1. Strategic Operations Management

1. 1. Strategic Operations Management

2. Introduction • Production and service operations have a central role in most firms (services and manufacturing). • They typically account for 70 - 80% of a firm’s assets, expenditure and people. • The nature of operations differs widely between industries and organisations

3. Evolution of Operations • Socially, production - though important - is often undervalued; • Seen as a career for male, engineer-types who enjoy getting their hands dirty! • Are views changing? The growth of services encourages rethinking the production concept • Technological innovation is raising the status of manufacturing. • In the UK people employed in 'operations' are far fewer today • Yet employment here is greater still than other functions. • A major part of total revenue and capital investment expenditure is spent on production operations.

4. Operations as Transformation: Four Types: • builders, gardeners and manufacturers transform raw materials & components • suppliers, wholesales, retailers change the nature of "ownership" • hauliers, postal/courier and telephone services transform "place" • insurance provides people with security, building societies lend for housing, physios improve physical well-being

5. Innovation Purchasing Marketing Finance/Accounting Personnel (HR) Product/Service Design CAD Standardization Location Decisions The State & Manufacturing Ops Management & Technology Flexible Manufacturing Systems Signs of De-Industrialization in UK Design of Operations Environment Production Technology & Job Issues The boundary concerns of operations management include discussion of:

6. 1) Innovation • New product development - What the design is and how it can be produced are important development decisions. • Innovative designs have to be made within cost and skill parameters.

7. 2) Purchasing • Procuring and storing raw materials, components & equipment is a key role.

8. 3) Marketing • Production staffs need marketing and sales information: total demand for the product, when is it required? • Customer feedback helps R&D design and create future products.

9. 4) Accounting & Finance • Production department must budget. • The cost of each element of expenditure/ activity must be known for price and wage determination and profit/loss identification. • Capital equipment has to be replaced, maintained and disposed

10. 5) Personnel • Recruitment, training, the design of reward systems, health and safety and industrial relations

11. 6) Product & Service Design • Products must be designed to function well. • The range of products or degree of standardisation must be decided. • Materials for the product must be chosen

12. 7) CAD • CAD (computer aided design) evaluates designs with fast computer graphics offering 3-D perspectives. • Specifications are more accurate. • CAD can store standard designs, names and dimensions of components (information needed for purchasing specifications, machine and tools set-up).

13. 8) Standardization/Modularization • Modular systems are a form of standardisation - a means of cost reduction. • A college with many under-subscribed evening courses - may rationalise its "product mix" around the most popular courses reducing staff costs and overheads. • Standardisation means longer production runs (economies of scale), discounts on bulk supplies. • The consumer however may have less choice.

14. 9) Location • A department store groups similar products to maximise staff product knowledge and satisfy customer expectations. • Fast-moving goods and those bought on impulse are located on the ground floor. • Furniture can be located on upper floors • Where production is located depends on factors ranging from raw material and power supply to transport and labour availability.

15. 10) The State & Manufacturing • Government encouragement of manufacturing, attempts to regenerate industries/firms and evidence for deindustrialisation? • Does manufacturing drive economic growth? What are the links between manufacturing output & GDP?

16. 11) Technology • Technology has developed exponentially, and this has a bearing on Ops management: • Computerised Numerical Control (CNC). • CAD • Robotics

17. 12) Flexible Manufacturing Systems • FMS involves advanced manufacturing engineering directed towards better consumer choice & a quicker response to customer demand using less working capital. It embraces: • CNC based equipment • automated transport systems for moving tools & work pieces at exactly the moment they are needed • the whole system is computer-controlled with software for scheduling, tool/part selection, fault finding, machine breakdown detection, etc.

18. 13) Signs of Deindustrialization in the UK? • There are signs • Other countries?

19. 14) Design of the Operations Environment • The production function – is influenced by business and technological environments: • Equipment has to be selected. • How much product should we make ourselves? How much to we buy in? • Product design, capacity planning, employee skills and accounting procedures all have a bearing. • Decisions extend to automation and computerisation, job security and employee stress. • The type of equipment used influences work design.

20. 15) Production technology & Job/Employment Issues • Issues include attitudes/alienation, training, industrial relations, redundancy and job loss, the quality of working life and payment systems, social responsibility to the community. • Changes: From Talyor to Herzberg: Scientific Management  Job Enrichment

21. The Japs • Japanese economic and export success stems from well-planned and executed methods of production management in manufacture • attention to detail and importance given to quality control (JIT & TQM/QCCs) • total integrated production systems from delivery of materials/parts to final distribution • Supported by cultural aspects of labour

22. More… • The discussion of boundary concerns of operation management leads us to conclude that operations is tied up with all aspects of the organization • Hence, operations is tied up with overall corporate/business strategy of the organization • With globalization and the speed of change, and the increased intensity of competition, overall strategy (and hence, operations) need to be flexible