Key operationsKey questions operations questions • What is operations management?
• Why is operations management important in all types of organization? • What is the input–transformation–output process? • What is the process hierarchy? • How do operations processes have different characteristics? • What are the activities of operations management? 2
Operations management defined
Operations management is the activity of managing the resources which are devoted to the production and delivery of products and services.
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Slack et al.’s model of operations management Operation’s performance
Operations management is fashionable! The consultancy services market – % of world revenues of 40 largest consultancy firms Financial 6 Organizational design 11
Marketing/sales 2
Operations and process management 31
Benefits/Actuarial 16
IT strategy 17
Corporate strategy 17
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Operations management at IKEA Design elegant products which can be flat-packed efficiently
Design a store layout which gives smooth and effective flow
Continually examine and improve operations practice
Site stores of an appropriate size in the most effective locations Maintain cleanliness and safety of storage area
Ensure that the jobs of all staff encourage their contribution to business success
Arrange for fast replenishment of products
Monitor and enhance quality of service to customers
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Operations are everywhere • The best way to start understanding the nature of ‘Operations’ is to look around you. • Everything you can see around you (except the flesh and blood) has been produced by an operation. • Every service you consumed today (radio station, bus service, lecture, etc.) has also been produced by an operation. • Operations Managers create everything you buy, sit on, wear, eat, throw at people and throw away.
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The three basic functions of enterprises
Digital Stock
Ford Motor Company 8
Interfunctional relationships between operations and other functions Engineering/ technical function Analysis of new technology options
Accounting and finance function
Provision of relevant data Financial analysis for performance and decisions
Understanding of human resource needs Recruitment development and training
Human resources function
Understanding of the capabilities and constraints of the operations process Understanding of process technology needs
Product/service development function
New product and service ideas
Operations function
Understanding of the capabilities and constraints of the operations process
Market requirements Understanding of Provision of systems for design, planning and infrastructural control, and improvement and system needs
Marketing function
Information technology (IT) function 9
• ‘High-end’ sandwich and snack retailer • Use only ‘wholesome’ ingredients
• All shops have their own kitchens where fresh sandwiches are prepared every day • Fresh ingredients are delivered early every morning • Same staff who serve you at lunch made the sandwiches that morning
• ‘We don’t work nights, we wear jeans, we party…’ 10
The three basic functions at Prêt a Manger
Product/ Service development
Marketing Promotional activities, market research, etc.
Nutritional ‘mechanical’ and aesthetic design of the sandwiches and snacks
Operations
Design, location and management of stores and in-store processes and the network that supplies them
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Operations management in all types of organization Automobile assembly factory – Operations management uses machines to efficiently assemble products that satisfy current customer demands
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Operations management in all types of organization (Continued)
Physician (General practitioner) – Operations management uses knowledge to effectively diagnose conditions in order to treat real and perceived patient concerns
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Operations management in all types of organization (Continued) Management consultant – Operations management uses people to effectively create the services that will address current and potential client needs
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Operations management in all types of organization (Continued) Disaster relief charity – Operations management uses ours and our partners’ resources to speedily provide the supplies and services that relieve community suffering
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Operations management in all types of organization (Continued)
Advertising agency – Operations management uses our staff’s knowledge and experience to creatively present ideas that delight clients and address their real needs
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Operations management uses… machines
to
efficiently
assemble
to treat real and perceived patient concerns
products
knowledge
to
effectively
diagnose conditions
people
to
effectively
create
services that will address current and potential client needs
to
speedily
provide
supplies and services that relieve community suffering
creatively
present
ideas that delight clients and address their real needs
ours and our partners’ resources our staff’s knowledge and experience
to
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Operations management is changing The business environment is changing, for example: • Increased cost-based competition
Prompting operations responses, for example: • Globalization of operations networking
•
Higher quality expectations
• Information-based technologies
•
Demands for better service
• Internet-based integration of operations activities
•
More choice and variety
• Supply chain management
•
Rapidly developing technologies
•
Frequent new product/service introduction
• Mass customization
•
Increased ethical sensitivity
• Lean process design
•
Environmental impacts are more transparent
• Environmentally sensitive design
•
More legal regulation
• Failure analysis
•
Greater security awareness
• Customer relationship management • Flexible working patterns • Fast time-to-market methods
• Supplier ‘partnership’ and development
• Business recovery planning 18
All operations are input–transformation–output processes
Inputs
Transformation process
Outputs
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Operations input resources and outputs Transformed resources • Materials • Information • Customers
Input resources
Transforming resources • Facilities
Transformation process
Output products and services
Customers
Outputs are products and services that add value for customers
• Staff 20
Inputs and outputs at Prêt a Manger Transformed resources • Ingredients • Packaging • Customers
Most operations produce products and services Crude oil production Aluminium smelting
Acme Whistles
Specialist machine tool production Prèt a Manger Restaurant Information systems provider
IKEA
Management consultancy Psychotherapy clinic
Mwagusi Safari Lodge
Pure products –Outputs that are exclusively tangible
Mixture of products and services – Outputs that are a mixture of the tangible and intangible
Pure services – Outputs that are exclusively intangible 22
Operations can be analyzed at three levels Flow between operations
The level of the supply network
Flow between processes
The level of the operation
The level of the process Flow between resources
Operations can be analyzed at three levels (Continued) Flow between operations
Operations management is concerned with the flow of transformed resources between operations, processes, where
Flow between processes
External operations interact with internal processes to form the external supply network
Flow between resources
Processes form an internal ‘supply network’ and become each others customers and suppliers
Example of analysis at three levels The supply network – Flow between operations Studios Casting agency Creative agency
Promotion agency
Programme/ video maker
Broadcasting company
A programme and video supply network
The operation – Flow between processes
The programme and video operation
Example of analysis at three levels (Continued) The supply network – Flow between operations
Programme and video maker
The operation – Flow between processes Engineering Marketing and sales
Finance and accounting
Production unit
Post production
Set and props manufacture
The programme and video operation
Example of analysis at three levels (Continued) The supply network – Flow between operations
Programme and video maker
The operation – Flow between processes
Set and props manufacture
The ‘Set and props manufacturing’ process
Set design
Set construction
Props acquisition
Set finishing
The television and video company divided into two ‘end-to-end’ business processes End-to-end process for programme production Engineering Programme marketing and sales
Programme finance and accounting
Programme production unit
Programme post production
Programme set and props manufacture End-to-end process for music video production
Music video marketing and sales
Music video finance and accounting
Music video set and props manufacture
Music video post Music video production production unit
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All functions use processes to provide service
Human resources Operations Marketing Information systems Finance
Sales
Any organization
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Differences within sectors are often greater than the differences between sectors Financial services An account management centre at a large retail bank
Financial analyst advising a client at an investment bank Pearson Education Ltd. MindStudio
Furniture manufacturing Craft production of reproduction ‘antique’ furniture
Mass production of kitchen units
Pearson Education Ltd. Rob Judges
Hotels Value-for-money hotel
Photodisc. Life File. Emma Lee
Lobby of an international luxury hotel Photodisc. Photolink. Jack Star
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A typology of operations and processes The 4 Vs Low
Volume
High High
High
Variety
Low
High
Variation in demand
Low
High
Visibility
Low
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A typology of operations and processes (Continued) The implications of high and low Volume in operations and processes Implications • Low repetition • Each staff member performs more of each task • Less systemization • High unit costs
Implications
Low
Volume
High
• High repeatability • Specialization • Capital intensive • Low unit costs
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A typology of operations and processes (Continued) The implications of high and low Variety in operations and processes Implications
• Flexible • Complex • Match customer needs • High unit costs
Implications
High
Variety
Low
• Well defined • Routine • Standardized • Regular • Low unit costs
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A typology of operations and processes (Continued) The implications of high and low Variation in operations and processes Implications • Changing capacity • Anticipation • Flexibility • In touch with demand • High unit costs
Implications Variation in High demand
Low
• • • • •
Stable Routine Predictable High utilization Low unit costs
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A typology of operations and processes (Continued) The implications of high and low Visibility in operations and processes Implications • Short waiting tolerance • Satisfaction governed by customer perception • Customer contact skills needed • Received variety is high • High unit costs
Implications High
Visibility
Low
• Time lag between production and consumption • Standardization • Low contact skills • High staff utilization • Centralization • Low unit costs
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A 4 Vs profile of two operations Low
Volume
High
High
Variety
Low
High
Variation
Low
High
Visibility
Low
Mwagusi Safari Lodge
Formule 1 Hotel
Important to understand how different operations are positioned on the 4 Vs. Is their position where they want to be? Do they understand the strategic implications? 36
