Master of Business Administration PGBM03 OPERATIONS MANAGEMENT Tutor: Operations Management & Decision Making – Slide 1 Ian Evans ian.evans@sunderland.ac.uk Week 3 – Performance Objectives & Operations Strategies Summary     The Role of OM within the Organization & 4stage Model Operation’s Five Performance Objectives Concept of Order Winners & Order Qualifiers Formulating Operations Strategy & Hill’s Framework Operations Management & Decision Making – Slide 2 A General Module of Operations Management ENVIRONMENT Operation’s strategic objectives Operations strategy The operation’s competitive role and position Input transformed resources Materials Information Customers Design Improvement Output products and services Input resources Facilities Staff Planning and control Input transforming resources ENVIRONMENT Operations Management & Decision Making – Slide 3 Customers Operations Function’s Five Performance Objectives Appearance, Functionality Reliability, Durability Recovery, Contact Operations Management & Decision Making – Slide 4 Quality means different things in different operations Hospital Patients receive the most appropriate treatment Treatment is carried out in the correct manner Patients are consulted and kept informed Staff are courteous, friendly and helpful Automobile plant All assembly is to specification The product is reliable All parts are made to specification The product is attractive and blemish-free Bus company Supermarket The buses are clean and tidy The buses are quiet and fume-free The timetable is accurate and user-friendly Staff are courteous, friendly and helpful The store is clean and tidy Décor is appropriate and attractive Goods are in good condition Staff are courteous, friendly and helpful Operations Management & Decision Making – Slide 5 Operations Function’s Five Performance Objectives Operations Management & Decision Making – Slide 6 Speed means different things in different operations Hospital Automobile plant The time between requiring treatment and receiving treatment kept to a minimum The time for test results, X-rays, etc. to be returned kept to a minimum Minimizing the time between dealers requesting a vehicle of a particular specification and receiving it Minimizing the time to deliver spares to service centres Bus company Supermarket The time between customer setting out on the journey and reaching his or her destination kept to a minimum Minimizing the time for the total transaction of going to the supermarket, making the purchases and returning The immediate availability of goods Operations Management & Decision Making – Slide 7 Operations Function’s Five Performance Objectives Operations Management & Decision Making – Slide 8 Dependability means different things in different operations Hospital Proportion of appointments which are cancelled kept to a minimum Keeping appointment times Test results, X-rays, etc. returned as promised Bus company Keeping to the published timetable at all points on the route Constant availability of seats for passengers Operations Management & Decision Making – Slide 9 Automobile plant On-time delivery of vehicles to dealers On-time delivery of spares to service centres Supermarket Predictability of opening hours Proportion of goods out of stock kept to a minimum Keeping to reasonable queuing times Constant availability of parking Operations Function’s Five Performance Objectives Product/Service Flexibility Mixed Flexibility Volume Flexibility Delivery Flexibility Operations Management & Decision Making – Slide 10 Flexibility means different things in different operations Hospital Automobile plant Introducing new treatments A wide range of treatments The ability to adjust the number of patients treated The ability to reschedule appointments The introduction of new models A wide range of options The ability to adjust the number of vehicles manufactured The ability to reschedule manufacturing priorities Bus company Supermarket The introduction of new routes and excursions A large number of locations served The ability to adjust the frequency of services The ability to reschedule trips The introduction of new goods A wide range of goods stocked The ability to adjust the number of customers served The ability to get out-of-stock items Operations Management & Decision Making – Slide 11 Operations Function’s Five Performance Objectives Staff Costs Technology & Facility costs Costs of Brought-in Materials & services Operations Management & Decision Making – Slide 12 Cost means different things in different operations Hospital Bought-in materials and services Automobile plant Technology and facilities costs Bought-in materials and services Staff costs Staff costs Bus company Bought-in materials and services Technology and facilities costs Supermarket Technology and facilities costs Staff costs Operations Management & Decision Making – Slide 13 Bought-in materials and services Technology and facilities costs Staff costs Operations Function’s Five Performance Objectives Appearance, Functionality Reliability, Durability Recovery, Contact Product/Service Flexibility Mixed Flexibility Volume Flexibility Delivery Flexibility Staff Costs Technology & Facility costs Costs of Brought-in Materials & services Operations Management & Decision Making – Slide 14 Operations Performance – Manufacturing V.S. Service Operations Management & Decision Making – Slide 15 Polar diagrams for a taxi service versus a bus service Taxi service Speed Cost Bus service Dependability Quality Operations Management & Decision Making – Slide 16 Flexibility Where does the business get its competitive advantage? The “technological” specification of its product/service? Product/ Service Technology Marketing The way it positions itself in its market? Operations Management & Decision Making – Slide 17 The way it produces its goods and Operations services? Where does the business get its competitive advantage? Operations Management & Decision Making – Slide 18 Organizational Scope of OM Operations Management should not be confused with the term Operational Management …. The scope of OM is from: Operational Management right through to Strategic Management Operations Management & Decision Making – Slide 19 Four-Stage Model of Operation’s Role in the organization Redefine the industry’s expectations Give an Operations Advantage Be clearly the best in the industry Link Strategy With Operations Correct the Worst Problems Internally supportive Be as good as competitors Adopt best Practice Externally neutral Stop holding the organization back STAGE 1 Externally supportive Internally neutral STAGE 2 The ability to Implement Operations Management & Decision Making – Slide 20 STAGE 3 The ability to support Strategy STAGE 4 The ability to Drive strategy Nature and Content of Operations Strategy The content of operations strategy A statement of the principles and policies which guide the operation’s activities Prioritised performance objectives for each product/service group The process of operations strategy The way in which the guiding principles and policies are developed Strategies for each decision area Design Operations Management & Decision Making – Slide 21 Planning and control Improvement Structured Approaches to Formulating Operations Strategy  Hill's Framework for Reflecting Operations Strategy in Corporate Decisions   Operations executives must think and act in a strategic, not reactive manner The key question in operations (and marketing) strategy formulation: “How do products and/or services win orders in the market-place?” Operations Management & Decision Making – Slide 22 The Hill Framework Step 3 Step I CORPORATE OBJECTIVES Step 2 MARKETING STRATEGY HOW DO PRODUCTS WIN ORDERS IN THE MARKET? Price Quality Delivery Service Responsiveness to change Technical performance Operations Management & Decision Making – Slide 23 MANUFACTURING/ OPERATIONS STRATEGY Step 4 Step 5 STRUCTURAL INFRASTRUCTURE CHOICE The Hill Framework Order Qualifiers Get a product/service into the market-place, or on to customers' short lists, and keep it there. Order Winners These criteria win orders. They differentiate a product/service from those of the competition by offering product/service features that are superior to those of the competition. Operations Management & Decision Making – Slide 24 An Example - Concept of Order Winners & Order Qualifiers Operations Management & Decision Making – Slide 25 The Hill Framework Step 3 Step I CORPORATE OBJECTIVES Step 2 MARKETING STRATEGY HOW DO PRODUCTS WIN ORDERS IN THE MARKET? Price Quality Delivery Service Responsiveness to change Technical performance Operations Management & Decision Making – Slide 26 MANUFACTURING/ OPERATIONS STRATEGY Step 4 Step 5 STRUCTURAL INFRASTRUCTURE CHOICE Strategic Decision Areas for Operations Management OPERATIONS STRATEGY BUSINESS STRATEGY CORPORATE OBJECTIVES ORDER WINNER AND QUALIFIERS PLANNING DESIGN and IMPROVEMENT CONTROL Strategies for Strategies for Strategies for New Product/ Service Development Capacity Management Performance Measurement Vertical Integration Planning and Control Systems Facilities and Technology Supplier Development Work Organization Inventory Management Operations Management & Decision Making – Slide 27 Improvement Process Failure Prevention and Recovery Strategic Decision Areas for Operations Management Operations Management & Decision Making – Slide 28 Operations strategy decision areas and their impact Q New product/service development   Facilities strategy Workforce and organization strategy     Inventory strategy Planning and control systems Improvement process strategy Failure prevention and recovery Operations Management & Decision Making – Slide 29     Capacity adjustment strategy Supplier development strategy D F  Vertical integration strategy Technology strategy S               C           Major Influential Factors on Order Winners/Qualifiers The influence of the organization’s customers The influence of the organization’s competitors The relative importance of each performance objective to the operation The stage of the organization’s products and services in its life cycle Operations Management & Decision Making – Slide 31 Major Influential Factors on Order Winners/Qualifiers The influence of the organization’s customers The influence of the organization’s competitors The relative importance of each performance objective to the operation The stage of the organization’s products and services in its life cycle Operations Management & Decision Making – Slide 32 An Example of Pizza Delivery Business Operations Management & Decision Making – Slide 33 An Example of Pizza Delivery Business Operations Management & Decision Making – Slide 34 An Example of Pizza Delivery Business Operations Management & Decision Making – Slide 35 An Example of Pizza Delivery Business Operations Management & Decision Making – Slide 36 An Example of Pizza Delivery Business Operations Management & Decision Making – Slide 37 Major Influential Factors on Order Winners/Qualifiers The influence of the organization’s customers The influence of the organization’s competitors The relative importance of each performance objective to the operation The stage of the organization’s products and services in its life cycle Operations Management & Decision Making – Slide 38 Product/Service Life Cycle SALES VOLUME Operations Management & Decision Making – Slide 39 Impact of Product/Service Life Cycle Operations Management & Decision Making – Slide 40 Product/Service Life Cycle SALES VOLUME Operations Management & Decision Making – Slide 41 Impact of Product/Service Life Cycle Operations Management & Decision Making – Slide 42 Product/Service Life Cycle SALES VOLUME Operations Management & Decision Making – Slide 43 Impact of Product/Service Life Cycle Operations Management & Decision Making – Slide 44 Product/Service Life Cycle SALES VOLUME Operations Management & Decision Making – Slide 45 Impact of Product/Service Life Cycle Operations Management & Decision Making – Slide 46 Impact of Product/Service Life Cycle Operations Management & Decision Making – Slide 47 The essence of managing Operations Strategy Operation’s Resources Operation’s Capabilities Customer’s Needs Structural / Infrastructural Decisions Operation’s Processes Operations Management & Decision Making – Slide 48 Operations Strategy Performance Objectives Stage in Product/Service Life Cycle Competitor’s Action Pause & Reflect … Link to WebCT Operations Management & Decision Making – Slide 49 Case Study – McDonald’s Questions: Q1 – How has the competitive situation that McDonald’s faces changed since it was founded in the 1950s? Q2 – How have McDonald’s operations activities, in terms of its design, delivery and development, influenced its operations performance objectives? Q3 – Draw an operations strategy matrix for McDonald’s Operations Management & Decision Making – Slide 50 Master of Business Administration PGBM03 OPERATIONS MANAGEMENT Tutor: MBS Operations Management – Slide 1 Ian Evans ian.evans@sunderland.ac.uk Week 6 – Planning & Control: Capacity & Aggregate Planning ENVIRONMENT Operation’s strategic objectives Operations strategy The operation’s competitive role and position Input transformed resources Materials Information Customers Design Improvement Output products and services Input resources Facilities Staff Input transforming resources Planning and control ENVIRONMENT MBS Operations Management – Slide 2 Customers What is planning and control? Once an operations system has been designed and installed, attention will then turn to its operational planning, monitoring and control of business resources on a day to day basis. Operations strategy Design Operations management Planning and control MBS Operations Management – Slide 3 Improvement What is planning and control? Ensuring that resources such as materials, staff, equipment and process technology are utilized to the right level in relation to market demand has a major impact not only on the efficiency and therefore the costs of the operation but also upon customer satisfaction (effectiveness). Supply of products and services Planning and control Demand for products and services The operation’s resources The activities which reconcile supply and demand The operation’s customers MBS Operations Management – Slide 4 Plan versus Control An “Open” System Resources INPUTS TRANSFORMATION PROCESS OUTPUT S Objectives …… no control MBS Operations Management – Slide 5 Plan versus Control A “Closed Loop” System Corrective action Measure Resources INPUTS TRANSFORMATION PROCESS Objectives Compare/Evaluate MBS Operations Management – Slide 6 OUTPUT S Plan versus Control Planning is deciding what activities should take place in the operation when they should take place what resources should be allocated to them Control is understanding what is actually happening in the operation deciding whether there is a significant deviation from what should be happening (if there is deviation) changing resources in order to affect the operation’s activities MBS Operations Management – Slide 7 Operations Planning Horizons Strategic Plans  Long Term (Capacity Planning):    strategic/business issue up to 5 years ahead or more Medium Term (Aggregate Planning):    Longrange Forecasts how can demand be met from existing facilities and resource inputs? up to 2 years ahead Capacity Plans Aggregate Plans Master Schedule Resource Plan Inventory control Short Term (Operational Planning):  monitoring and correction of day-to-day activities versus plan MBS Operations Management – Slide 8 Work Loading / Activity Scheduling Capacity of Operations   The ability of operations to meet requirements Capacity is a basic measure of operation’s performance   It can be defined as “the maximum amount that can be processed within a specified time” (Waters, 1991) “the maximum throughput of an operation over a specific period of time” (Slack et al, 2004) MBS Operations Management – Slide 9 Capacity Planning at Strategic Level To provide an ‘appropriate’ amount of capacity at any point in time The ‘appropriateness’ of capacity planning in any part of the operation can be judged by its effect on … Costs Revenue Working capital Service level Source: British Airways London Eye MBS Operations Management – Slide 10 Process utilization, waiting time and variability 0 Decreasing variability Average number of units waiting to be processed Average number of units waiting to be processed Process utilization, waiting time and variability 10 20 30 40 50 60 70 80 90 100 Utilization (a) Decreasing variability allows higher utilization without long waiting times. MBS Operations Management – Slide 11 0 High utilization but long waiting time Short waiting time but low utilization Reduction in process variability Y X Z 10 20 30 40 50 60 70 80 90 100 Utilization (b) Managing process capacity and/or variability. Arrival Arrival 30 Processingtime time 20 105–15 105–15 Processing frequency frequency 9 mins mins mins mins (demand) (demand) mins X Utilization Utilization = 33.33 50 100 % % %%% QQ QQ== ==0infinity 0>0 Utilization = =100
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