Contents
Operations Management and Strategy
Rationale
Operations Management is an area of business that is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It also is the management of resources and the distribution of goods and services to customers.
Operations also refers to the production of goods and services, the set of value-added activities that transform inputs into many outputs. Fundamentally, these value-adding creative activities should be aligned with market opportunity (see Marketing) for optimal enterprise performance.
APICS The Association for Operations Management defines operations management as "the field of study that focuses on the effective planning, scheduling, use and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the organization" (APICS Dictionary, 11th edition).
Historically, the body of knowledge stemming from industrial engineering formed the basis of the first MBA programs, and is central to operations management as used across diverse business sectors, industry, consulting and non-profit organizations.
Learning Outcomes
Knowledge
After completing the course, student will
1. be able to define operations management and understand how it fits into the organization
2. understand the concepts and analytic methods that are useful in the management of a firm's operations.
3. be familiar with the problems and issues confronting operations managers
4. understand the common-sense modeling concepts
5. have learned the basics of project management
Skills
After completing the course, student will
1. posses the language, concepts, insights and tools to deal with these issues in order to gain competitive advantage through operations.
2. quantitative and qualitative analysis skills needed for managing operating systems
3. be able to work cooperatively and productively on a project team
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Teaching and Learning Resources
Introduction
- The Operations Function
- Operations Strategy
- Product Design
- Design of Goods and Services
- Waiting Line Models
Introduction
To look at what operations strategy is, we would break the word into the two separate forming words: operations and strategy. Both these words act as antitheses to the other, see Slack and Lewis(2002). Where operations deals with the functions and procedures involved in the day-to-day processes of manufacturing goods and products, strategy deals with the direction and scope of an organisation over a long period of time on how they deliver to their clients. It turns out that the name itself holds information about the broad subject that tends to bind together routine process management, i.e., operations managements with a foresight of things forming up way ahead in the future.
We will focus on providing the reader with a proper definition of operations strategy and the difference between operations strategy and operations management. Furthermore, we will also shed light on how the market tends to stear the strategic focus of operations. At the end of this chapter, the user would have significant knowledge of:
- What operations strategy is?
- What the difference between operations strategy and operations management is?
- How markets govern the strategic focus of operations?
- How operations strategy helps a market mature and evolve?
Topics we'd be covering
- Operations strategy: working on a definition
- Difference between operations strategy and operations management
- Approaches towards operations strategy
Product Design is defined as the idea generation, concept development, testing and manufacturing or implementation of a physical object or service. It is possibly the evolution of former discipline name - Industrial Design. Product Designers conceptualise and evaluate ideas, making them tangible through products. Designers deal with aspects of technology, ergonomics, usability, human factors, material technology and qualities. Product designers are equipped with the skills needed to bring products from conception to market. They should also have the ability to manage design projects, and subcontract areas to other sectors of the design industry. |
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Industrial Design is an applied art whereby the aesthetics and usability of products may be improved. Design aspects specified by the industrial designer may include the overall shape of the object, the location of details with respect to one another, colors, texture, [[in an industrial way, for example an artisan can't be considered an Industrial Designer although he may challenge the same aspects of a product.
Some industrial designs are viewed as classic pieces that can be regarded as much as works of art of Societies of Industrial Design: "Design is a creative activity whose aim is to establish the multi-faceted qualities of objects, processes, services and their systems in whole life-cycles. Therefore, design is the central factor of innovative humanisation of technologies and the crucial factor of cultural and economic exchange" [1].
Activities
- Practice Problems 1
- Practice Problems 2
- Practice Problems 3
- Internet Homework Problems
- Internet Homework Problems
Operations as a Competitive Weapon. Operations Strategy
Tutorials
- Operations As a Competitive Weapon
- Operations Strategy
- Operations and Productivity
- Operations Strategy in a Global Environment
- The Value-Driven Approach to Operations Management
Readings
Value Engineering is a systematic method to improve the "Value" of goods and services by using an examination of FUNCTION. Value, as defined, is the ratio of Function to Cost. Value can therefore be increased by either improving the Function or reducing the cost. It is a primary tenet of Value Engineering that quality not be reduced as a consequence of pursuing Value improvements. In the United States, Value Engineering is specifically called out in Public Law 104-106, which states “Each executive agency shall establish and maintain cost-effective Value Engineering procedures and processes.” Value Engineering is sometimes taught within the Project Management or industrial engineering body of knowledge as a technique in which the value of a system’s outputs is optimized by crafting a mix of performance (Function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers. Value Engineering uses intuitive logic (a unique "how" - "why" questioning technique) and the analysis of Function to identify relationships that increase Value. It is considered a quantitative method similar to the Scientific Method, which focuses on Hypothesis - Conclusion to test relationships, and Operations Research, which uses model building to identify predictive relationships. |
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Value Engineering is also referred to as "Value Methodology".
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| In economics, Productivity is the amount of output created (in terms of goods produced or services rendered) per unit input used. For instance, labour productivity is typically measured as output per worker or output per labour-hour. With respect to land, the "yield" is equivalent to "land productivity".
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Activities
Project Management. Managing Project Processes
Tutorials
- Planning and Managing Projects
- Project Management
- Project Management
- Value-Driven Operations Strategy
- Planning and Managing Projects
- Process
Choices
Readings
Project Management is the discipline of defining and achieving targets while optimizing (or just allocating) the use of resources (time, money, people, materials, energy, space, provisions, communication etc) over the course of a project (a set of activities of finite duration). Project Management is quite often the province and responsibility of an individual project manager. This individual seldom participates directly in the activities that produce the end result, but rather strives to maintain the progress and productive mutual interaction of various parties in such a way that overall risk of failure is reduced. In contrast to on-going, functional work, a project is "a temporary endeavor undertaken to create a unique product or service." The duration of a project is the time from its start to its completion, which can take days, weeks, months or even years. Typical projects include the engineering and construction of various public or consumer products, including buildings, vehicles, electronic devices, and computer software. |
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- Project Management activities
- Project control variables
- History of Project Management
- Approaches
- The traditional approach
- Process-based management
- Auditing
- Project management and professional certification
- Case Studies
- Building engineering
- Building construction
- Capability Maturity Model
- Commonware
- Critical chain
- Critical path
- Dependency Structure Matrix
- Earned value management
- Estimation
- Flexible project management
- Functionality, mission and scope creep
- Gantt chart
- Governance
- Human Interaction Management
- Management
- Metrics
- Project accounting
- Program management
- Project management software (List of project management software)
- RACI diagram
- Software project management
- The Mythical Man-Month
- Timesheet
- Work Breakdown Structure
- Literature
Case Studies
- Internet Case Study - Haygood Brothers Construction - Haygood.doc
- Internet Case Study - Shale Oil Company - Shale.doc
Activities
Process Design
Tutorials
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Readings
The term Business Process Management (or BPM) refers to activities performed by businesses to optimize and adapt their processes.
Although it can be said that organizations have always been using BPM, a new impetus based on the advent of software tools (business process management systems or BPMS) which allow for the direct execution of the business processes without a costly and time intensive development of the required software. In addition, these tools can also monitor the execution of the business processes, providing managers of an organization with the means to analyze their performance and make changes to the original processes in real-time. Using a BPMS the modified process can then be merged into the current business process atmosphere.
Where Business Process Reengineering (popular in the 1990s) dealt with one-off changes to the organization, Business Process Management deals with the continuity and embedding of process orientation in the organization. Business Process Management has evolved as technology has caught up with management processes to the point that technology should no longer be the limiting factor in BPM.
Business Process Management encompasses other process elements, such as Total Quality Management (TQM), Six Sigma, Performance Management, etc..
Process Design is the creation of processes for desired physical and/or chemical transformation of materials.
Process design is central to chemical engineering, and like other forms of engineering design, it can be considered the summit of chemical engineering, bringing together the components of that field and placing engineering in a social, economic, and environmental context.
Processes can be designed from scratch or can be adaptations or extensions of existing facilities. The design starts at a conceptual level and ultimately takes the form of construction and fabrication plans.
Process design is distinct from equipment design, which is closer in spirit to the design of unit operations. Processes often include many unit operations, and the design is more related to systems engineering in it holistic approach.
The term Process Model (usually business process model) is used in different contexts. The context in which process models will be described in the forthcoming sections, will be Information System Development. There, process models are concepts which belong to the wider area of Method Engineering, more specific Process Engineering.
A description of what process models are is provided by Colette Rolland: “Processes of the same nature are classified together into a process model. Thus, a process model is a description of a process at the type level. Since the process model is at the type level, a process is an instantiation of it. The same process model is used repeatedly for the development of many applications and thus, has many instantiations. […] One possible use of a process model is to prescribe ‘how things must/should/could be done’ in contrast to the process itself which is really what happens. A process model is more or less a rough anticipation of what the process will look like. What the process shall be will be determined during actual system development” [Rolland1998]
Abstraction level for processes [Rolland1993]
Business Analysis is a structured methodology that is focused on completely understanding the customer's needs, identifying how best to meet those needs, and then "reinventing" the stream of processes to meet those needs. Its purpose is to develop business process improvement (BPI) as a key strategy and a management tool, capable of supporting the organization's vision, mission, goals, and objectives, and to promote the use of technology throughout the organization.
Business analysis also helps an organization to improve the way in which it conducts its functions and activities in order to reduce overall costs, provide more efficient use of scarce resources, and better support its customers. It introduces the notion of process orientation, of concentrating on and rethinking end-to-end activities that create value for customers, while removing unnecessary non-value added work.
Managing Technology. Human Resources and Job Design
Tutorials |
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Readings
Computer-Integrated Manufacturing (CIM) is manufacturing supported by computers. It is the total integration of Computer Aided Design / Manufacturing and also other business operations and databases.
This term has generally been replaced by Manufacturing Process Management in the wider field of PLM - Product Lifecycle Management
Some components of CIM are: CAD, CAPP (Computer-aided process planning), CAQ (Computer-aided quality assurance), CAM (Computer-aided manufacturing).
Definition according to the Computer and Automated Systems Association of the Society of Manufacturing Engineers: "CIM is the integration of total manufacturing enterprise by using integrated systems and data communication coupled with new managerial philosophies that improve organizational and personnel efficiency."
In 1993 the European Union ESPRIT programme carried out an investigation on how the trade-off between manual labour and automation affects the quality of the resultant products.
Case Studies
- Human Resources, Inc.
- Lincoln Electric's Incentive Pay System
- Chicago Southern Hospital
- Telephone Operator Standards at AT&T
Activities
Managing Quality. Total Quality Management. Statistical Process Control
Tutorials
- Managing Quality 1
- Managing Quality 2
- Total Quality Management
- Statistical Process Control
- Quality Control and Improvement
- Total Quality Management: Frameworks, Measures and Standards
- Quality
Improvement Tools & Techniques
Readings
Total Quality Management (TQM) is a management strategy aimed at embedding awareness of quality in all organizational processes. TQM has been widely used in manufacturing, education, government, and service industries, as well as NASA space and science programs.
Statistical Process Control (SPC) is a method for achieving quality control in manufacturing processes. It is a set of methods using statistical tools such as mean, variance and others, to detect whether the process observed is under control.
Case Studies
Activities
Capacity. Process Strategy
Tutorials
Readings
Capacity Planning enables the determination of sufficient resources so that user satisfaction can be maximised through timely, efficient and accurate responses.
Capacity planning is important when starting a new organisation, extending the operations of an existing business, considering additions or modifications to product lines, and introducing new techniques, equipment and materials.
In business, capacity is the optimum rate of output for a process. This means that capacity is the work that the system is capable of doing in a given period of time. Capacity can be expressed in the formula (number of machines and/or workers) x (number of shifts) x (utilization) x (efficiency) = capacity.
The goal of capacity planning is to meet current and future demand with a minimal amount of waste. The three main types of capacity planning are lead strategy, lag strategy, and match strategy.
The lead capacity strategy is adding capacity in anticipation of an increase in demand. Lead strategy is an aggressive strategy with the goal of luring customers away from the company’s competitors. The possible disadvantage to this strategy is that it often results in excess inventory, which is costly and often wasteful.
Lag strategy refers to adding capacity only after the company is running at full capacity or beyond due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy that decreases the risk of waste but may result in the loss of possible customers.
The match strategy (also known as the tracking strategy) is adding capacity in small amounts in response to changing demand in the market. This is a more moderate strategy.
References: North Carolina State University. (2006). Definitions: Capacity Planning and Capacity Strategy. Retrieved January 10, 2006 from http://scrc.ncsu.edu/public/DEFINITIONS/C.html
Capacity Utilization is a concept in Economics which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity. Thus, it refers to the relationship between actual output produced and potential output that could be produced with installed equipment, if capacity was fully used.
Case Studies
Activities
Part of the production line at Nissan's Sunderland plant. This image was
taken by a partner company of Nissan who supply software solutions to
help businesses. In this case, the project was to develop a database to
capture the unique Vehicle Identification Number (VIN) for each vehicle
passing through the production line.
Image reproduced with permission
from David Saville, Aldex Software Ltd.
Image copyright: Joseph Zlomek
Location Strategies. Location. Layout Strategy. Layout
Tutorials
- Location
- Location Strategies
- Layout Strategy
- Lecture Presentation - chap09.ppt
- Lecture Presentation - chap10.ppt
Readings
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In economics, Profit Maximization is the process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenue - total cost method relies on the fact that profit equals revenue minus cost, and the marginal revenue - marginal cost method is based on the fact that total profit in a perfectly competitive market reaches its maximum point where marginal revenue equals marginal cost.
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Case Studies
- Internet Homework Problems
- Internet Homework Problems
- Consolidated Bottling: A
- Southwestern University's Location Decision
- Collier Technical College
- Microfix Inc
- W & G Beer Distributorship
Activities
Image: The traditional view of China - culturally, politically and socially quite
a different place to do business. Copyright: Bill Brad, stock.xchng
Supply-Chain Management. Perspectives. Forecasting. E-Commerce and Operations Management
Tutorials
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Readings
Supply Chain Management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption.
According to the Council of Supply Chain Management Professionals (CSCMP), a professional association that developed a definition in 2004, Supply Chain Management "encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies."[1]
Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM possible scenarios can be created and solutions can be planned.
Some experts distinguish supply chain management and logistics management, while others consider the terms to be interchangeable. From the point of view of an enterprise, the scope of supply chain management is usually bounded on the supply side by your supplier's suppliers and on the customer side by your customer's customers.
Supply chain management is also a category of software products.
- APICS
- Beer Distribution Game
- Customer Driven Supply Chain
- Demand chain management
- Distribution
- Information technology management
- Logistic engineering
- Logistics
- Management Information Systems
- Marketing
- Reverse Auction
- Strategic information system
- Supply Chain Security
- Supply chain
- Vendor Managed Inventory
- External links
- References
- Notes
Electronic Business, or "e-business", may be defined broadly as any business process that relies on an automated information system. Today, this is mostly done with Web-based technologies. The term "e-business" was coined by Lou Gerstner, CEO of IBM. Electronic business methods enable companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers. In practice, e-business usually includes e-commerce. E-commerce seeks to add revenue streams using the Worldwide Web or the Internet to build and enhance relationships with clients and partners and to improve efficiency. Often, e-commerce involves the application of knowledge management systems. |
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E-business is more than just e-commerce. It involves business processes spanning the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service, and cooperating with business partners. Special technical standards for e-business facilitate the exchange of data between companies. E-business software solutions allow the integration of intra and inter firm business processes. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these.
Applications can be divided into three categories:
1) Internal business systems
- customer relationship management
- enterprise resource planning
- employee information portals
- knowledge management
- workflow management
- document management systems
- human resources management
- process control
- internal transaction processing
2) Enterprise communication and collaboration
- content management system
- voice mail
- discussion forums
- chat systems
- data conferencing
- collaborative work systems
3) Electronic commerce - Business-to-business electronic commerce or business-to-consumer electronic commerce
- electronic funds transfer
- supply chain management
- e-marketing
- online marketing
- online transaction processing
- music downloads
Case Studies
- AT&T Buys a Printer
- Blue and Gray, Inc.
- Factory Enterprises, Inc.
- Thomas Manufacturing Company
- Cisco's E-commerce Connection
- Fruit of the Loom Tries E-Commerce
- The Akron Zoological Park - Akron.doc
- The North-South Airline - Northsouth.doc
Activities
Inventory Management
Tutorials
- Independent-Demand Inventory
- Inventory Management 1
- Inventory Management 2
- Inventory Management 3
- Independent Demand Inventory Management Systems
Readings
In business management, inventory consists of a list of goods and materials held available in stock.
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Case Studies
Activities
Aggregate Planning. Resource Planning. Just-in-Time and Lean Systems
Tutorials
- Aggregate Planning 1
- Aggregate Planning 2
- Facilities and Aggregate Planning
- Dependent Demand Requirements Planning Systems
- Resource Planning
- Just-in-Time and Lean Systems
- Just-In-Time Systems
- Lean/Just-In-Time Systems
- Lean Systems 1
- Lean Systems 2
- Lean Systems Tools and Procedures
Readings
Aggregate Planning is an operational activity which does an aggregate plan for the production process, in advance of 2 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organisation is kept to the minimum, over that period. The quantity of outsourcing, subcontracting of items, overtime of labour, numbers to be hired and fired in each period and the amount of inventory to be held in stock and to be backlogged for each period are decided. All of these activities are done within the framework of the company ethics, policies, and long term commitment to the society, community and the country of operation. Aggregate planning has certain prerequired inputs which are inevitable. They include: 1. Information about the resources and the facilities available. 2. Demand forecast for the period for which the planning has to be done. 3. Cost of various alternatives and resources. This includes cost of holding inventory, ordering cost, cost of production through various production alternatives like subcontracting, backordering and overtime. 4. Organisational policies regarding the usage of above alternatives. |
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Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, or Kanban (Jp. カンバン also 看板), that tell production processes to make the next part. Kanban are usually simple visual signals, such as the presence or absence of a part on a shelf. JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency when implemented correctly.
New stock is ordered when stock reaches the re-order level. This saves warehouse space and costs. However, one drawback of the JIT system is that the re-order level is determined by historical demand. If demand rises above the historical average planning duration demand, the firm could deplete inventory and cause customer service issues. To meet a 95% service rate a firm must carry about 2 standard deviations of demand in safety stock. Forecasted shifts in demand should be planned for around the Kanban until trends can be established to reset the appropriate Kanban level. In recent years manufacturers have touted a trailing 13 week average is a better predictor than most forecasters could provide.
Lean Manufacturing is a management philosophy focusing on reduction of the seven wastes (Over-production, Waiting time, Transportation, Processing, Inventory, Motion and Scrap) in manufactured products or any type of business. By eliminating waste (muda), quality is improved, production time is reduced and cost is reduced. Lean "tools" include constant process analysis (kaizen), "pull" production (by means of kanban) and mistake-proofing (poka yoke). Lean, as a management philosophy, is also very focused on creating a better workplace through the Toyota principle of "respect for humanity."
The key lean manufacturing principles: 1. Perfect first-time quality - quest for zero defects, revealing & solving problems at the source 2. Waste minimization – eliminating all activities that do not add value & safety nets, maximize use of scarce resources (capital, people and land) 3. Continuous improvement – reducing costs, improving quality, increasing productivity and information sharing 4. Pull processing: products are pulled from the consumer end, not pushed from the production end 5. Flexibility – producing different mixes or greater diversity of products quickly, without sacrificing efficiency at lower volumes of production 6. Building and maintaining a long term relationship with suppliers through collaborative risk sharing, cost sharing and information sharing arrangements.
Lean is basically all about getting the right things, to the right place, at the right time, in the right quantity while minimizing waste and being flexible and open to change. |
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- History
- Types of waste
- System engineering
- Mechanical engineering
- Software engineering
- Lean healthcare
- See also
- Books on lean production
- 9External links
Workshop
Case Studies
Activities
Material Requirements Planning (MRP) and ERP. Scheduling. Short Term Scheduling. Maintenance and Reliability. Financial Analysis
Tutorials
Readings
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Case Studies
Activities
Recommended Texts
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Operations Management: Contemporary Concepts and Cases, 2/e Roger G. Schroeder, University of Minnesota Check the availability and buy your books from our Bookshop. |
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Value-Driven
Operations Management: Check the availability and buy your books from our Bookshop. |
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Operations Management: Process and Value Chains
Lee J. Krajewski, University of Notre Dame ISBN: 0-13-169739-0 Check the availability and buy your books from our Bookshop. |
Resources
