Operations Management (SL OP 502) : Module 1 (Cont'd), Oct., 7 - 8, 2010 A. Ramachandran

Operations Management (SL OP 502)
Module 1 (Cont’d), Oct., 7 - 8, 2010

A. Ramachandran
Operations Management, Module 1 (Cont’d)

1 12/07/21
A. Ramachandran, Oct., 7 - 8, 2010
Agenda
• REVIEW
• Any questions/clarifications relative to the previous session?
• Today’s session – a PREVIEW
• Today’s session – in depth
• Any questions/clarifications relative to today’s session?
• REVIEW of today’s session
• Home work/assignment – action point(s)

2 12/07/21
REVIEW
• Specific topics to be addressed in the Course:
– Module 1:
• Formal introduction to the field of OM
– Basics of production/operations system. Manufacturing and service.
Plan of the course structure. Historical development of OM – major
milestones. Current issues in OM.
– Operations strategy and competitiveness
– Module 2:
• Product design and process selection
– Product design.
– Process analysis.
– Process selection and design:
» Manufacturing process-intensive context
» Service process-intensive context.

3 12/07/21
REVIEW
• Specific topics to be addressed in the Course (cont’d):

– Module 3: Supply chain design
• Supply chain strategy
• Strategic capacity management.
• Facility location.
• Facility layout.
• Lean production (i.e. Just-in-time (JIT) and lean manufacturing).

4 12/07/21
REVIEW
• Specific topics to be addressed in the Course (cont’d):
– Module 4: Planning and controlling the supply chain
• Aggregate sales and operations planning.
• Inventory control.
• Material requirements planning (MRP).
• Manpower scheduling.
• Quality management: focus on TQM and Six Sigma.
• Project management.

5 12/07/21
REVIEW
• Preliminary notions/concepts/theories that we visited:
– Porter’s 5-force model of industry competition.
– The Value System Model (Porter and Millar) – based on the notion of a Value
Chain (VC): Supplier VCs –> Firm VC –> Channel VCs –> Buyer VCs, i.e.
Upstream value –> Firm value –> Downstream value.
– The Firm Value-Chain Analysis model (Porter and Millar)
• Core processes consisting of primary activities.
• Support processes consisting of secondary activities.
• At the right-end interface point between of every successive pairs of firms
on the industry value chain, there is scope for creating “Margin,” i.e.
“Value.”

6 12/07/21
REVIEW
• Notion of “Manufacturing strategic intent:”
– While World-Class manufacturing companies,e.g. Toyota, since the
1980s, have been driven by AGILE manufacturing objective, MANY
Indian companies used to FOCUS on Internal efficiency-centered
objective (such as CAPACITY UTILIZATION)!
– Agility: Focus on EFFECTIVENESS in meeting customer’s
requirement (achievable through maintaining 100% OPERABLE
RATE OF EQUIPMENT, with DEMAND determining OPERATING
RATE OF EQUIPMENT.
• What is the purpose of business?
• What is the purpose of management?
• Notion of a system

7 12/07/21
REVIEW
• DEFINITIONS:
– Production/operations system (or process) technology (both hard and
soft technologies)
• It is the ability for you to create, access, manipulate and transmit value-
added products/services in myriad forms, by the application of
manufacturing, computing, communication, management and related
technologies.
– Operations Management DEFINED
• It’s the design, operation and improvement of the systems that create and
deliver the firm’s products and services.

8 12/07/21
REVIEW
• Why should a student of Business study OM?
• Six types of transformation in a production system
– Inputs are transformed into desired outputs, using resources
in the process. (Transformation types: physical, locational,
exchange, storage, physiological, and informational.)
• Differences between a Good and a Service.
• Operations as Service:
– Core services
– Value-added services

9 12/07/21
REVIEW
• Major milestones in the historical development of OM
– Total Quality Control (TQC) and Just-In-Time (JIT) manufacturing.
– Manufacturing strategy paradigms – Plant-Within-Plant (PWP),
focused factory, ..
– Service quality and productivity.
– Total Quality Management (TQM), Total Productive Maintenance
(TPM), and quality certification (and evolving standards) (ISO,
Deming Prize, Six Sigma, …).
– Business Process Reengineering (BPR).
– Supply Chain Management (SCM).
– E-commerce, and so on.

10 12/07/21
REVIEW
• Current concerns in OM
– Effective consolidation of operations due to mergers and acquisitions.
– Developing global supply chains that are adaptive/flexible, to enable
mass customization.
– Global management of the networks of supply chain partners
(suppliers, producers/manufacturers, and distributors).
– Increased “commoditization” of suppliers.
– Achieving the “service factory.”
– Enhancing value-added services.
– Making more efficient use of Internet technology.
– Achieving better service from service firms.

11 12/07/21
Any questions/clarifications relative to the previous session?

12 12/07/21
PREVIEW – Operations Strategy & Product Design
• Operations strategy and competitiveness:

– Operations strategy and operations competitive
dimensions.
– Corporate strategy design process.
– Fitting operational activities to strategy – the Kaplan-and-
Norton Generic Strategy Map (KNGSM) framework.
– Productivity measurement.

13 12/07/21
• Product design:
– IDEO vignette.
– Recent trend.
– The generic product development process and its variants.
– Design for the customer.
– Design for manufacturing and assembly.
– Measuring product development performance.

14 12/07/21
• Process analysis.
• Process selection and design:
– Manufacturing process-intensive context
– Service process-intensive context.

15 12/07/21
Operations strategy and product design (in detail)
• Operations strategy
• Competitive dimensions
• Order qualifiers and order winners
• Strategy design process
• A framework for manufacturing strategy
• Service strategy capacity capabilities
• Productivity measures

16 12/07/21
• Strategy development process – key stages
– Customer needs
– Corporate strategy
– Operations strategy
– Decisions on processes and infrastructure
• Example – Southwest Airlines
• Need: convenience, low cost.
• Business model: point-to-point, short-haul flights (not hub-and-spokes,
long-haul flights, of full service carriers)
• Standardized aircraft, smaller (secondary) airports, free seating, no in-
flight services, no baggage transfer, …..
• Electronic ticketing and check-in, low turnaround time, ….

17 12/07/21
• Operations-related Competitive dimensions

– Cost
– Product Quality and Reliability
– Delivery Speed
– Delivery Reliability
– Coping with Changes in Demand
– Flexibility and New Product Introduction Speed
– Other Product-Specific Criteria
• One has to deal with trade-offs among cost, quality, time to deliver (or
market), and functionality (or flexibility)

18 12/07/21
• Order qualifiers are the basic criteria that permit the firm’s
products to be considered as candidates for purchase by
customers.
• Order winners are the criteria that differentiate the products
and services of one firm from another’s.
• Can you think of some examples for these?
• (Pause)

19 12/07/21
• Strategy design process (Kaplan-and-Norton Generic Strategy

Map – KNGSM)
• Financial perspective – improve shareholder value (ROCE).
– Revenue growth strategy
• Build the franchise (new revenue sources – customer acquisition)
• Increase customer value (customer profitability – customer retention)
– Productivity strategy
• Improve cost structure (cost per unit)
• Improve asset utilization (asset utilization)

20 12/07/21
• Customer perspective – clearly define the Customer Value Proposition
(CVP): Operational excellence/ Customer intimacy/ Product leadership
– Product/service attributes
• Price
• Quality
• Time
• Functionality
– Relationship
• Service
• Relationships
– Image
• Brand

21 12/07/21
• Internal perspective:
– Build the franchise (innovation processes)
– Increase customer value (customer management processes)
– Achieve operational excellence (operational processes)
– Be a good corporate citizen (regulatory and environmental processes)
• What you choose to do herein, and how you do it, will have a
direct impact on Customer and Financial Perspective goals.

22 12/07/21
• Learning and growth perspective (a motivated and prepared

workforce)
– Strategic competencies
– Strategic technologies
– Climate for action
• What you choose to do herein, and how you do it, will have a
direct impact on Internal Perspective goals.

23 12/07/21
• In KNGSM, under the Financial Perspective, the
Productivity Strategy is generally made up from two
components:
– Improve cost structure: Lower direct and indirect costs
– Increase asset utilization: Reduce working and fixed capital
• The Revenue Growth Strategy is generally made up from
two components:
– Build the franchise: Develop new sources of revenue
– Increase customer value: Work with existing customers to expand
relationships with company

24 12/07/21
• Under the Customer Perspective, there are three ways
suggested as means of differentiating a company from
others in a marketplace:
– Product leadership
– Customer intimacy
– Operational excellence
• Under the Learning and Growth Perspective, there are three
principal categories of intangible assets needed for learning:
– Strategic competencies
– Strategic technologies
– Climate for action

25 12/07/21
• Steps in developing a manufacturing strategy

– Segment the market according to the product group
– Identify product requirements, demand patterns, and profit margins of
each group
– Determine order qualifiers and winners for each group
– Convert order winners into specific performance requirements

26 12/07/21
• Service strategy capacity capabilities

– Process-based
• Capacities that transforms material or information and provide advantages
on dimensions of cost and quality
– Systems-based
• Capacities that are broad-based involving the entire operating system and provide
advantages of short lead times and customize on demand
– Organization-based
• Capacities that are difficult to replicate and provide abilities to master new
technologies

27 12/07/21
• Productivity gives a measure of how well resources are being used. It is

usually measured as the ratio: Outputs/Inputs.
– The above ratio also refers to total factor productivity. That is, it is the ratio:
Value of goods and services produced/Value of all resources consumed.
• Partial factor productivity measures:
– Output/Labor, or Output/capital, or Output/Materials, or Output/Energy.
• Multifactor productivity measures:
– Output/(Labor + Capital + Energy)
– Output/(Labor + Capital + Materials)

28 12/07/21
• Product design:
– IDEO Product Development – the world’s most celebrated design firm.
Their novel design process is centered around two activities, viz. (i)
Brainstorming, and (ii) Rapid prototyping (right, rapid, and right),
repeated iteratively.
– Recent trend – outsourcing:
• Contract manufacturing
• Core competency
– Two extremes of activity spread and control: fully vertically integrated,
end-to-end; OR, only sell the products, and outsource the entire design
and manufacturing function.

29 12/07/21
• The 6-phase generic product development process.

– 0. Planning.
– 1. Concept development.
– 2. System-level design.
– 3. Design detail.
– 4. Testing and refinement.
– 5. Production ramp-up.
• Variants of the above generic process (eight categories of
products – description of each category, distinct features, and
examples) (Ref. Chase 11/e, Exhibit 4.2, pp. 117.)

30 12/07/21
• Design for the customer:

– The QFD (Quality Function Deployment approach – the HOQ (House
of Quality) matrix.
– Value Analysis/Value Engineering (VA/VE).
• Design for manufacturing and assembly.
(Caselet on NCR: The Best Engineered Part is No Part) (To be discussed
later.)
• Measuring product development performance:
– Dimensions, measures, and impact on competitiveness (Ref. Chase, 11/e,
exhibit 4.10, pp. 131.)

31 12/07/21
• Process analysis:
– Definition of terms: process, cycle time, utilization; process
flowcharting; process performance measures.
– Process throughput time reduction.
• Process selection and design:
– Manufacturing process-intensive context – five basic process flow
structures; the product-process matrix; mfg process flow chart.
– Service process-intensive context – customer-centric view of service
mgt; high/low contact service systems; structuring the service
encounter – service-system design matrix; service blueprinting and
fail-safing; three contrasting service designs.

32 12/07/21
• Case discussion: Operations management at Southwest
Airlines.
– Can you attempt a good mapping of the Case context onto KNGSM?
– Performance results?
– Impact on competitors? Global impact, if any?
– Prognosis: sustainability question?
• Insights from the two news clippings?
– Low cost water purifier (Tata Chem)
– Plant location (Hatsun agro)

33 12/07/21
• Any (further) questions/clarifications relative to
today’s session?
• Any other points to ponder?
• Your suggestions for my improvement of delivery of
session content in future?

34 12/07/21
REVIEW
• The summary – we
– Reviewed where we came from
– Previewed where we’ll be going to, today
• Visited, with some attention to detail, Operations and
Competitiveness, Product Design, Process selection and
design.
• Looked a little closely at an interesting Case – Southwest Airlines – and
also two news clippings of interest, viz. Tata Chem and Hatsun Agro.

35 12/07/21
• Home work/assignment for next session:
– Case – Mass customization: the BMW way.
– Some clippings/caselets/vignettes (to be communicated)
(e.g. Caselet on NCR)
THANK YOU …

36 12/07/21

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Operations Management (SL OP 502)

Module 1 (Cont’d), Oct., 7 - 8, 2010

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

• Specific topics to be addressed in the Course (cont’d):

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

• Operations strategy and competitiveness:

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

• Operations-related Competitive dimensions

Operations Management, Module 1 (Cont’d)

• Can you think of some examples for these?

Operations Management, Module 1 (Cont’d)

• Strategy design process (Kaplan-and-Norton Generic Strategy

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

• Learning and growth perspective (a motivated and prepared

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

• Steps in developing a manufacturing strategy

Operations Management, Module 1 (Cont’d)

• Service strategy capacity capabilities

Operations Management, Module 1 (Cont’d)

• Productivity gives a measure of how well resources are being used. It is

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

• The 6-phase generic product development process.

Operations Management, Module 1 (Cont’d)

• Design for the customer:

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

Operations Management, Module 1 (Cont’d)

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