Operations Management Ppt - Leadstar College of Management and Leadership Operations Management Graduate Faculty of Business Administration and

Operations Management Ppt - Leadstar College of Management...

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Unformatted text preview: Leadstar College of Management and Leadership Operations Management Graduate Faculty of Business Administration and Leadership 03/11/17 Compiled by: Matiwos Ensermu, PhD 1 Chapter One Introduction What is Operations Management?Operations Management is the activity of managing the resources, which produce and deliver goods and services (Slack et al., 2010). The operations function can be described as that part of the organization devoted to the production or delivery of goods and services. 03/11/17 Compiled by: Matiwos Ensermu, PhD 2 Manufacturing and Service Operations Manufacturing organizations produce physical, tangible items which can be stored as inventory before delivery to the customer. Service organizations produce intangible items that cannot be produced ahead of time. 03/11/17 Compiled by: Matiwos Ensermu, PhD 3 The Systems View of Operations • A system is a group of interrelated Management • items in which no item studied in isolation will act in the same way as it would in the system. A system is divided into a series of parts or subsystems, and any system is a part of a larger system. The activities in an operations system can be classified as input, transformation process and output 03/11/17 Compiled by: Matiwos Ensermu, PhD 4 Continued • • The operations system is concerned with converting the transformed resources from inputs into outputs in the form of goods and services. There are three main types of transformed resource of materials which can be transformed either physically (e.g. manufacturing), by location (e.g. transportation), by ownership (e.g. retail) or by storage (e.g. warehousing), information which can be transformed by property (e.g. accountants), by possession (e.g. market research), by storage (e.g. libraries), or by location (e.g. telecommunications) and customers they can be transformed either physically (hairdresser), by storage (e.g. hotels), by location (e.g. airlines), by physiological state (e.g. hospitals), or by psychological state (e.g. entertainment). 03/11/17 Compiled by: Matiwos Ensermu, PhD 5 Process View Organizations • There has been a of move away from considering business as a set of discrete functional areas towards a view of the organization as consisting of sets of processes which link together in order to meet customer needs. Processes can be related in one functional area (e.g. production). • In functional terms the processes would be situated in areas such as operations, marketing and finance, but from the customer’s view the value they gain is dependent on the performance if the set of linked processes involved in the delivery of the product/service. 03/11/17 Compiled by: Matiwos Ensermu, PhD 6 2. Operations Strategy • What is Strategy? • Strategic decisions can be classified as those decisions which make major long term changes to the resource base of the organization in response to external factors such as markets, customers and competitors. • Operations strategy is concerned with both what the operation has to do in order to meet current and future challenges and also is concerned with the long-term development of its operations resources and processes so that they can provide the basis for a sustainable advantage 03/11/17 Compiled by: Matiwos Ensermu, PhD 7 Levels • • • of Strategy Strategy can be seen to exist at three main levels within the organization. At the highest or corporate level the strategy provides very general longrange guidance for the whole organization, often expressed as a statement of its mission The second level of strategy is termed a business strategy and may be for the organization or at the strategic business unit level in larger diversified companies 03/11/17 Compiled by: Matiwos Ensermu, PhD 8 The third level of strategy is termed the operational or functional strategy were the functions of the business (e.g. operations, marketing, finance) make long-range plans which support the business strategy. Since the operations function is responsible in large part for the delivery of the product/service it has a major responsibility for business strategy formulation and implementation 03/11/17 Compiled by: Matiwos Ensermu, PhD 9 The Role of Operations in Strategy The operations function plays an Development important role in the formulation and delivery of the organization’s strategy The approach is based on the firm’s ability to forecast future market conditions and thus identify gaps between future market needs and organisational capability 03/11/17 Compiled by: Matiwos Ensermu, PhD 10 Operations Competitive Priorities Cost If an organization is competing on price then it is essential that it keeps its cost base lower than the competition 03/11/17 Compiled by: Matiwos Ensermu, PhD 11 Time The time delay or speed of operation can be measured as the time between a customer request for a product/service and then receiving that product/service. Speed is an important factor to the customer in making a choice about which organization to use. 03/11/17 Compiled by: Matiwos Ensermu, PhD 12 Quality • Quality covers both the quality of the product/service itself and the quality of the process that delivers the product/service. Quality can be measured by the ‘cost of quality’ model were costs are categorized as either the cost of achieving good quality (the cost of quality assurance) or the cost of poor quality products (the costs of not conforming to specifications). • 03/11/17 Compiled by: Matiwos Ensermu, PhD 13 • • Flexibility There are a number of areas in which flexibility can be demonstrated. For example it can mean the ability to offer a wide variety of products/services to the customer and to be able to change these products/services quickly. Flexibility is needed so the organisation can adapt to changing customer needs in terms of product range and varying demand and to cope with capacity shortfalls due to equipment breakdown or component shortage 03/11/17 Compiled by: Matiwos Ensermu, PhD 14 Strategy Process Company Mission Business Strategy Functional Functional Area Area Strategies Marketing Decisions Operations Decisions 03/11/17 Fin./Acct. Decisions Compiled by: Matiwos Ensermu, PhD 215 Strategies for Competitive Advantage Differentiation Cost leadership Quick response 03/11/17 Compiled by: Matiwos Ensermu, PhD 216 Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value 03/11/17 Compiled by: Matiwos Ensermu, PhD 17 Competing on Cost Provide the maximum value as perceived by customer Does not imply low value or low quality 03/11/17 Compiled by: Matiwos Ensermu, PhD 218 Competing on Response Flexibility Reliability Timeliness Requires institutionalization within the firm of the ability to respond 03/11/17 Compiled by: Matiwos Ensermu, PhD 219 OM’s Contribution to Strategy Operations Decisions Specific Strategy Used Examples Quality Product Process FLEXIBILITY Sony’s constant innovation of new products HP’s ability to follow the printer market Southwest Airlines No-frills service Design Volume LOW COST Location DELIVERY Pizza Hut’s five-minute guarantee at lunchtime Speed Dependability Federal Express’s “absolutely, positively on time” Layout Human Resource Supply Chain Maintenance Differentiation (Better) QUALITY Conformance Motorola’s automotive products ignition systems Motorola’s pagers Performance Inventory Scheduling Competitive Advantage Cost leadership (Cheaper) Response (Faster) IBM’s after-sale service on mainframe computers AFTER-SALE SERVICE BROAD PRODUCT LINE Fidelity Security’s broad line of mutual funds 03/11/17 Compiled by: Matiwos Ensermu, PhD 20 3. Product Process New Design and Selection product designs can provide a competitive edge by bringing new ideas to the market quickly, doing a better job of satisfying customer needs, or being easier to manufacture, use and repair. 03/11/17 Compiled by: Matiwos Ensermu, PhD 21 Generating Ideas Ideas for new products and services should be sought from a variety of sources including market research, customer viewpoints, the organization's research and development (R&D) department if one exists, competitors or relevant developments in new technology 03/11/17 Compiled by: Matiwos Ensermu, PhD 22 Product Screening The screening process consists of market analysis, economic analysis and technical analysis. 03/11/17 Compiled by: Matiwos Ensermu, PhD 23 Market analysis Market analysis consists of evaluating the product concept with potential customers through interviews, focus groups and other data collection methods. Economic Analysis Economic Analysis consists of developing estimates of production and demand costs and comparing them with estimates of demand 03/11/17 Compiled by: Matiwos Ensermu, PhD 24 X = (P + FC) ----------(SP – VC) where X = volume (units) P = profit FC = fixed costs SP = selling price VC = variable costs 03/11/17 Compiled by: Matiwos Ensermu, PhD 25 Technical Analysis Technical analysis consists of determining whether technical capability to manufacture the product. This covers such issues as ensuring materials are available to make the product to the specification required, and ensuring the appropriate machinery and skills are available to work with these materials. 03/11/17 Compiled by: Matiwos Ensermu, PhD 26 Preliminary Design Product concepts that pass the feasibility stage enter preliminary design. The specification of the components of the package requires a product /service structure which describes the relationship between the components and a bill of materials or list of component quantities derived from the product structure. 03/11/17 Compiled by: Matiwos Ensermu, PhD 27 Final Design The final design stage involves the use of a prototype to test the preliminary design until a final design can be chosen. Computer Aided Design (CAD) and Simulation Modeling can be used to construct a computer-based prototype of the product design. 03/11/17 Compiled by: Matiwos Ensermu, PhD 28 Methods for Improving Product Design for Manufacture (DFM) is Design a concept which provides guidelines on how this can be achieved using techniques such as simplification, standardization and modularization 03/11/17 Compiled by: Matiwos Ensermu, PhD 29 Concurrent Engineering Concurrent engineering is when contributors to the design effort provide work throughout the design process as a team. This differs from the traditional design process when work is undertaken separately within functional areas such as engineering and operations 03/11/17 Compiled by: Matiwos Ensermu, PhD 30 Process Selection When considering product design the issue of the design of the process that is used to produce that design should be considered also 03/11/17 Compiled by: Matiwos Ensermu, PhD 31 Project Processes that produce products of high variety and low volume are termed projects 03/11/17 Compiled by: Matiwos Ensermu, PhD 32 Jobbing Jobbing processes are used to make a one-off or low volume product to a customer specification. A feature of a jobbing process is that the product moves to the location of transforming resources such as equipment. Thus resources such as staff and equipment can be shared between many products 03/11/17 Compiled by: Matiwos Ensermu, PhD 33 Batch Processes that produce products of medium variety and medium volume are termed batch which denote that the products are grouped as they move through the design process. 03/11/17 Compiled by: Matiwos Ensermu, PhD 34 Line Processes that produce products of high volume and low variety are termed line or mass processes 03/11/17 Compiled by: Matiwos Ensermu, PhD 35 Continuous Processes that operate continually to produce a very high volume of a standard product are termed continuous. The products produced by a continuous operation are usually a continuous flow such as oil and gas. Continuous processes use a large amount of equipment specialised and dedicated to producing a single product (such as an oil refinery for example). 03/11/17 Compiled by: Matiwos Ensermu, PhD 36 Total Quality Management Total Quality Management (TQM) requires that the principles of quality management are applied in all aspects and at every level in an organization 03/11/17 Compiled by: Matiwos Ensermu, PhD 37 Quality and Strategy Managing quality supports differentiation, low cost, and response strategies Quality helps firms increase sales and reduce costs Building a quality organization is a demanding task 03/11/17 Compiled by: Matiwos Ensermu, PhD 38 Defining Quality The totality of features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs American Society for Quality 03/11/17 Compiled by: Matiwos Ensermu, PhD 39 For some quality signifies the degree of perfection. In fact, quality, like beauty, lies in the beholder’s eyes. Quality is often described as getting things done ‘right first time, every time’ 03/11/17 Compiled by: Matiwos Ensermu, PhD 40 Quality is not an option in most walks of life. For example, it would be unthinkable for airline pilots or hospital midwives to aim for anything less than perfection in what they do, and nonsense to think of only trying for an ‘acceptable’ level of failure – one plane crash in 100 or one baby dropped per 500 deliveries! 03/11/17 Compiled by: Matiwos Ensermu, PhD 41 One of the annoying factors about quality is that seemingly unimportant details can have an astonishing impact on how quality is perceived. For example, when Concorde crashed it was as a result of a lack of attention to a piece of debris on the runway The issue of safety (the most important element of travel in our evaluation of service quality) now became paramount 03/11/17 Compiled by: Matiwos Ensermu, PhD 42 It is not always true that a product with high quality will also be costly. Conversely, many times an expensive product is low in quality 03/11/17 Compiled by: Matiwos Ensermu, PhD 43 Contd. Garvin (1983, p. 40) identifies five different definitions of quality: Transcendent quality is ‘innate excellence’ – an absolute and universally recognizable high level of achievement. E.g. Artist User-based quality ‘lies in the eye of the beholder’, so that each person will have a different idea of quality, based on its fitness for use by the individual. 03/11/17 Compiled by: Matiwos Ensermu, PhD 44 Contd. Value-based quality is performance or conformance at an acceptable price or cost Product-based quality is a precise and measurable variable, and goods can be ranked according to how they score on this measure Manufacturing-based quality is ‘conformance to requirements’, adhering to a design or specification 03/11/17 Compiled by: Matiwos Ensermu, PhD 45 Different Views User-based – better performance, more features Manufacturing-based – conformance to standards, making it right the first time Product-based – specific and measurable attributes of the product 03/11/17 Compiled by: Matiwos Ensermu, PhD 46 Implications of Quality 1. Company reputation Perception of new products Employment practices Supplier relations 2. Product liability Reduce risk 3. Global implications Improved ability to compete 03/11/17 Compiled by: Matiwos Ensermu, PhD 47 Key Dimensions of Quality Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality Value 03/11/17 Compiled by: Matiwos Ensermu, PhD 48 Malcom Baldrige National Quality Award Established in 1988 by the U.S. government Designed to promote TQM practices Recent winners Premier Inc., MESA Products, Sunny Fresh Foods, Park Place Lexus, North Mississippi Medical Center, The Bama Companies, Richland College, Texas Nameplate Company, Inc. 03/11/17 Compiled by: Matiwos Ensermu, PhD 49 Baldrige Criteria Applicants are evaluated on: Categories Points Leadership 120 Strategic Planning 85 Customer & Market Focus 85 Measurement, Analysis, and Knowledge Management 90 Workforce Focus 85 Process Management 85 Results 450 03/11/17 Compiled by: Matiwos Ensermu, PhD 50 Costs of Quality Prevention costs - reducing the potential for defects Appraisal costs - evaluating products, parts, and services Internal failure - producing defective parts or service before delivery External costs - defects discovered after delivery 03/11/17 Compiled by: Matiwos Ensermu, PhD 51 Costs of Quality Total Cost Total Cost External Failure Internal Failure Prevention Appraisal Quality Improvement 03/11/17 Compiled by: Matiwos Ensermu, PhD 52 Leaders in Quality W. Edwards Deming Edwards (1900-1993) 14 Points for Management Joseph M. Juran Top management commitment, fitness for use Armand Feigenbaum Total Quality Control Philip B. Crosby Quality is Free, zero defects Kaoru Ishikawa(1915-1989) Company Wide Quality Control Movement(CWQC) 03/11/17 Compiled by: Matiwos Ensermu, PhD 53 Juran's Trilogy 03/11/17 Compiled by: Matiwos Ensermu, PhD 54 Ethics and Quality Management Operations managers must deliver healthy, safe, quality products and services Poor quality risks injuries, lawsuits, recalls, and regulation Organizations are judged by how they respond to problems All stakeholders must be considered 03/11/17 Compiled by: Matiwos Ensermu, PhD 55 International Quality Standards ISO 9000 series (Europe/EC) Common quality standards for products sold in Europe (even if made in U.S.) 2000 update places greater emphasis on leadership and customer satisfaction ISO 14000 series (Europe/EC) 03/11/17 Compiled by: Matiwos Ensermu, PhD 56 ISO 14000 Environmental Standard Core Elements: Environmental management Auditing Performance evaluation Labeling Life cycle assessment 03/11/17 Compiled by: Matiwos Ensermu, PhD 57 TQM Encompasses entire organization, from supplier to customer Stresses a commitment by management to have a continuing, companywide drive toward excellence in all aspects of products and services that are important to the customer. 03/11/17 Compiled by: Matiwos Ensermu, PhD 58 Deming’s Fourteen Points 1. 2. 3. 4. 5. 6. 7. Create consistency of purpose Lead to promote change Build quality into the product; stop depending on inspection Build long-term relationships based on performance, not price Continuously improve product, quality, and service Start training Emphasize leadership Table 6.1 03/11/17 Compiled by: Matiwos Ensermu, PhD 59 Deming’s Fourteen Points 8. 9. 10. 11. 12. 13. 14. Drive out fear Break down barriers between departments Stop haranguing (to criticize or question somebody )workers Support, help, improve Remove barriers to pride in work Institute a vigorous program of education and self-improvement Put everybody in the company to work on the transformation Table 6.1 03/11/17 Compiled by: Matiwos Ensermu, PhD 60 Seven Concepts of TQM Continuous improvement Six Sigma Employee empowerment Benchmarking Just-in-time (JIT) Taguchi concepts Knowledge of TQM tools 03/11/17 Compiled by: Matiwos Ensermu, PhD 61 Continuous Improvement/Kaizen Represents continual improvement of all processes Involves all operations and work centers including suppliers and customers People, Equipment, Materials, Procedures 03/11/17 Compiled by: Matiwos Ensermu, PhD 62 Shewhart’s PDCA Model 1.Plan Identify the 4. Act Implement the improvement and make a plan plan 3. Check Is the plan working? 2. Do Test the plan Figure 6.3 03/11/17 Compiled by: Matiwos Ensermu, PhD 63 Six Sigma Two meanings Statistical definition of a process that is 99.9997% capable, 3.4 defects per million opportunities (DPMO) A program designed to reduce defects, lower costs, and improve customer satisfaction 03/11/17 Compiled by: Matiwos Ensermu, PhD 64 Six Sigma Two meanings Lower limits Upper limits 2,700 defects/million Statistical definition of a process that is 99.9997% capable, 3.4 defects per 3.4 defects/million million opportunities (DPMO) A program designed to reduce defects, lower costs, and improve customer satisfaction Mean ±3 ±6 Figure 6.4 03/11/17 Compiled by: Matiwos Ensermu, ...
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