OPSM 301 Operations Management Fall 2011

1. OPSM 301Operations ManagementFall 2011 Zeynep Akşin

2. The operations function • The role of the operations function may be defined as the design, operation, and improvement of the production systemthat creates the firm’s primary products andservices • We will studyhow organisations “actually do things” 

3. Key Principle of course: 1. The Strategic Role of Ops “A company’s operations function is either a competitive weapon or a corporate millstone. It is seldom neutral.” [Skinner ‘69]

4. Operations as a Competitive Weapon • Dell Computers Innovative Supply Chain Strategy (direct model) • Southwest Airlines Leader in lowfare flights, by elimination of all waste • Zara Speed and fashion combined. More on this later.. • Vestel manufaturing flexibility

5. Key Principle of Course: 2. The Process View of Ops UL Sup. WH KA Ind. Markets WH Sana KA: 64 days Groceries:132 days Shelf life: 120 days! . . . Sub. WH 76 days collection time Groceries Markets Sales cost: 4% Trade rebate: 12% Logistics: complex 1997: 35000/76000 tons Sana and Aymar collected

6. Consumer centric-efficient SC Warehouse stock level 12% - 8% UL Make-to-order 120000-140000/180000 outlets 36 days collection time Distributors Groceries Market KA Sana KA: 2 weeks Consumer Sales cost: 6% Trade rebate: 5.2% Logistics: simple

7. Global processes: i-phone 4 production • Product design: USA • Final Assembly: Shenzen China • Chips: Korea, Germany, USA • Monitor: Taiwan • More than 100 suppliers • Distribution: globally • Costs: labor %7, bill of materials: 187,51 dolars • Price: 600 dolars

8. Process Management Information structure Network of Activities and Buffers Inputs Outputs Goods Services Flow units (customers, data, material, cash, etc.) Labor & Capital Resources Operations & the Process View: What is a Process?

9. Organization Chart

10. customer customer suppliers Process

11. What is Operations Management? • Management of business processes • How to structure the processes and manage resources to develop the appropriate capabilities to convert inputs to outputs. • What is appropriate?

12. All Managers are Operations Managers • All managers must transform inputs into outputs • Example: Accounting Manager • Inputs: data, information, labor • Transformation: application of accounting principles and knowledge • Outputs: accounting reports, knowledge of performance, ... • All managers have an “operation” to run

13. What defines a “good process”? Performance: Financial Measures • Absolute measures: • revenues, costs, operating income, net income • Net Present Value (NPV) = • Relative measures: • ROI, ROE • ROA = • Survival measure: • cash flow

14. Firms compete on product attributes. This requires process capabilities. • Price (Cost) P • Quality Q • Customer service • Product quality • Time T • Rapid, reliable delivery • New product development • Variety V • Degree of customization “order winners” To deliver we need “capabilities”

16. 80% of calls answered in less than 20 seconds

17. Competing on variety requires flexibility • Vestel Elektronik – Manisa • Europe’s number 1, world’snumber 2. OEM TV producer! 6% of World TV production. • Daily capacity: 50.000 TVs (average production 35.000/day) • 20 parallel assembly lines • Flexibility to produce 40 differentbrands-modelsin a day • 60% of orders for quantities less than 200 • Direct deliveries to some chain stores in Europe • Esnekliğin yönetimi

18. Performance Measures

19. Process Capabilities are affected by Process Structure and Management • Process structure or architecture: • (1) inputs and outputs • (2) flow unit (“jobs”) • (3) network of activities & buffers • quantity & location • precedence relationships • (4) resource allocation • capacity & throughput • (5) information structure • Operations Planning & Control • Organization

20. Significant Events in Operations Management