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OPSM 501: Operations Management

Ko ç Un iversity Graduate School of Business MBA Program. OPSM 501: Operations Management. Session 3 &4 : Strategic F it Process selection. Zeynep Aksin zaksin @ku.edu.tr. Shouldice Hospital Video Case wrap-up. On what product attributes does Vestel Elektronik compete?.

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OPSM 501: Operations Management

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  1. Koç University Graduate School of Business MBA Program OPSM 501: Operations Management Session 3&4: Strategic Fit Process selection Zeynep Aksin zaksin@ku.edu.tr

  2. Shouldice HospitalVideo Case wrap-up

  3. On what product attributes does Vestel Elektronik compete?

  4. 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”

  5. Existing Desired Measures Product Attributes P, T, Q, V Feasible Business Strategies Desired Business Strategy Strategy Gap? Capability Gap? Desired Capabilities Existing Capabilities Marketing, …, Financial Strategy Operations Strategy Process Attributes C, T, Q, Flex Operational Structure: Processes & Infrastructure Desired Oper’l Structure: Processes & Infrastructure Process Gap? Strategic Operational Audit

  6. What are process attributes at Vestel? How are these achieved?

  7. Classification of Processes: by Customer Interface Raw Material Components Semifinished Finished Make-to-Stock Assemble-to-Order SUPPLIER CLIENT Make-to-Order Engineer-to-Order Order Forecast

  8. Competing on variety requires flexibility • 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

  9. Where is Vestel Elektronik on the product-process matrix?

  10. Industrialization 1: Standardizing Product High Customization Some Customization High Stardardization Process Flexible Job Shop Batch Flow Rigid Line Flow

  11. Industrialization 2: Flexibility Product High Customization Some Customization High Stardardization Process Flexible Job Shop Batch Flow Rigid Line Flow

  12. Strategic Value Gained Product High Customization Some Customization High Stardardization Process Flexible Job Shop Batch Flow Rigid Line Flow

  13. Threats going forward?Strategy going forward?

  14. The product-process matrix

  15. Classification of Processes by process architecture • Project • Job Shop • Batch • Line Flow • Continuous Flow Job Shop Flow Shop

  16. The Job Shop Process • Process Layout • One of a Kind Build • (To Customer Order) • Absence of Rigid Flow Pattern • Usually High Product Mix

  17. Process Layout Lathe#1 Lathe#2 Drill Press #1 Paint Machine Lathe#3 Packaging Machine #1 Finish Production Drill Press #2 Lathe#4 Packaging Machine #2 Product #1735B: Start of Production

  18. The Flow Line Process • Product Layout • Discrete Parts • Rigid Flow Pattern • Product Mix of Standard Products

  19. Product Layout Product #1735B Start Production Drill Press #1 Lathe Packaging Machine #2 Drill Press #2 Paint Machine Finish Production

  20. What is innovative about Zara?

  21. Zara Business Concept Integrated fashion delivery: Fashion at low cost Low Cost • Focus on getting it approximately correct • Define a fast process • Solve the material constraint • Constrain designers • Optimize the offer • Offer follow-up (next batch) and create customer flows Fashion • Store experience • Copy fashion • Involve the customers and his group • Create a network/brand

  22. Zara Customer Offer:Product/Process Attributes • Cost: • Low monetary cost • Low time cost “The Zara experience” • Quality: • Raw Material: poor/OK • Knit: poor • Look: grand • Customer satisfaction: fashion at low price • Time: • Fast copying of leading styles • Fast delivery in own stores • Limited editions • Variety/Flexibility: • Limited product variety: only what is on display • Every customer is participating in the process • Customer defines the next batch

  23. Classical textile business process:12 month lead time Design Purchase RM Mfg Dist Sell Discount

  24. Zara Business Process: 5 day lead time . 1.Scan fashion shows 2.Simplify hits & Library of designs Purchase RM 3.Final design of Next batch Mfg Dist Shopping Experience 2.Shoppers and store mgrs. PULL next design Designers adapt

  25. The design process Creative design Preliminary designs Final product design Traditional Creative design Preliminary designs Final product design Zara Outsource And scan Copy and simplify Adapt and optimize

  26. Why is profitability in textile so low, when margins are so high? Perfect forecast Excess demand Excess stock Expected demand Actual demand

  27. Accurate Response • Improving Forecasts Total Sales Initial Forecast

  28. Accurate Response • Improving Forecasts Total Sales Updated Forecast, Incorporating 20% of Sales Data

  29. Accurate Response • Improving Forecasts Total Sales Updated Forecast, Incorporating 80% of Sales Data

  30. Zara’a Approach to Demand uncertainty Excess stock and unmet demand are avoided by stopping production when market saturates Expected demand Actual demand Small batches

  31. Disruptive Technological Change Performance Zara Quality Freshness Zara M&S Time

  32. Zara as a lean enterprise

  33. Industrialization 1: Standardizing Product High Customization Some Customization High Stardardization Process Flexible Job Shop Batch Flow Rigid Line Flow

  34. Industrialization 2: Flexibility Product High Customization Some Customization High Stardardization Process Flexible Job Shop Batch Flow Rigid Line Flow

  35. Strategic Value Gained Product High Customization Some Customization High Stardardization Process Flexible Job Shop Batch Flow Rigid Line Flow

  36. Key learnings from Operations Strategy module • Business model: customer segment and selected processes to match those segments’ needs • Product-process attributes: P, Q, T, V (C, Q, T, Flex) (what?) • Operating effectiveness (how well?) • Product-process matrix • Lean enterprise: focus, which allows clear value proposition, perfection (optimization), elimination of waste, and focus on customer flows • Process competition: Shouldice, Vestel Elektronik, M&S, Zara

  37. Announcements • We will play the house building game, see instruction slides that follow • Start reading The Goal • Course TA: Beliz Keçelerli; Office Hours T-Th 11-12:30 or by appointment CAS Z52 bkecelerli@ku.edu.tr

  38. KEEP DESKS CLEAR! • Only need a pen or pencil. • Please keep desks and aisles clear of notebooks, PCs, backpacks etc. • Please do not disturb materials!

  39. HouseBuilding.com: Manufacturing Operations Production Control (color sheets, log sheets, scissors) Base Punch (scissors) Roof Base Form (scissors) Base Weld (stapler) Final Assembly (tape) Quality Control Customer

  40. Production Control Operating Procedures • Prepare a batch of 4 units. • Cut each sheet (one at a time) into two: roof and base. • Write the batch number on the roof and the base. All items in the same batch have the same number. The numbers have to match in assembly. • Repeat • 4 times, which yields one batch • When 4 units (one batch) are complete, “release” the batch. • Put the batch in your out-basket: it’s ready for pickup by the trucker. • Record release time for each batch. • Release one batch each minute.

  41. Truckers Operating Procedures • Truckers are responsible for transporting work in process inventory between production steps. • You can carry only one batch of 4 roofs or 4 bases at a time. Not both! Production Control (color sheets, log sheets, scissors) Base Punch (scissors) Roof Base Form (scissors) (scissors) Base Weld (stapler) Final Assembly (tape) Quality Control Customer

  42. Roof Operating Procedures • Cut the roof along double lines, one at a time. • Fold roof along dotted line at top. Think quality! • Work in batches of 4 units. • When a batch is ready, call the trucker and send to Final Assembly. • Ask trucker for inputs when needed.

  43. Base Punch (Cut) Operating Procedures • Cut the base along double lines, one at a time. Think quality! • Work in batches of 4 units • When a batch is ready, call the trucker and send to Base Form. • Ask trucker for inputs when needed.

  44. Base Form Operating Procedures • Fold the lines on the base (4 folds). • Work in batches of 4 units • When a batch is ready, call the trucker to send them to Base Weld. • Ask trucker for inputs when needed

  45. Base Weld Operating Procedures • Staple base on top and bottom about 0.5 cm from the edge. • Work in batches of 4 units. • When a batch is ready, call the trucker to send them to Final Assembly. • Ask trucker for inputs when needed.

  46. Final Assembly Operating Procedures • Tape the roof to the base (2 tapes). • Work in batches of 4 units. • When a batch is ready, send them to QA. (No trucker required.) • Ask trucker for inputs when needed.

  47. Check each batch if they conform to quality standards! If the house conforms to quality standards, put it on the market. Once on the market no more rework! Customers can reject houses Quality Standards Batch numbers must match. Folds and cuts should be along appropriate lines. Folds should be crisp and cuts should be straight. Roof should be centered and door should be visible. Top of base should be flush with roof. Staples and tape should be centered and parallel to the ground. Not too much tape. About 1 cm Staples about 0.5 cm from edge. Quality Assurance Operating Procedures

  48. Quality Standards Batch numbers must match. Folds and cuts should be along appropriate lines. Folds should be crisp and cuts should be straight. Roof should be centered and door should be visible. Top of base should be flush with roof. Staples and tape should be centered and parallel to the ground. Not too much tape. About 1 cm. Staples about 0.5 cm from edge. House Game Overview Production Control (color sheets, log sheets, scissors) Base Cut (scissors) Roof Base Form (scissors) (scissors) Base Weld (stapler) Final Assembly (tape) Quality Control Customer

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