OPERATIONS MANAGEMENT Adi Djoko Guritno PROGRAM MAGISTER MANAJEMEN

OPERATIONS MANAGEMENT Adi Djoko Guritno PROGRAM MAGISTER MANAJEMEN UNIVERSITAS GADJAH MADA Operations Management - MM UGM - ADG

Objectives - Introducing the cross functional decision making within operations management’s - strategy context new concepts in operations Discussing some management - Creating ideas in operation management research - Problem-solving in case studies Operations Management - MM UGM - ADG

References 1 - Jacobs, F. B. , Chase, R. B. , and N. J. Aquilano, 2009, Operations and Supply Chain Management, Mc. Graw Hill. 2 - Heizer, J. and B. Render, 2008, Operations Management, Prentice Hall. 3 - Finch, B. J. 2006. Operations Now: Profitability, Processes, Performance. Mc. Graw Hill. 4 - Beckman, S. L. and D. B. Rosenfield, 2008. Operations Strategy. Mc. Graw Hill. Operations Management - MM UGM - ADG

Syllabi …. Operations Management - MM UGM - ADG

Big Paper * ü ü ü Abstrak I. Pendahuluan: Latar Belakang; Rumusan Masalah; Batasan Penelitian; Tujuan Penelitian II. Landasan Teori: Teori; Model Penelitian; Hipotesis III. Metodologi: Objek; Populasi dan Sampel Penelitian; Uji Hipotesis (Formula dan Cara Uji Hipotesis); Flow Chart Penelitian Referensi * Dikerjakan setiap kelompok yg dibentuk (abstrak. Operations Management copy dan dibagikan, hard - MM UGM - ADG soft copy paper). Urutan presentasi ditentukan saat pengumpulan paper.

Evaluation * Case & Quiz : 10% Group Presentation Big paper : 15% Class Participation + Discussion : 10% Mid Examination : 25% Final Examination : 25% * Negotiable Operations Management - MM UGM - ADG

• • • • Lecturer in Supply Chain Management and Operations Management (Master of Management), Management Science and Management of Technology (Doctoral Program) • Lecturer in Advanced Operations Management - Post Graduate Program FEUGM • Vice Dean of Finance, and Human Resources, Faculty of Agricultural Technology, UGM (2004 to present) • Permanent Lecturer at Department of Agro-Industrial Technology, Faculty of Agricultural Technology, UGM (1988 to present) Adi Djoko Guritno • Temporary Lecturer in Supply Chain, Post Graduate Program of Industrial Engineering UII, Tbk (private university), Jogjakarta Audit Committee Member of PT Timah UPN (State Owned Company-Mining), Jakarta (2000 to 2007) Head of Risk Management and Investment Committee of PT Timah (Persero) Tbk (2007 -present) Permanent Consultant in Business Development, PT MG Consult (Geological Survey) Certified Professional in Risk Management (CPRM) ; Business Continuity Certified Planner (BCCP) Member of CSCMP, POMS, APICS, Eur. OMA, IKAI, PATPI, BCMI Journal Reviewer: International Journal of Business (IJB), Industrial Progress, Industrial Research, Agritech, Teknoin Research interest: Industrial Management, Supply Chain Management and Strategic Management Affiliation of research institutions: Green Symbiosis Japan, CIRDAI, PPA-UGM, PPE-UGM, ISTMI Training experiences: PT. Combiphar, PT Pegadaian, PT BNI 1946, PT Geo Dipa Energi, PT Quick Tractors, PT Sari Husada, PT Pfizer-PCH, PT Timah, PT Telkom, PT Sriboga Raturaya, Department of Agriculture, Department of Trade and Industry, PT. Samator Group, PT. Perkebunan Nusantara Chairman of ISTMI ; Chairman of RISPESCIA (Riset dan Pengembangan Supply Chain Indonesia) Awards: Freezailah Research Award ITTO (Yokohama) ; Robert S Mc. Namara Research Award (Washington) E-mail : adidjoko@ugm. ac. id ; konsultasiom@yahoo. com ; adidjoko@pttimah. co. id Blog : http: //www. adidjoko. wordpress. com Operations Management - MM UGM - ADG

Operations Management: Content, history, and current issues Operations Management - MM UGM - ADG

Definition of Operations Management Operations is responsible for supplying the product or service of the organization. Operations managers make decisions regarding the operations function and its connection with other functions. The operations managers plan and control the production system and its interfaces within the organization and with the external environment. Operations Management - MM UGM - ADG

New Paradigm Business Goal Setting Business Goal Getting Operations Management - MM UGM - ADG

• Cost Efficiency Competitive Dimension • Quality • Delivery • Flexibility Operations Management - MM UGM - ADG

Eli Whitney Just In Time Taichi Ohno Standardization Gilbreth Quality Assessment Baldrige Motion Study Goldratt Theory of Constraints Operations Management - MM UGM - ADG

The Hard Rock Cafe First opened in 1971 l Now – 110 restaurants in over 40 countries Rock music memorabilia Creates value in the form of good food and entertainment 3, 500+ custom meals per day How does an item get on the menu? Role of the Operations Manager Operations Management - MM UGM - ADG

Significant Events in Operations Management - MM UGM - ADG

Major Decisions at Pizza USA A Framework for OM • Process • Quality • Capacity • Inventory Operations Management - MM UGM - ADG

Cross-Functional Decision Making • Operations as the primary function • Other primary functions: l Marketing l Finance • Supporting functions • Major cross-functional decisions Operations Management - MM UGM - ADG

Operations as a System Energy Materials Labor Capital Transformation (Conversion) Process Goods or Services Information Feedback information for control of process inputs and process technology Operations Management - MM UGM - ADG

Relation of Operations to its Environment SOCIETY Human Engineering Marketing Resources Suppliers Operations transformation system Accounting Finance External Environment CUSTOMERS MIS COMPETITORS GOVERNMENT Operations Management - MM UGM - ADG

New Challenges in OM From To • • • Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization Global focus Just-in-time Supply chain partnering Rapid product development, alliances Mass customization Empowered employees, teams Operations Management - MM UGM - ADG

The Economic System Transforms Inputs to Outputs Inputs Land, Labor, Capital, Management Process Outputs The economic system transforms inputs to outputs at about an annual 2. 5% increase in productivity (capital 38% of 2. 5%), labor (10% of 2. 5%), management (52% of 2. 5%) Goods and Services Feedback loop Operations Management - MM UGM - ADG

Fig. Ownership is family-based in Asia, except in Japan where it is widely held control over companies is seen today as a domain of professional managers, not owners. Operations Management - MM UGM - ADG

Fig. Asian firm have varied ways of maintaining control. Operations Management - MM UGM - ADG

Measurement Problems • Quality may change while the quantity of inputs and outputs remains constant • External elements may cause an increase or decrease in productivity • Precise units of measure may be lacking Operations Management - MM UGM - ADG

Article: On theory in operations management Operations Management - MM UGM - ADG

The terminology of the philosophy of science in OM • Law of variability • Law of bottlenecks • Law of science methods • Law of quality • Law of factory focus Operations Management - MM UGM - ADG

Law of variability The greater the random variability, either demanded of the process or inherent in the process itself or in the processed, the less productive the process is Operations Management - MM UGM - ADG

Law of bottleneck An operation’s productivity is improved by eliminating or by better managing its bottlenecks. If a bottleneck cannot be eliminated in some way, say by adding capacity, productivity can be augmented by maintaining consistent production through it. Operations Management - MM UGM - ADG

Law of scientific methods The productivity of labor can be augmented in most instances by applying methods such as those identified by the scientific management movement Operations Management - MM UGM - ADG

Law of quality Productivity can frequently be improved as quality is improved and as waste declines, either by changes in product design, or by changes in materials or processing. Various techniques of the quality movement can be responsible for these improvements Operations Management - MM UGM - ADG

Law of factory focus Factories that focus on a limited set of tasks will be more productive than similar factories with a broader array of tasks. Operations Management - MM UGM - ADG

The Theory of Swift, Even Flow Productivity for any process - be it labor productivity, machine productivity, materials productivity, or total factor productivity - rises with the speed by which material flow through the process, and it falls with increases in the variability associated with the demand on the process or with steps in the process itself. Operations Management - MM UGM - ADG

DEMAND VARIABILITY High demand variability Low speed of materials through the process Low demand variability Job shops Batch operations SPEED OF FLOW High speed of materials through the process Assembly lines Highly productive continuous flow process Fig. A variant on the product-process matrix Operations Management - MM UGM - ADG

Law of Trade-offs A manufacturing plant cannot simultaneously provide the highest levels among all competitors of product quality, flexibility, and delivery, at the lowest manufactured cost Law of Cumulative Capabilities Improvements in certain manufacturing capabilities e. g. , quality are basic and enable improvements to be made more easily in other manufacturing capabilities e. g. , flexibility. Operations Management - MM UGM - ADG

The Theory of Performance Frontiers A production frontiers is defined as the maximum output that can be produced from any given set of inputs, given technical considerations. Operations Management - MM UGM - ADG

COST Operating Frontier for B A Operating Frontier for A B Asset Frontier PERFORMANCE Fig. Operating and asset frontiers Operations Management - MM UGM - ADG

Bettered Operating Frontier COST A Operating Frontier A 1 A 2 Asset Frontier PERFORMANCE Fig. Three operating states for a manufacturing plant Operations Management - MM UGM - ADG

Law of Diminishing Returns As improvement moves a manufacturing plant nearer and nearer to its operating frontier or its asset frontier, more and more resources must be expended in order to achieve each additional increment of benefit. Law of Diminishing Synergy The strength of the synergistic effects predicted by the law of cumulative capabilities diminishes as a manufacturing plant approaches its asset frontier. Operations Management - MM UGM - ADG

Operations Strategy and Competitiveness Operations Management - MM UGM - ADG

Boeing Suppliers (777) Fir m Aleni Count ry Ital Part s Wing a Aero. Spa Technolog ce CAS ies A Fu ji y Austral ia Spai n Japa n GEC Avionics Korean Air Menas co Short Brothers Singapo Aerospa re ce United Kingdom Kore a Cana da Irelan d Singapo re flaps Rudd er Ailero ns Landing gear doors, wing section Flight computers Flap supports Landing gear doors Aerospa ce Operations Management - MM UGM - ADG

Brainpower Weighs In PRODUCT PC microprocessor PRICE WEIGHT in pounds PRICE per pound 851 0. 01984 $42, 893. 0 0 8 0. 00068 $11, 766. 0 0 Gold (ounce) 301. 7 0. 0625 $4, 827. 20 Hermès scarf 275 0. 14 $1, 964. 29 Palm V 449 0. 26 $1, 726. 92 34. 99 0. 04 874. 75 4 0. 04 100 19. 99 0. 49 40. 8 $78, 445. 00 4, 134. 00 18. 98 40 2. 99 13. 38 Viagra (tablet) Saving Private Ryan on DVD Cigarettes (20) Who Moved My Cheese? by Spencer Johnson Mercedes-Benz E-class four-door sedan The Competitive Advantage of Nations by Michael Porter Chevrolet Cavalier four-door sedan Operations $17, 770. 00 Management - MM UGM - ADG 6. 76 2, 630. 00

Corporate Strategy Supply Chain Strategy Service Strategy Manufacture Strategy Distribution & Retailing Risk Management KPI Monitoring Fig. Flow of Supply Chain Strategy Operations Management - MM UGM - ADG 50

A strategy must • Fit the existing and potential environment • Provide a linkage mechanism • Incorporate the activities of all major line functions • Extend into staff activities • Specify the performance required • Promote a culture of continual improvement Operations Management - MM UGM - ADG 51

Steps in Developing a Manufacturing Strategy 1. Segment the market according to the product group 2. Identify product requirements, demand patterns, and profit margins of each group 3. Determine order qualifiers and winners for each group 4. Convert order winners into specific performance requirements Operations Management - MM UGM - ADG 52

A plan for being competitive Operations Strategy Its not what you say, its what you do… Successful strategy ? ? ? • The firm • Customers Operations Management - MM UGM - ADG

• Cost Efficiency Competitive Dimension • Quality • Delivery • Flexibility Operations Management - MM UGM - ADG

Market Leadership Product Leadership Competitors Focus Customer Intimacy Customer Focus Operational excellence Company Focus Fig. Strategic Triangle Operations Management - MM UGM - ADG 55

Cross Functional Corporate Strategy Mission Objectives Policies Int. & Ext. Analysis • Process • Quality • Capacity • Flexibility Competence • Cost • Delivery Distinctive • Inventory Consistent Pattern of Decision Operations Management - MM UGM - ADG 56

Mission of Fed. Ex is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction. Operations Management - MM UGM - ADG

Mission of the Hard Rock Café To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success. Operations Management - MM UGM - ADG

Example: Distinctive competencies of Japanese manufacturing • Low labour cost strategy – shortly after the war; • Scale-based strategy – high productivity and low unit cost; • Focused factory strategy – specialization for higher quality; • Flexible factory strategy – high quality with increased variety; • Lean production – reducing all waste Operations Management - MM UGM - ADG 59

Table. Typical Operation Objectives (Example) Operations Management - MM UGM - ADG

Examples of Important Policies in Operations Policy Type Policy Area Strategic Choices Process Span of process Automation Process flow Job specialization Supervision Make or buy Handmade or machine –made Flexible or hard automation Project, batch, line, or continuous Highly decentralized or centralized Quality Systems Approach Training Suppliers Prevention or inspection Technical or managerial training Selected on quality or cost Capacity Facility size Location Investment One large or several small facilities Near markets, low cost, or foreign Permanent or temporary Inventory Amount Distr. Control Systems High levels or low levels of inventory Centralized or decentralized warehouses Control in great detail or less detail Operations Management - MM UGM - ADG

Order Qualifiers and Winners Defined Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers Order winners are the criteria that differentiates the products and services of one firm from another Operations Management - MM UGM - ADG

Table Strategic Alternatives Strategy A Business Strategy Market conditions Operation mission Distinctive competence operations Operations policies Marketing strategies Finance strategies Strategy B Product Imitator Product Innovator Price sensitive Mature market High volume Standardization Emphasiz e low cost for mature products Low cost through superior process technology and vertical integration Superior processes Dedicated automation Slow reaction to change Economy of scale Workforce involvement Mass distribution Repeat sales Maximizing of sales opportunities National salesforce Low risk Low profit margin Product features Emerging market sensitive Low volume Customized products Emphasize flexibility to introduce new products Fast and reliable new product introduction through product teams and fle xible automation Superior products Flexible automation Fast reaction to changes Economies of scope Use product development teams Selective distribution New-market development Product design Sales made through agents Higher risk Higher profit margins Operations Management - MM UGM - ADG

Why Some Organizations Fail Too much emphasis on short-term financial performance Failing to take advantage of strengths and opportunities Failing to recognize competitive threats Neglecting operations strategy Too much emphasis in product and service design and not enough on improvement Neglecting investments in capital and human resources Failing to establish good internal communications Failing to consider customer wants and needs Operations Management - MM UGM - ADG

OM’s Contribution to Strategy Operation Decisions Examples Specific Strategy Used Quality Product Sony - constant innovation ……. FLEXIBILITY Process Compact - PC market ……. . . . … FLEXIBILITY Location Southwest Airlines - no frills service. . LOW PRICE Layout Pizza Hut - five minutes guarantee … DELIVERY Human Resources Fed. Ex - on time …………………. ……… DELIVERY Supply Chain Motorola pagers - performance ……. QUALITY Inventory IBM - after sales …………… AFTER SALES Scheduling Maintenance Operations Management - MM UGM - ADG

Brand Name Drugs vs Generic Drugs Operations Management - MM UGM - ADG

Operations Strategies for Two Drug Companies Operations Management - MM UGM - ADG

Strategy and Issues During a Product’s Life Operations Management - MM UGM - ADG

Types of Focus • Product focus • Process type • Technology • Volume of sales • Make-to-stock and make-to-order • New products and mature products Operations Management - MM UGM - ADG

Some Multinational Corporations Company Home Country ICI Britain 78 50 NA Nestlé Switzerland 98 95 97 Philips Electronics Netherlands 94 85 82 Siemens Germany 51 NA 38 Britain & Netherlands 95 Unilever % Sales Outside Home Country % Assets % Foreign Outside Workforce Home Country 70 64 Operations Management - MM UGM - ADG

Four International Operations Strategies Operations Management - MM UGM - ADG

Mass Customization and Strategic Process Choices Operations Management - MM UGM - ADG

Case: Retaining A Consistent Position Operations Management - MM UGM - ADG

CS: Retaining A Consistent Position A local chain of fast food restaurants wants to extend its performance in the flexibility characteristic and is considering broadening its menu to offer chicken, fish, or veal platters in addition to its normal, limited-menu sandwich items. The new platters will not be ordered in large volume as are its standard items, and the company is therefore evaluating alternative decisions regarding whether or not the platters will be prepared ahead of time. If the company chooses not to prepare platters ahead of demand, it will move away from the delivery-service characteristic for these items. If these items are prepared ahead and held, the platters might not appear so fresh and be so tasty. This option would cause the company to move away from a highquality emphasis. If the items are prepared at some rate of reasonable expected demand thrown away if not demanded, the company's cost performance will suffer. (Adapted from: James B. Dilworth, Production and Operations Management: Operations Management Manufacturing and Non-manufacturing, 3 rd ed, p. 60, 1986, - MM UGM - ADG Random

If the company chooses not to prepare platters ahead of demand delivery-service If these items are prepared ahead and held high-quality problems If the items are prepared at some rate of reasonable expected demand Cost performance problems Operations Management - MM UGM - ADG

Differences in manufacturing strategy decision between Japanese and Western manufacturing plants: the role of strategic time orientation Chris Voss, Kate Blackmon Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Next : Innovation and Managing the renewal of the business Operations Management - MM UGM - ADG

Pun, Kit Fai, 2004. “A conceptual synergy model of strategy formulation for manufacturing “. International Journal of Operation and Production Management Vol. 24 No. 9: 903 -928 Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG

Operations Management - MM UGM - ADG