OPERATIONS

MANAGEMENT
Program:
Business - Marketing / Business - General / Supply Chain
Management

Code: BU3044

Week2
Operations Management - Meaning?
Definition: The set of activities that creating,
controlling and developing the processes
of production of goods or services.

Input Process Output

Transforming inputs into outputs.

1. Design of goods, services, and the processes that create them
2. Day-to-day management of processes
3. Continual improvement of goods, services, and processes
 Wheat Production

Grinding and packing

the Wheat(Flour)

Storing the Flour and bread making

Transportation

Illustrative Photo Of OM Selling the bread

Operations
Strategy
Learning Objectives
Explain how organizations seek to gain
Explain competitive advantage

Explain approaches for understanding

Explain customer wants and needs

Describe how customers evaluate goods and

Describe services

Explain Explain the five key competitive priorities

Explain the role of organizations management,

Explain sustainability, and operations in strategic
planning

Describe Hill’s framework for operations

Describe strategy
Competitive Advantage

• Firm’s ability to achieve market and financial

superiority over its competitors Requires:

1. Understanding customer needs and

expectations

2. Building and leveraging operational

capabilities to support desired competitive
priorities
Customers’ Expectations

Understood by segmenting customers based on their unique

wants and needs

1. Order Qualifiers: Basic customer expectations

- Minimum performance level required to stay in
business

2. Order Winners: Goods and service features and

performance characteristics that differentiate one
customer benefit package from another
- Help win the customers’ business
Evaluating Goods and Services
Exhibit 3.1 How Customers Evaluate Goods
and Services

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Competitive Priorities

• Strategic emphasis that a firm places on certain

performance measures and operational
capabilities within a value chain

• Types
• Cost
• Quality
• Time
• Flexibility
* Innovation
Low-Cost Goods and Services

• Help firms gain a competitive advantage

• Low prices can be achieved by:
• High productivity
• High-capacity utilization
• Achieving economies of scale
• Efficient design and operation of the
supply chain
• Improvement in quality
Exhibit 3.2
Interlinking Quality and Profitability
Performance

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 Time

• Important source of competitive advantage

• Customers demand quick responses, short
waiting times, and consistency in
performance
• Speeding up processes in supply chains
improves customer response

• Reductions
• Accomplished by streamlining and
simplifying processes and value chains
• Drive improvements in quality, cost, and
productivity
 Flexibility

• Manifests in mass-customization
strategies

• Mass customization: Ability to

make goods and services that
global customers require at any
volume and time
 Innovation

• Discovery and practical application or

commercialization of a device, method, or idea
that differs from existing norms

• Innovative companies focus on:

• Outstanding product research, design,
and development
• High product quality
• Ability to modify production facilities to
produce new products frequently
 Strategy

• Pattern or plan that integrates an organization’s

major goals, policies, and action sequences
into a cohesive whole

• Effective Strategies
• Develop around competitive priorities
• Provide focus for an organization and
use its core competencies
• Core competencies: Strengths
unique to an organization
Strategic Planning

• Process of determining long-term

goals and policies for an
organization

• Helps an organization build a strong

position to achieve its goals, despite
unforeseen external forces
Levels of Strategy, Part 1

• Corporate Strategy
• Defines businesses in which corporations participate and
develop plans for:
• Acquisition and allocation of resources among
Strategic Business Units (SBUs)

• Business Strategy
• Helps make decisions about the competitive priorities that
SBUs need to pursue to gain competitive advantage
 Levels of Strategy, Part 2

• Functional strategy - Set of decisions that each functional

area develops to support its particular business strategy

• Operations strategy
1. Set of decisions made across value chains that supports
implementation of higher-level business strategies
2. Developed by translating competitive priorities into
operational capabilities
 Sustainability

• Type of an Organizational Strategy and is also

considered a Corporate Strategy by some
companies
• Requires innovation in value chains,
operations design, and day-to-day
management activities

• Dimensions
• Environmental
• Social
• Economic
Operations Design Choices

• Decisions made for determining the process structures that

are best suited for producing goods or creating services

• Address:
1. Types of processes
2. Value chain integration and outsourcing
3. Technology
4. Capacity and facilities
5. Inventory and service capacity
6. Trade-offs
 Infrastructure

• Focuses on non-process features and the capabilities of an organization

• Includes:
• Workforce
• Operating plans and control systems
• Quality control
• Organizational structure
• Compensation systems
• Learning and innovation systems
• Support services
 LO 3-6

Hill’s Strategy Development Framework

Exhibit 3.3

Exhibit 3.3Hill’s Strategy Development Framework

How Do Goods and Services Operations Strategy,
Corporate Objectives Marketing Strategy Operations Strategy,
Qualify and Win Orders in the
Marketplace?
Operations Design Choices Infrastructure
• Growth • Goods and services markets and • Safety • Type of processes and alternative • Workforce
+
• Economic sustainability (survival) segments • Price (cost) designs • Operating plans and control system(s)
• Profit • Range • Range • Supply chain integration and • Quality control
• Return on investment • Mix • Flexibility outsourcing • Organizational structure
• Other market and financial • Volumes • Demand • Technology • Compensation system
measures • Standardization versus • Goods and service design • Capacity and facilities (size, timing, • Learning and innovation systems
• Social (welfare) sustainability + customization • Quality location) • Support services
• Environmental sustainability + • Level of innovation • Service • Inventory
• Leader versus follower • Goods • Trade-off analysis
alternatives • Environment
• Social (community)
• Brand image
• Delivery
• Speed
• Variability
• Technical support
• Pre- and post service support

+Note: We have added sustainability criteria to Professor Hill's original framework.

Sources: Adapted from T. Hill, Manufacturing Strategy: Text and Cases, 3rd ed., Burr Ridge, IL: McGraw-Hill, 2000, p. 32; T. Hill, Operations
Management: Strategic
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Cengage Learning. and
All Rights Managerial
Reserved. May not be Analysis,
scanned, copied2nd ed., Prigrame
or duplicated, or posted to aMacMillan,
publicly acce ssible2005,
website,p.50.
in whole or in part. OM6 | CH1 23
 Four Key Decision Loops in Terry Hill’s
Exhibit 3.4

Generic Strategy Framework

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 Operations Strategy at McDonald’s,
Part 1

• Aims to:
1. Be the best employer
2. Deliver operational excellence
3. Achieve enduring profitable growth
4. Build a sustainable business by:
• Adopting an approach of
reducing, reusing, and recycling
• Striving to provide eco-friendly
workplaces and restaurants
Operations Strategy at McDonald’s,
Part 2

• Working with suppliers and outside

experts to continuously improve:

• Purchasing decisions
• Evaluation of supplier
performance regarding animal
welfare
Corporate Strategy at McDonald's

1. Profitable growth
2. Operational excellence
3. Leveraging innovation and
technology capabilities
4. Developing and
maintaining a diverse
workforce
1. Competitive advantage is required to show a firm’s ability to achieve superiority
over its competitors
2. Understanding competitive priorities provides basis for designing the processes
that create and deliver goods and services
3. Professor Terry Hill proposed a framework that ties corporate and marketing
strategy to operations strategy
THANK YOU…

ANY QUESTIONS?