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Operations as a
Competitive Weapon What is a Process?
Chapter 1 • Processes: definition, examples

– Ad agency
» As aggregate process
» Detailed processes, each with inputs and
outputs
– Manufacturing — physical, chemical
– Airline — locational
– School — educational
– Store — exchange
– Theater — attitudinal
– Distribution center — break shipping quantities
– Hospital — physiological
– Congress — deliberative
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved. To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.
Process View of an Ad Agency

What is a Process?
Accounting process
• Nested processes: process within a

process
Advertisement design Client interface process – Interconnectivity within a business
Clients
and planning process

Inputs
• Communicate with client,

• Create the ad to the get needs, and – Nature of each process’
process’s inputs and outputs
needs of the client and coordinate progress
prepare a plan for
media exposure • Customer-
Customer-Supplier Relationships
– External customers
– Internal customers
– External suppliers
Production process – Internal suppliers
• Prepare ad for publication
and deliver to media outlets
Figure 1.1
Internal Value-
Value-Chain Linkages
Nested Processes Showing Work and Information Flows
Advertisement Design and Planning Process Support processes
External customers
External suppliers
Creative design process Media planning process

• Receive work request • Receive work request New service/
product Customer
• Create team • Prepare several media relationship
development
• Prepare several designs plans process
process
• Receive inputs from • Receive inputs from
Account Executive Account Executive
• Prepare final concept • Prepare final plan
• Revise concept per • Revise plan per client’s Supplier Order
client’s inputs inputs relationship fulfillment
process process
Figure 1.2 Figure 1.3

Support Processes
What is a Process?
Table 1.1 Examples of Support Processes
Capital Acquisition The provision of financial resources for the organization to do its
work and to execute its strategy • Service and Manufacturing Processes
Budgeting The process of deciding how funds will be allocated over a period of – Nature of output and degree of customer contact
time
– Differences and similarities
Recruitment and The acquisition of people to do the work of the organization – Ratio of service to manufacturing jobs
Hiring
– Services related to the underlying products
Evaluation and The assessment and payment of the people for the work and value
Compensation they provide to the company – Key issues in service and manufacturing processes
– Process design
Human Resource The preparation of the people for their current jobs and future skill
– Quality
Support and and knowledge needs
Development – Productivity
– Capacity
Regulatory The process that insure the company if meeting all laws and legal
Compliance obligations
– Staffing levels
– Forecasting
Information Systems The movement and processing of data and information to expedite – Location and layout
business operations and decisions
– Inventory of outputs and/or inputs
Enterprise and The systems and activities that provide strategic direction and ensure
Functional effective execution of the work of the business
Management
Operations Management
Types of OM Decisions
as a Function
Strategic choices
New Processes
Quality
Value Chains
Operating Decisions
Process
Management
Project Management
Inventory
Scheduling Figure 1.4
Value Chains Operations Management

• Def’
Def’n: The systematic design, direction, and
• Definition: interrelated series of processes that produces a control of processes that transform inputs into
good or service services and products for internal as well as
• Interconnectedness of processes to business external customers.
performance
• Type of processes in the value chain – Underlies all departments in a business because
departments are composed of many processes.
– Core process: directly involved in the service or
product for the external customer
• Customer relationship process
– Operations Management as a Function
• Responsibilities of each function
• New service/product development process • OM draws from several disciplines
• Order fulfillment process
• Supplier relationship process – Operations management as a set of decisions
– Support process: provides key resources, • Basic decision-
decision-making steps
capabilities, or other inputs that allow core processes • Strategic and tactical decisions
to function
Operations Management Trends/Challenges in OM
• Strategic decisions: examples • Productivity improvement
– The value of outputs produced is divided by the value of
– Development of new capabilities input resources.
– Maintenance of existing capabilities – While there are signs of improvement, service sector
– Design of new processes productivity gains have been much lower than those in the
manufacturing sector.
– Development and organization of value chains – Productivity Calculations / Productivity measures
– Key performance measures (e.g. cost, quality) – Productivity from the level of the value chain
• Global competition
• Tactical decisions: examples – Viewing operations in global terms
– Process improvement and performance measurement – world trade in materials and services
– Management and planning of projects – Productivity comparisons
– Generation of production and staffing plans – Challenge: produce products or services that can compete
on a global basis and design processes to back them up
– Inventory management
– Resource scheduling
Trends/Challenges in OM Competitive Operations

• Competing with operations
• Rapid technological change – Process view of business
– Technological change is a source of competitive – Value chains
advantage as well as a challenge. – Operations strategy: link operating characteristics of
– How can technology be used to its greatest processes to strategies and objectives of the firm.
advantage? – Process design strategy
– How must processes be redesigned?
– robotics and the Internet.
• Designing and improving processes
– Systematic approach to process analysis
• Ethical, and workforce diversity and – Process performance and quality
environmental issues • TQM
– Decisions about the design and operations of • SPC
production systems consider the environment, ethics, • Six-
Six-sigma
and workplace diversity issues
– Examples: oil spills, use of Styrofoam packaging, – Process capacity
tobacco, drinking water, global warming – Process layout
– Planning and managing projects
Competitive Operations Operations Roadmap

Competing with Operations Outcomes
• Designing value chains
– Supply chain design
– Location Operations As a
Competitive Weapon
– Lean systems Designing and
Improving Processes
1
Operating Value Chains
• Operating value chains Operations Strategy

Process Analysis 2 Information Technology
– Information technology and value chains 4 and Value Chains
12
– Aggregate planning
– Inventory management Process Design Strategy
Process 3
– Resource planning Performance and Forecasting
13
Quality
– Scheduling 5
Designing Value Chains Aggregate Planning

• Outcomes Process Process
14
• The services or products the firm produces Capability

6
Layout
7
• The rewards the firm receives from the marketplace Supply Chain Inventory Resource
Design Management Planning
• Feedback from external customers 9 15 16
• Performance measures Planning and
• Financial measures Managing Projects
8
Scheduling
• Customer perceptions Location
10
Lean Systems
11 17
Figure 1.6
OM Across the Organization OM Across the Organization
• Operations management as an inter-
inter-functional imperative • Operations management as a competitive
weapon
– Cross-
Cross-functional coordination
• Interdependent functions require coordination
• Strongest connection with marketing – Operations can be either a competitive weapon or a
• Accounting provides operations performance feedback millstone.
• Finance influences investments
• Human resources recruits and trains personnel – Meeting the competitive challenge at selected firms
• Engineering design should match operation’
operation’s capabilities – Examples in text include Continental Airlines, GTE
Corporation, Merlin Metalworks,
Metalworks, and Sharp
– Achieving cross-
cross-functional coordination Corporation
• Unified strategy, department vision
• Redesigned organizational structure guided by a process view
of the organization
• Reward systems consistent with cross-
cross-functional goals
• Decision support information systems
• Informal social systems
• Employee selection and promotion

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Operations as a

Competitive Weapon What is a Process?

Chapter 1 • Processes: definition, examples

Process View of an Ad Agency

• Nested processes: process within a

and planning process

• Communicate with client,

Creative design process Media planning process

Figure 1.2 Figure 1.3

Value Chains Operations Management

Trends/Challenges in OM Competitive Operations

Competitive Operations Operations Roadmap

• Operating value chains Operations Strategy

Designing Value Chains Aggregate Planning

• The services or products the firm produces Capability

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