B Doctor (examination rooms) Radiology (X-ray) Triage (assess severity of illness) Blood (lab test) Pharmacy (fill prescriptions) Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Health Clinic Process Physical exam D Flu R P Broken arm T B Flu Figure 1. 6 D: R: T: B: P: Doctor (examination rooms) Radiology (X-ray) Triage (assess severity of illness) Blood (lab test) Pharmacy (fill prescriptions) Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1 -

Examples of Manufacturing Strategies • Make-to-stock – Mass-produced automobiles • Assemble-to-order – Upscale Unique Furniture • Make-to-order – High-end homes Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 19

Strategy and Decisions Corporate strategy Market analysis Competitive priorities Capabilities Operations strategy Services Manufacturing • Standardized services • Make-to-stock • Assemble-to-order • Customized services • Make-to-order • • Process decisions Quality decisions Capacity, location, and layout decisions Operating decisions Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. Figure 1. 8 1 -

Cross-Functional Coordination • Removing barriers between departments • Moving from sequential decision-making to coordination leads to: – Improved communication – More accurate market information – More timely internal feedback Foundations of Operations Management, Canadian Edition Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 21