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Chapter 1 – Operations Management

Operations Management
Systematic design, direction, and control of processes that transform inputs to services and products for internal, as well as external customers
Any activity or group of activities that takes one or more inputs, transform them, and provides one or more outputs for its customer
_ clustered together into operations
A group of resources performing all or part of one or more processes
Supply Chain
An interrelated series of processes within and across firms that produces a service or product to the satisfaction of customers
Supply Chain Management
The synchronization of a firm’s processes with those of its suppliers and customers to match flow of materials, services and information with customer demand
3 Mainline Functions of any Business
1) Operations
2) Marketing
3) Finance
Integration between Different Functional Areas of a Business
Integration between Different Functional Areas of a Business
Process Details
_ can have its own objectives
_ involve work flow across different department
_ require resources from several departments
_ have inputs and outputs
A Process Illustration
A Process Illustration
Outputs of a Process
Services or tangible products to internal or external customers
External Customers
A customer who is either an end user or an intermediary buying the firm’s finished services or products
Internal Customers
One or more employees of processes that rely on inputs from other employees or processes in order to perform their work.
External Suppliers
The businesses or individuals who provide the resources, services, products, and materials for the firm’s short-term and long-term needs
Internal Suppliers
The employees or processes that supply important information or materials to a firm’s processes
2 Types of Major Processes
1) Service
2) Manufacturing
2 Key Differences Between Service and Manufacturing
1) Nature of output
2) Degree of customer contact
5 Transformation Dimensions
1) Physical properties
2) Shape
3) Size
4) Surface finish
5) Joining Transfomraiont
Manufacturing’s Nature of Output
Convert materials into goods that have is tangible
_ longer response time
_ capital intensive
_ change at least 1 of 5 transformation
Service’s Nature of Output
Produce intangible, perishable outputs
_ does not change at least 1 of 5 transformation
Process View of a Company
Helpful for understanding how services or products are produced and why cross-functional coordination is important
_ do not know the strategic benefits of the processes
Supply Chain View of a Company
Link between process and performance
2 Main Types of Processes in the Supply Chain
1) Core processes
2) Support processes
Supply Chain Linkages Illustration
Supply Chain Linkages Illustration
Core Processes
A set of activities that delivers value to external customers
4 Core Processes
1) Supplier relationship process
2) New service/product development process
3) Order fulfillment process
4) Customer relationship process
Supplier Relationship Process
A process that selects the suppliers of services, materials, and information and facilitates the timely and efficient flow of these items into the firm
New Service/Product Development Process
A process that designs and develops new services or products
from inputs received from external customer specifications or from the market in general
through the customer relationship process.
Order Fulfillment Process
A process that includes the activities required to produce and deliver the service or product to the external customer
Customer Relationship Process
A process that identifies, attracts,
and builds relationships with external customers, and facilitates the placement of orders by
customers, sometimes referred to as customer relationship management
Support Processes
A process that provides vital resources and inputs to the core processes
_ essential to management of the business
Operations Strategy
The means by which operations implements the firm’s corporate strategy and helps to build a customer-drive firm
_ links long-term and short-term operations decisions to corporate strategy and develops the capabilities the firm needs to be competitive
_ form supply chain
Connection Between Corporate Strategy and Key Operations Management Decisions
Connection Between Corporate Strategy and Key Operations Management Decisions
Corporate Strategy
Provides an overall direction that serves as the framework for carrying out all the organization’s function
_ specifies business company will pursue
_ isolate new opportunities and threats
_ identifies growth objectives
What do corporate strategies include?
_ coordinates the firm’s overall goals with its core processes
_ determines with market will serves
_ responses needed to the changing environment
_ provides resources to develop core competencies and core processes
_ global strategies
Core Competencies
The unique resources and strengths that an organization’s
management considers when formulating strategy
Developing Core Competencies
Need to reflect the collective learning of the organization
_ especially in how to coordinate processes and integrate technologies
core competencies = core processes
4 Consideration for Developing Core Competencies
1) Workforce
2) Facilities
3) Market and Financial Know-How
4) System and technology
Workforce – A Consideration for Developing Core Competencies
Needs to be well-trained and flexible to respond to market needs
Facilities – A Consideration for Developing Core Competencies
Well-located and flexible facilities able to handle a variety of services and products
Market & Financial Know How – A Consideration for Developing Core Competencies
An organization that can easily attract capital from stock sales, market and distribute its services or products, or differentiate them from similar services or products on the market has a competitive edge
Systems & Techonology – A Consideration for Developing Core Competencies
Organizations with expertise in information systems have an edge. Having the patents on a new technology is also a big advantage.
2 Effective Global Strategies
1) Strategic alliances
2) Locating abroad
Strategic Alliance
An agreement with another firm to complete a share objective
3 Forms of Strategic Alliance
1) Collaborative effort
2) Joint venture
3) Techonology licensing
Collaborative Effort
One firm has core competencies that another needs but is unwilling (or unable) to duplicate
_ buyer-supplier relationship
Joint Venture
Two firms agree to produce a service
or product jointly
_ often used by firms to gain access to foreign markets
Technology Licensing
One company licenses its service or production methods to another
_ maybe used to gain access to foreign markets
Locating Abroad
Moving operation to a location abroad
_ a lot more risks
_ key decision of supply chain because it affects the flow of materials, information, and employees in support of the firm’s core processes
What does market analysis include?
_ categories the firm’s customer = market segmentation
_ customers’ needs assessment
_ assesses competitor’s strength
Market Segmentation
The process of identifying groups of customers with enough in common to warrant the design and provision of services or products that the
group wants and needs
_ must determine the characteristics that clearly differentiate each segment
Needs Assessment
Identifies the needs of each segment and assesses how well competitors are addressing those
_ needs can be related to the service or product and its supply chain
_ market needs should include both the tangible and intangible attributes and features of products and services that a customer desires
4 Types of Market Needs
1) Service or product needs
2) Delivery system needs
3) Volume needs
4) Other needs
Competitive Priorities
The critical operational dimensions a process or supply chain must
possess to satisfy internal or external customers
_ based on market analysis help managers develop the services or products and the processes needed to be competitive
_ important to existing or old
_ important to maintain or build market share
_ planned for processes and supply chain created them
Competitive Capabilities
The cost, quality, time, and flexibility dimensions that a process or supply chain actually possesses and is able to deliver
Order Winners
A criterion that customers use to differentiate the services or products of one firm from those of another
_ may include criteria not directly related to the firm’s operation
Order Qualifier
Minimal level required from a set of criteria for a firm to do business in a particular market
Basic measure of performance for economies, industries, firms, and processes
Productivity Equation
Productivity Equation

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