Posted - Value Creation and Suppliers as Stakeholders 2010_1

Posted - Value Creation and Suppliers as Stakeholders...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Operations Management and Operations Suppliers as Stakeholders Suppliers The Art of Creating Value 9-1 What is Operations Management? Management? • The management of the transformation The process that creates value or profit. or • A transformation process changes transformation something about an item or process that changes (increases) the value of the item/process. item/process. 9-2 7 VALUE-ADDING ACTIVITIES (types of transformations) 1. Physical change 2. Transportation 3. Storage and distribution 4. Inspection 5. Exchange 6. Information 7. Physiological What is Operations Management? Management? • The management of the transformation The process that creates value or profit. or • A transformation process changes transformation something about an item or process that changes (increases) the value of the item/process. item/process. • Who determines that value? The customer 9-4 Example Example One pound ball of clay – value is $.50 9-5 Value of this Mug? Value $5.00 $7.00 $10.00 $12.00 9-6 Operations Management •Materials – clay and glaze •Utilities – electricity water •Equipment – wheel, kiln, tools •Building •People •Transportation Total cost $7.00 Profit $3.00 Customer’s opinion of value $10.00 9-7 Supply Chain Management = “From the dirt to the dump” “make and buy” decisions Operations Management “Makes” value within the firm Supplier Inputs: Raw Materials Labor Capital Information Transformation Process Outputs: Products Services Customer Make or Buy? Make Dig the clay out of the ground. Buy dry clay and mix it myself? Buy it in a bag for $10? What is your core competency? 9 9- Core competency Core • • • • Something a firm does particularly well It provides consumer benefit It is not easy for competitors to imitate The firm’s strategy is based on it’s core competencies competencies 9-10 Operations Management Profit $3.00 •Materials – clay, glaze •Utilities – electricity water •Equipment – wheel,kiln, tools •Building •People •Transportation Suppliers want to raise prices Total cost $7.00 Porter’s Competitive Forces Buyers want to pay less $10.00 Selling Price New entrants to market Substitutes 9-11 What to do now? What Quit? Quit? No! No! Use Strategy Use Strategy 9-12 Value, Strategy and Processes to Link • Profitability comes from the difference Profitability between the value perceived by the customer and cost of creating it. • Transformation process – inputs into a desired Transformation output of higher value output • Plan for creating value is a strategy • The strategy dictates how the company will The meet the customers’ value expectations. meet • We need a strategy to position our business We to survive the competitive forces. to 3-13 WHAT IS STRATEGY? • Mission, goals, and objectives are formal Mission, statements statements • To be a strategy you have to say “no” to To “no” something something • Consistent decisions can create synergy • Strategic decisions are made on several Strategic levels levels 9-14 Overview of Strategic Hierarchy Hierarchy • Corporate Strategy • What Business are we in? • Business Strategy • Porter’s 3 Business Strategies: Cost, Differentiation, Focus • Functional Strategy • Operations Strategy Structural and Structural Infrastructural Decisions Decisions • Capabilities (What) • Processes (How) Porter’s 3 Strategy Categories Porter’s • Cost leadership • • • Low cost Economies of scale May have high profit through cost advantage • Differentiation • • • Unique product features Quality High cost to produce but can charge a premium • Focus • Segment of the market, niche • May have low cost, high differentiation or both Longaberger Baskets Longaberger Cost leader, differentiation or focus? How does this strategy combat Porter’s competitive forces? (Suppliers, Customers, Competitors, Substitutes, New Entrants) 9-17 Infrastructure Structural Operations Functional Strategy • Supply Chain – Make/Buy • Facility Location • Facility Layout • Materials Requirement Materials Planning Planning • Purchasing • J-I-T Inventory Control • Quality Control • Labor Force 9-18 2 General Layout Alternatives General to support our strategy 1. Product-oriented layout • optimizes making the product optimizes product • higher volume, lower per unit cost higher • Assembly line * * * 1. Product Oriented Layout • Optimizes Optimizes making the product product • High High volume, low unit cost unit • Not flexible 9-20 2 General Layout Alternatives General to support our strategy 2. Process-oriented layout 2. • optimizes the process/equipment • Lower volume, more flexibility • Woodworking shop, a kitchen 2. Process Oriented Layout •Optimizes the process or equipment •Low volume, high flexibility 9-22 PROCESS TYPE CHOICES PROCESS Process Layouts Product Layouts Make to order Make to stock The following slides should be covered outside of class for the exam – come with questions exam 9-24 * Creating Value Deals With Decisions Like: * • How many factories? * • How much capacity at each? • Will we set up our lines to make standard products at low cost, or customized products? • What will we make, and what will we buy from others (supply chain, Make or Buy decisions)? • How will we measure quality? What are the specifications need for success? • How much inventory will we have? • Will we used skilled or unskilled labor? • “How will we run the business day-to-day?” • Reducing Cost – Improving Quality Hold Down Costs Hold Up Price (Quality) * * * One way to think about business-level One strategy – Order Losers, Qualifiers, and Winners Winners Cost Quality Response Time Dependability Convenience Style/ Fashion Ethics Technology Flexibility Personalization Example: Taking kids to lunch on a Saturday afternoon. • Order Loser: a product or service Order characteristic that repels customers. characteristic Rotten food = VEGETABLES! (quality) • Order Qualifier: a product or service Order characteristic that is necessary, but not sufficient to win the order. sufficient Able to make cheeseburger ketchup only (flexibility) • Order Winner: a product or service Order characteristic most important to a particular customer. Cool toy (style/fashion) customer. Beware Order Winners Becoming Order Qualifiers!! 9-26 Overview of Strategic Hierarchy Hierarchy • Corporate Strategy • What Business are we in? • Business Strategy • Porter’s 3 Business Strategies: Cost, Differentiation, Focus • Functional Strategy • Operations Strategy Structural and Structural Infrastructural Decisions Decisions • Capabilities (What) • Processes (How) * * * BUSINESS STRATAGIES • Michael Porter identified 2 key generic ways to develop a Michael competitive advantage competitive • Which translate to the 3 types of business strategy. Target Scope Advantage Low Cost Advantage Product Product Uniqueness Uniqueness Broad (industry wide) 1. Low Cost 1. Strategy Strategy 2. Differentiation Strategy Strategy “Fight” “Flee” 3. Focus Strategy 3. Focus Strategy Narrow (low cost) (differentiation) (niche segments) “Hide” “Hide” * * * Business Strategies at a Business Glance Glance Low Cost Differentiation Focus Low Cost Low Adding value Adding Segments. Culture. Culture. through: through: Niche Markets. Economies of Economies Unique Product Unique Scale. Scale. Targeting. features. features. Eliminate Eliminate Limited Territory. Higher Product Higher Unnecessary Either cost Either quality. quality. Costs. Costs. leadership or High Cost but High Enjoys high Enjoys charges a premium differentiation within profits through cost the segment. the price. price. advantage. advantage. Infrastructure Structural Operations Functional Strategy • Supply Chain – Make/Buy • Facility Location • Facility Layout • Materials Requirement Materials Planning Planning • Purchasing • J-I-T Inventory Control • Quality Control • Labor Force 9-30 * * * Business decision-maker vis a vis vendors, suppliers, creditors • This relationship is purely contractual; very little governmental regulations apply other than the controls on credit arrangements (Uniform Commercial Code – UCC). C * * * MANUFACTURING VS. SERVICES (a false dichotomy?) • Goods (manufactured objects or products) • tangible, can be stored and transported • Services • intangible, perishable (consumed & produced simultaneously) • Facilitating services (typically offered with goods) • Financing, Assembly, Delivery, Warranties • Facilitating goods (typically offered with services) • Cell Phone for Wireless Service Product­service bundle ­ the synergistic combination of service and manufactured value * * * Simplified Rules for Running a Business 1. Safety Associates, Consumers 1. Quality As defined by Consumers 1. Quantity Make sure it is a big enough idea 1. Cost Take care of the others and this is much easier ...
View Full Document

Ask a homework question - tutors are online