Operations Management

The process type McDonald's uses is batch process because there are moderate volume and moderate variety in their products and services. McDonald's products are semi-standardized as they are stocked pre cooked. When a customer makes an order, the product is then prepared. This shows high flexibility, for example, a customer orders a special order of McCracken without lettuce, the order will be processed within minutes. There is also high volume of production as McDonald's serves thousands of customers dally. Inning a batch process means that the speed of delivery Is dependent upon the speed and experience of the Individual worker. This process supports the business of McDonald's as they will be able to process the different types orders to cater to the different needs of customers, In the shortest time possible. To achieve that, moderate skill level of workers is required. The advantages of batch process are that it allows workers to specialist in specific lobscouse and use the speci alist equipment, different batches of different production an be made.On the other hand, there are also disadvantages of batch process. Firstly, specialization means that the workers are doing repetitive jobs, which can result to boredom. Secondly, the machinery needs to be reset and cleaned in between batches. This can be time consuming which in turns slows down the production. Also, when the hamburgers are produced by batches, they would keep them for as long as possible and eventually discard them if they were not sold. This will increase the cost for McDonald's. Operations Management OPERATIONS MANAGEMENT: as a competitive weapon mks [email  protected] ac. in http://mks507. vistapanel. net Prof. (Dr. ) Manoj K Srivastava Operations Management Area 1. The Systems Approach C O N T E N T S 2. 3. OM Definition Ten Critical Decisions 4. 5. The Cases 4V Typology of Operations 6. 7. Productivity Competitiveness 8. 9. Manufacturing Vs. Service? The History 10. The Future 1 Systems Approach Systems Approach Reduce waste†¦or enhance output†¦ 2 OM Definition What is Operations Management? What is Operations? a function or system that transforms inputs into outputs of greater valueOperations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs TYPES OF TRANSFORMATIONS †¢ †¢ Physical: Locational: as in manufacturing operations as in transportation operations What is a Transformation Process? a series of activities along a value chain extending from supplier to customer. activiti es that do not add value are superfluous and should be eliminated †¢ †¢ Exchange: Physiological: as in retail operations as in health care What is Operations Management? esign, operation, and improvement of productive systems †¢ †¢ Psychological: Informational: as in entertainment as in communication Value Engineering / Value Analysis ? Use ? Esteem ? Time ? Place 3 What Operations Managers do? ? Service, product design†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Quality management†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Process, capacity design†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Location †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Ten Critical Decisions ? Layout design †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Human resources, job design†¦Ã¢â‚¬ ¦.. ? Supply-chain management†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Inventory management †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. ? Scheduling †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Maintenance †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 4 The Cases Britannica StoryInvite your enemy onto the roof, then remove the ladder Sun tzu The Art of War 36 Stratagems 1988 1988-93 Britannica (Leader, 230 years experience, 1768), $1000 Microsoft encyclopedia from funk & Wagnall’s encyclopedia Searchability, Multimedia, Graphics, Timeline (20 feet), cross-links, updating 1993 1995 Price $300 (cost of CD:$1) (in-fact you can purchase encarta encyclopedia + a PC in Britannica price) Britannica has to jump in a business which was not its strength, Price still $1000 1997 Reduced to $125, later on free online, crashed twice Innovation in Operations McDonald’s Corp Olympic Flame ? ? ? Facing Increased Competition Smarter and More Demanding Customers Less Brand Loyal Switched to hamburger bun that does not require toasting. ? Customers prefer taste of new bun ? Saves time an d money, QSVC Model ? ? ? ? 10,000 runners 15,000 miles through 42 states in 84 days Two years of planning Must plan for no-show runners and rush hour traffic ? Cost of this operation in the neighbourhood of $20 million Innovation in Operations Ginger Hotel BillDesk No-frills, June 2004 No room service, travel desk, swimming pool Wi-fi, Two type of room: Rs. 999 and Rs. 1199, Prabhat Pani, CEO, Roots CorporationBillDesk, a property of IndiaIdeas. com Ltd. , 2000 Three Arthur Anderson Executives Third-party bill collection 25 Banks, 100 companies Just apply today. It only takes a few minutes. Once you're approved, you get your very own Zipcard. Reserve one of our cars – for a couple hours or the entire Day. Do it online or use a phone. We're easy. Walk to the car, then just hold your Zipcard to the windshield. The doors will unlock, and it's all yours! Drive away†¦ and return to the same reserved parking spot at the end of your reservation. It's that simple. And remember, gas and insurance are included too. 5Operations typology: 4V Approach 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 Furniture manufacturing Mass production of kitchen units Craft production of reproduction ‘antique’ furniture Hotels Value-for-money hotel Lobby of an international luxury hotel A Typology of Operations: 4 V’s Low Volume High High how many products or services are made by the operation? how many different types of products or services are made by the operation?High Variety Low High Variation in demand Low how much does the level of demand change over time? how much of the operation’s internal working are ‘exposed’ to its customers? High Visibility Low Implications Low repetition Each staff member performs more of job Less systemization High unit costs Flexible Comple x Match customer needs High unit costs Changing capacity Anticipation Flexibility In touch with demand High unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs A Typology of Operations ImplicationsHigh repeatability Specialization Capital intensive Low unit costs Well defined Routine Standardized Regular Low unit costs Stable Routine Predictable High utilization Low unit costs Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs Low Volume High High High Variety Low High Variation in demand Low High Visibility Low 6 Productivity Effectiveness Efficiency Productivity Types of Productivity Single Factor Productivity Output Labor Output Materials Output is of quality nature Output Capital Multifactor ProductivityOutput Labor + Materials + Overheads Output Labor + Energy + Capital Total Factor Productivity Good s and Services Produced All inputs used to produce them America West’s Reverse Pyramid system This is in contrast to the approach used by many airlines of just boarding all seats starting from the back of the plane and working forward. 7 Competitiveness Competitiveness The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens. A firm is competitive if it can produce products [†¦ of superior quality or lower costs than its domestic and international competitors. (US-President`s Commission on Industrial Competitiveness 1985, S. 6) Global Competitiveness Ranking 1. Switzerland 2. Sweden 3. Singapore 4. United States 5. Germany 6. Japan 7. Finland 8. Netherlands 9. Denmark India 51 10. Canada China 27 Competition Within Industries Increases When ? Firms are relatively equal in size and resources ? Products and services are standardized ? Industry growt h is slow or exponential Barriers to Entry ? ? Economies of scale Learning curves Capital investment Access to supply and distribution channels 8 Manufacturing vs. services Degree of Servitization Manufacturing and Service Employment Manufacturing Employment and Production Services as % of GDP Tangibility Spectrum Economic Offerings can determine prior to purchasing can only be discerned after purchase or during consumption or use customer must believe in, but cannot personally evaluate even after purchase & consumption Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Perishability Production & Consumption 9 History of OM Five Eras of Operations Management Journey of Operations Management Adam Smith uge increases in productivity obtainable from technology or technological progress are possible match human and physical capital, Division of labor Eli Whitney †¢ †¢ In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications – Musket parts could be used in any musket Significant events in operations management ? ? ? ? Division of labor Standardized parts Scientific management Coordinated assembly line (Smith (Whitney (Taylor (Ford 1776) 1800) 1881) 1913) ? ? ? Gantt charts Motion study Quality control (Gantt (Gilbreths (Shewhart 1916) 1922) 1924) 10Where are we going? Exciting New Challenges in Operations Management Changing Challenges Past Local or national focus Batch (large) shipments Causes Low-cost, reliable worldwide communication and transportation networks Cost of capital puts pressure on reducing investment in inventory Global Focus Future Just-in-time shipments Low-bid purchasing Quality emphasis requires that suppliers be engaged in product improvement Shorter life cycles, rapid international communication, computer-aided design, and international collaboration Affluence and worldwide markets; increasingly flexible production processes Changing sociocultural milieu.Increasingly a knowledge and information society. Environmental issues, ISO 14000, increasing disposal costs Supply-chain partners Rapid product development, alliances, collaborative designs Mass customization Empowered employees, teams, and lean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing Lengthy product development Standardized products Job specialization Low cost focus Operations Management QUESTION 1 Operations management must be managed properly in order to improve an organization’s productivity and profitability. In the Cadbury World case, several micro and macro processes are involved and those processes bring some impacts to Cadbury World. Thus, Cadbury World must possess a sustainable micro and macro processes to achieve the best outcome and performance. Micro processes that involved are easily to manage compared to macro processes because macro processes are hard to manage or manipulate (Jae, Shim, Joel & Siegel, 1999).As a result, Cadbury World must put more efforts in solving the obstacles and troubles that occurred within the macro processes. First of foremost, we will be discussing the micro processes that involved in Cadbury World case. Within the micro processes, they can make some planning on their operation and strategic management processes to enhance their business and profitability. Micro Processes| Explanation and elaboration| Company| * Cadbur y has set up a team to improve their operation management. * More tickets collectors have been assigned in the exhibition centre to manage and help visitors when they need assistance. Cadbury is always open for criticism, feedbacks and recommendation to improve their operation management. | Customers | * Cadbury always attempting to fulfill all the requirements and needs from their customers and ensure their customers will have a wonderful trip in their exhibition centre. * This is because customers will affect their reputation and brand name if they are not satisfying with the services and products that provided (Galloway, 1998). * Other than that, Cadbury has launched some new products and add more elements into their exhibition programme to attract more visitors and customers. Competitors| * Cadbury World has implemented SWOT analysis to identify their strengths and weaknesses and also the opportunities and threats from their outside environment. So that, they are able to gain th e competitive advantage among their competitors. | Intermediaries| * Cadbury requires several marketing intermediaries in promoting their activities and products. * As such, they have selected some marketing intermediaries to promote this Cadbury World exhibition event and help them to gain the profits. | Suppliers| * It is crucial to select the best suppliers to enhance the production of Cadbury.Due to this, Cadbury has implemented some analysis and works when choosing their suppliers because they always ensure their products have the high quality that can fulfill every customer’s requirements. | Table 1: Micro processes as applied to the case Cadbury World Macro Processes| Description | Demographic| * Several analysis have been implemented to analyze the preference and needs among people from different demographic profile. * This is because demographic profile is crucial when managing the requirements from different customers. Those analysis can be done according to several groups such as gender, age group, nationality, likeliness. | Natural| * Cadbury always seek for alternatives although their natural resources are still available and still able to support their operation and production. * This is because they believed that natural resources will be finished exploited in one day. So that, they want to put some efforts before the day to come. | Economic| * Economic trend must be aware from time to time to prevent Cadbury World business being affected during the economic crisis. Technological| * Cadbury always conscious and aware with the new technological and applied the technological elements into their operation system to gain the higher profits. * Besides, with the technological elements such as automated system or centralized system can help their operation system become more efficient and easy to manage the visitors that entering their exhibition centre. | Table 2: Macro processes as applied to the case Cadbury World Figure 1: Input-Transformati on-Output model (Cadbury World case) The model of input-transformation-output in Cadbury World case has been displayed in Figure 1 above.This model consisted of micro and macro processes because as mentioned earlier, micro and macro processes are very important for the operation processes in an organization. From the figure above, we will be discussing the micro processes of Cadbury World case in the form of input-transformation-output model. Those micro processes are company, customers, suppliers and competitors. Cadbury needs a lot of human resources such as manpower to carry out their daily operations process. Those manpower with the technological methods are essential to convert the raw materials from the input to the transformation process   (Tilanus, 1997).After that, the incomplete goods that in the transformation process will turn into the outputs which are products and goods that introduce to the markets. When the products introduced to market, Cadbury may get some feedba cks from publics or their customers and also their competitors. Hence, Cadbury must do some amendment on their operation processes within the internal management in their organization or review their suppliers to enhance their operation process. QUESTION 2 Process flow chart to show the ways of customers are being processed through the operation from start to finishThe process design that adopted by Cadbury World case is the product-based layout because the arrangement of the equipments in every section of the exhibition centre are clearly displayed in a logical sequence. Hence, the process design can provide the better understanding to their visitors if they wish to take a tour without guiding. This is because the product-based layout can eliminate the confusion of the visitors as the process flow is predictable and repeatable (Thompson, 1967)  . QUESTION 3 3. 1: The capacity of each processes in question 2 above The entrance 5-20 visitors x (60 minutes / 2-1/2 minutes) =  360- 480 visitors per hour The Marie Cadbury room * Original design (70 visitors x 1/3) x [60 minutes / (5 minutes + 1-2 minutes + 4 minutes)] =  131-144 visitors per hour * Peak times 70 visitors x [60 minutes / (5 minutes + 1-2 minutes + 4 minutes)] =  382-420 visitors per hour The packaging plant 30 visitors x [60 minutes / (3 minutes + 8 minutes) =  164 visitors per hour The demonstration area (15 visitors x 8 guides) x (60 minutes / 6-17 minutes) =  424-1200 visitors per hour * The shop [(60 minutes x 60 seconds)/15 seconds] x 3 checkouts =  720 visitors per hour * The restaurant: If the tables are allowed to sit with different families or groups of visitors (60 minutes/25 minutes) x 169 covers =  406 visitors per hour * If the tables are allowed to sit with one family or same group of visitors (60 minutes/25 minutes) x 53 tables =  128 visitors per hour The coffee and ice-cream  parlour (60 minutes/18 minutes) x 46 covers =  154 visitors per hour 3. 2: The project ed annual, weekly and hourly demand from the data in the case (Mid August to end of December 4. 5 months). Explain  the impact of seasonality on these figures. 1. The Entrance: 2. 5 minutes 2. The Marie Cadbury Room: 10 – 11 minutes 3.The Packaging Plant: 11 minutes 4. The Demonstration Area: 6 – 17 minutes 5. The Shop: 15 seconds = 0. 25 minutes 6. The Restaurant: 25 minutes 7. The coffee and ice-cream Parlour: 18 minutes After reviewing the case of Cadbury World, we can understand that the time required for each station in the case of Cadbury World when during the normal period are 84. 75 minutes / 3. 53 hours and 72. 75 / 3. 03 hours during the peak periods. Therefore, the projected demand are as below:- 1. Annual demand = 4. 5 x 30 x (3. 03 – 3. 53) = 409. 05 – 476. 55 hours 2. Weekly demand = 7 x (3. 03 – 3. 53) = 21. 21 – 24. 71 hours 3.Hourly demand = 3. 03 – 3. 53 hours Holiday season, weather, national celebration or event such as election can cause some impacts of seasonality that affect Cadbury World business and operation. From the Cadbury World case, the period of the exhibition event is held from mid of August to the end of December. During that period, Halloween and Christmas might influence their operation as people may wish to take a short travel to refresh themselves during these holidays. As such, Cadbury World can be a better selection. However, when the demand of seasonality increased, Cadbury World needs extra capacities to support their operation.If not, they will face some bottlenecks and affect their overall performance and profitability. QUESTION 4 4. 1 The ways that Cadbury world management has varied capacity to respond to changes in demand When the business of an organization is boosted up, this means that the demand has been increased as well. Thus, the organization need more capacities to prevent they fall into bottlenecks (Stevenson, 2010). In Cadbury World case, some bottleneck s might be occurred if they didn’t varied the capacity to respond to the changes of demand. Firstly, more ticket collected have been arranged accordingly in the entrance area during peak period.Those ticket collectors will apply the technological system such as automation system to handle the situation in the exhibition centre and also the safety of their visitors. Besides, Cadbury internal management team have implemented some actions to enlarge the space of parking lots during the peak period. After that, the shop, restaurant and ice-cream parlour areas will be amend to cater more visitors. 4. 2 The operations that occurred the bottlenecks in the process  and the ways that service can be amended to increase bottleneck capacity. Where are the bottlenecks in the process? How could service be amended to increase bottlenecks capacity? | The entrance| * Introduce online ticketing to reduce the time that needed to purchase the tickets. * Utilize information technology system to handle the safety of visitors that enter the exhibition centre. * Enhance the dependability and speed in the exhibition centre to provide the convenience to visitors. | The exhibition area| * Boost up the efficiency of Cadbury staffs that handle the visitors that enter this area. * Apply micro operation system and information technology method to reduce the delays problems and also eliminate the workload of attendant. Improve the process flow in Marie Cadbury room as it is the bottlenecks in this section. | The packaging plant| * Change the areas that show the brief videos. * Such as displaying the brief videos in the areas before entering the packaging plant to give a brief explanation and understanding to visitors. | The restaurant| * Amend the process flow because current process flow is inconvenient to visitors. * Redesign the serving points and serve more variety of food in each serving point. * So that, visitors can enjoy their favorite food without passing every serving poin ts. The restaurant design can amend to a round shape instead of row arrangement to increase the flexibility to visitors. | LIST OF REFENCES Galloway, L. (1998)  Principles of Operations Management. India: ITP. Jae, K. , Shim, Joel, G. & Siegel (1999) Operations Management. USA: Barron’s Educational Series. Stevenson, W. J. (2010) Operations Management. An Asian Perspective (9th Edition). New Zealand: McGraw-Hill. Thompson, J. (1967)  Organizations in Action. New York: McGraw-Hill. Tilanus, B. (1997)  Information Systems in Logistics and Transformation (2nd ed). USA: Elsevier Science Ltd. Operations Management The process type McDonald's uses is batch process because there are moderate volume and moderate variety in their products and services. McDonald's products are semi-standardized as they are stocked pre cooked. When a customer makes an order, the product is then prepared. This shows high flexibility, for example, a customer orders a special order of McCracken without lettuce, the order will be processed within minutes. There is also high volume of production as McDonald's serves thousands of customers dally. Inning a batch process means that the speed of delivery Is dependent upon the speed and experience of the Individual worker. This process supports the business of McDonald's as they will be able to process the different types orders to cater to the different needs of customers, In the shortest time possible. To achieve that, moderate skill level of workers is required. The advantages of batch process are that it allows workers to specialist in specific lobscouse and use the speci alist equipment, different batches of different production an be made.On the other hand, there are also disadvantages of batch process. Firstly, specialization means that the workers are doing repetitive jobs, which can result to boredom. Secondly, the machinery needs to be reset and cleaned in between batches. This can be time consuming which in turns slows down the production. Also, when the hamburgers are produced by batches, they would keep them for as long as possible and eventually discard them if they were not sold. This will increase the cost for McDonald's. Operations Management OPERATIONS MANAGEMENT: as a competitive weapon mks [email  protected] ac. in http://mks507. vistapanel. net Prof. (Dr. ) Manoj K Srivastava Operations Management Area 1. The Systems Approach C O N T E N T S 2. 3. OM Definition Ten Critical Decisions 4. 5. The Cases 4V Typology of Operations 6. 7. Productivity Competitiveness 8. 9. Manufacturing Vs. Service? The History 10. The Future 1 Systems Approach Systems Approach Reduce waste†¦or enhance output†¦ 2 OM Definition What is Operations Management? What is Operations? a function or system that transforms inputs into outputs of greater valueOperations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs TYPES OF TRANSFORMATIONS †¢ †¢ Physical: Locational: as in manufacturing operations as in transportation operations What is a Transformation Process? a series of activities along a value chain extending from supplier to customer. activiti es that do not add value are superfluous and should be eliminated †¢ †¢ Exchange: Physiological: as in retail operations as in health care What is Operations Management? esign, operation, and improvement of productive systems †¢ †¢ Psychological: Informational: as in entertainment as in communication Value Engineering / Value Analysis ? Use ? Esteem ? Time ? Place 3 What Operations Managers do? ? Service, product design†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Quality management†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Process, capacity design†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Location †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Ten Critical Decisions ? Layout design †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Human resources, job design†¦Ã¢â‚¬ ¦.. ? Supply-chain management†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Inventory management †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. ? Scheduling †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Maintenance †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 4 The Cases Britannica StoryInvite your enemy onto the roof, then remove the ladder Sun tzu The Art of War 36 Stratagems 1988 1988-93 Britannica (Leader, 230 years experience, 1768), $1000 Microsoft encyclopedia from funk & Wagnall’s encyclopedia Searchability, Multimedia, Graphics, Timeline (20 feet), cross-links, updating 1993 1995 Price $300 (cost of CD:$1) (in-fact you can purchase encarta encyclopedia + a PC in Britannica price) Britannica has to jump in a business which was not its strength, Price still $1000 1997 Reduced to $125, later on free online, crashed twice Innovation in Operations McDonald’s Corp Olympic Flame ? ? ? Facing Increased Competition Smarter and More Demanding Customers Less Brand Loyal Switched to hamburger bun that does not require toasting. ? Customers prefer taste of new bun ? Saves time an d money, QSVC Model ? ? ? ? 10,000 runners 15,000 miles through 42 states in 84 days Two years of planning Must plan for no-show runners and rush hour traffic ? Cost of this operation in the neighbourhood of $20 million Innovation in Operations Ginger Hotel BillDesk No-frills, June 2004 No room service, travel desk, swimming pool Wi-fi, Two type of room: Rs. 999 and Rs. 1199, Prabhat Pani, CEO, Roots CorporationBillDesk, a property of IndiaIdeas. com Ltd. , 2000 Three Arthur Anderson Executives Third-party bill collection 25 Banks, 100 companies Just apply today. It only takes a few minutes. Once you're approved, you get your very own Zipcard. Reserve one of our cars – for a couple hours or the entire Day. Do it online or use a phone. We're easy. Walk to the car, then just hold your Zipcard to the windshield. The doors will unlock, and it's all yours! Drive away†¦ and return to the same reserved parking spot at the end of your reservation. It's that simple. And remember, gas and insurance are included too. 5Operations typology: 4V Approach 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 Furniture manufacturing Mass production of kitchen units Craft production of reproduction ‘antique’ furniture Hotels Value-for-money hotel Lobby of an international luxury hotel A Typology of Operations: 4 V’s Low Volume High High how many products or services are made by the operation? how many different types of products or services are made by the operation?High Variety Low High Variation in demand Low how much does the level of demand change over time? how much of the operation’s internal working are ‘exposed’ to its customers? High Visibility Low Implications Low repetition Each staff member performs more of job Less systemization High unit costs Flexible Comple x Match customer needs High unit costs Changing capacity Anticipation Flexibility In touch with demand High unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs A Typology of Operations ImplicationsHigh repeatability Specialization Capital intensive Low unit costs Well defined Routine Standardized Regular Low unit costs Stable Routine Predictable High utilization Low unit costs Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs Low Volume High High High Variety Low High Variation in demand Low High Visibility Low 6 Productivity Effectiveness Efficiency Productivity Types of Productivity Single Factor Productivity Output Labor Output Materials Output is of quality nature Output Capital Multifactor ProductivityOutput Labor + Materials + Overheads Output Labor + Energy + Capital Total Factor Productivity Good s and Services Produced All inputs used to produce them America West’s Reverse Pyramid system This is in contrast to the approach used by many airlines of just boarding all seats starting from the back of the plane and working forward. 7 Competitiveness Competitiveness The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens. A firm is competitive if it can produce products [†¦ of superior quality or lower costs than its domestic and international competitors. (US-President`s Commission on Industrial Competitiveness 1985, S. 6) Global Competitiveness Ranking 1. Switzerland 2. Sweden 3. Singapore 4. United States 5. Germany 6. Japan 7. Finland 8. Netherlands 9. Denmark India 51 10. Canada China 27 Competition Within Industries Increases When ? Firms are relatively equal in size and resources ? Products and services are standardized ? Industry growt h is slow or exponential Barriers to Entry ? ? Economies of scale Learning curves Capital investment Access to supply and distribution channels 8 Manufacturing vs. services Degree of Servitization Manufacturing and Service Employment Manufacturing Employment and Production Services as % of GDP Tangibility Spectrum Economic Offerings can determine prior to purchasing can only be discerned after purchase or during consumption or use customer must believe in, but cannot personally evaluate even after purchase & consumption Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Perishability Production & Consumption 9 History of OM Five Eras of Operations Management Journey of Operations Management Adam Smith uge increases in productivity obtainable from technology or technological progress are possible match human and physical capital, Division of labor Eli Whitney †¢ †¢ In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications – Musket parts could be used in any musket Significant events in operations management ? ? ? ? Division of labor Standardized parts Scientific management Coordinated assembly line (Smith (Whitney (Taylor (Ford 1776) 1800) 1881) 1913) ? ? ? Gantt charts Motion study Quality control (Gantt (Gilbreths (Shewhart 1916) 1922) 1924) 10Where are we going? Exciting New Challenges in Operations Management Changing Challenges Past Local or national focus Batch (large) shipments Causes Low-cost, reliable worldwide communication and transportation networks Cost of capital puts pressure on reducing investment in inventory Global Focus Future Just-in-time shipments Low-bid purchasing Quality emphasis requires that suppliers be engaged in product improvement Shorter life cycles, rapid international communication, computer-aided design, and international collaboration Affluence and worldwide markets; increasingly flexible production processes Changing sociocultural milieu.Increasingly a knowledge and information society. Environmental issues, ISO 14000, increasing disposal costs Supply-chain partners Rapid product development, alliances, collaborative designs Mass customization Empowered employees, teams, and lean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing Lengthy product development Standardized products Job specialization Low cost focus Operations Management OPERATIONS MANAGEMENT: as a competitive weapon mks [email  protected] ac. in http://mks507. vistapanel. net Prof. (Dr. ) Manoj K Srivastava Operations Management Area 1. The Systems Approach C O N T E N T S 2. 3. OM Definition Ten Critical Decisions 4. 5. The Cases 4V Typology of Operations 6. 7. Productivity Competitiveness 8. 9. Manufacturing Vs. Service? The History 10. The Future 1 Systems Approach Systems Approach Reduce waste†¦or enhance output†¦ 2 OM Definition What is Operations Management? What is Operations? a function or system that transforms inputs into outputs of greater valueOperations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs TYPES OF TRANSFORMATIONS †¢ †¢ Physical: Locational: as in manufacturing operations as in transportation operations What is a Transformation Process? a series of activities along a value chain extending from supplier to customer. activiti es that do not add value are superfluous and should be eliminated †¢ †¢ Exchange: Physiological: as in retail operations as in health care What is Operations Management? esign, operation, and improvement of productive systems †¢ †¢ Psychological: Informational: as in entertainment as in communication Value Engineering / Value Analysis ? Use ? Esteem ? Time ? Place 3 What Operations Managers do? ? Service, product design†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Quality management†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Process, capacity design†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Location †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Ten Critical Decisions ? Layout design †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. ? Human resources, job design†¦Ã¢â‚¬ ¦.. ? Supply-chain management†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Inventory management †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. ? Scheduling †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ ? Maintenance †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 4 The Cases Britannica StoryInvite your enemy onto the roof, then remove the ladder Sun tzu The Art of War 36 Stratagems 1988 1988-93 Britannica (Leader, 230 years experience, 1768), $1000 Microsoft encyclopedia from funk & Wagnall’s encyclopedia Searchability, Multimedia, Graphics, Timeline (20 feet), cross-links, updating 1993 1995 Price $300 (cost of CD:$1) (in-fact you can purchase encarta encyclopedia + a PC in Britannica price) Britannica has to jump in a business which was not its strength, Price still $1000 1997 Reduced to $125, later on free online, crashed twice Innovation in Operations McDonald’s Corp Olympic Flame ? ? ? Facing Increased Competition Smarter and More Demanding Customers Less Brand Loyal Switched to hamburger bun that does not require toasting. ? Customers prefer taste of new bun ? Saves time an d money, QSVC Model ? ? ? ? 10,000 runners 15,000 miles through 42 states in 84 days Two years of planning Must plan for no-show runners and rush hour traffic ? Cost of this operation in the neighbourhood of $20 million Innovation in Operations Ginger Hotel BillDesk No-frills, June 2004 No room service, travel desk, swimming pool Wi-fi, Two type of room: Rs. 999 and Rs. 1199, Prabhat Pani, CEO, Roots CorporationBillDesk, a property of IndiaIdeas. com Ltd. , 2000 Three Arthur Anderson Executives Third-party bill collection 25 Banks, 100 companies Just apply today. It only takes a few minutes. Once you're approved, you get your very own Zipcard. Reserve one of our cars – for a couple hours or the entire Day. Do it online or use a phone. We're easy. Walk to the car, then just hold your Zipcard to the windshield. The doors will unlock, and it's all yours! Drive away†¦ and return to the same reserved parking spot at the end of your reservation. It's that simple. And remember, gas and insurance are included too. 5Operations typology: 4V Approach 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 Furniture manufacturing Mass production of kitchen units Craft production of reproduction ‘antique’ furniture Hotels Value-for-money hotel Lobby of an international luxury hotel A Typology of Operations: 4 V’s Low Volume High High how many products or services are made by the operation? how many different types of products or services are made by the operation?High Variety Low High Variation in demand Low how much does the level of demand change over time? how much of the operation’s internal working are ‘exposed’ to its customers? High Visibility Low Implications Low repetition Each staff member performs more of job Less systemization High unit costs Flexible Comple x Match customer needs High unit costs Changing capacity Anticipation Flexibility In touch with demand High unit costs Short waiting tolerance Satisfaction governed by customer perception Customer contact skills needed Received variety is high High unit costs A Typology of Operations ImplicationsHigh repeatability Specialization Capital intensive Low unit costs Well defined Routine Standardized Regular Low unit costs Stable Routine Predictable High utilization Low unit costs Time lag between production and consumption Standardization Low contact skills High staff utilization Centralization Low unit costs Low Volume High High High Variety Low High Variation in demand Low High Visibility Low 6 Productivity Effectiveness Efficiency Productivity Types of Productivity Single Factor Productivity Output Labor Output Materials Output is of quality nature Output Capital Multifactor ProductivityOutput Labor + Materials + Overheads Output Labor + Energy + Capital Total Factor Productivity Good s and Services Produced All inputs used to produce them America West’s Reverse Pyramid system This is in contrast to the approach used by many airlines of just boarding all seats starting from the back of the plane and working forward. 7 Competitiveness Competitiveness The degree to which a nation can produce goods and services that meet the test of international markets while simultaneously maintaining or expanding the real incomes of its citizens. A firm is competitive if it can produce products [†¦ of superior quality or lower costs than its domestic and international competitors. (US-President`s Commission on Industrial Competitiveness 1985, S. 6) Global Competitiveness Ranking 1. Switzerland 2. Sweden 3. Singapore 4. United States 5. Germany 6. Japan 7. Finland 8. Netherlands 9. Denmark India 51 10. Canada China 27 Competition Within Industries Increases When ? Firms are relatively equal in size and resources ? Products and services are standardized ? Industry growt h is slow or exponential Barriers to Entry ? ? Economies of scale Learning curves Capital investment Access to supply and distribution channels 8 Manufacturing vs. services Degree of Servitization Manufacturing and Service Employment Manufacturing Employment and Production Services as % of GDP Tangibility Spectrum Economic Offerings can determine prior to purchasing can only be discerned after purchase or during consumption or use customer must believe in, but cannot personally evaluate even after purchase & consumption Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Perishability Production & Consumption 9 History of OM Five Eras of Operations Management Journey of Operations Management Adam Smith uge increases in productivity obtainable from technology or technological progress are possible match human and physical capital, Division of labor Eli Whitney †¢ †¢ In 1798, received government contract to make 10,000 muskets Showed that machine tools could make standardized parts to exact specifications – Musket parts could be used in any musket Significant events in operations management ? ? ? ? Division of labor Standardized parts Scientific management Coordinated assembly line (Smith (Whitney (Taylor (Ford 1776) 1800) 1881) 1913) ? ? ? Gantt charts Motion study Quality control (Gantt (Gilbreths (Shewhart 1916) 1922) 1924) 10Where are we going? Exciting New Challenges in Operations Management Changing Challenges Past Local or national focus Batch (large) shipments Causes Low-cost, reliable worldwide communication and transportation networks Cost of capital puts pressure on reducing investment in inventory Global Focus Future Just-in-time shipments Low-bid purchasing Quality emphasis requires that suppliers be engaged in product improvement Shorter life cycles, rapid international communication, computer-aided design, and international collaboration Affluence and worldwide markets; increasingly flexible production processes Changing sociocultural milieu.Increasingly a knowledge and information society. Environmental issues, ISO 14000, increasing disposal costs Supply-chain partners Rapid product development, alliances, collaborative designs Mass customization Empowered employees, teams, and lean production Environmentally sensitive production, Green manufacturing, recycled materials, remanufacturing Lengthy product development Standardized products Job specialization Low cost focus