Using Operations to Create Value – Important Points – Summary – Krajewski – 12th Edition

Role of Operations in an Organization  –  Historical Evolution and Perspectives

  • Describe the role of operations in an organization and its historical evolution over time.
A Process View 
  • Describe the process view of operations in terms of inputs, processes, outputs, information flows, suppliers, and customers.
A Process View 
  • Describe the supply chain view of operations in terms of linkages between core and support processes.
Operations Strategy 
  • Define an operations strategy and its linkage to corporate strategy and market analysis.
Competitive Priorities and Capabilities 
  • Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern of decisions can develop organizational capabilities.
Addressing the Trends and Challenges in Operations Management
  • Identify the latest trends in operations management, and understand how given these trends, firms can address the challenges facing operations and supply chain managers in a firm

Chapter 1 USING OPERATIONS TO CREATE VALUE

Disney Brief Description

Role of Operations in an Organization

Operations management refers to the systematic design, direction, and control of processes that transform inputs into services and products for internal, as well as external customers.

A process is any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its customers. Processes have operations as subunits. An operation is a group of resources performing all or part of a processes. Processes linked together form a supply chain, which is the interrelated series of processes within a firm and across different firms that combine through supply contracts to produce a service or product to the satisfaction of customers.  A firm can have multiple supply chains due to variety of products or services provided. Similarly a firm can be part of several supply chains when it is supplying components to different firms. Supply chain management is concerned with the synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services, and information with customer demand.  All firms have processes and supply chains. Sound planning and design of these processes, operation along with internal and external coordination within its supply chain are required to create wealth and value for a firm’s diverse stakeholders. The value created by operations and supply chain function can be estimated by transfer pricing based on market prices for marketing and finance serves.

Broadly speaking, operations and supply chain management underlie all departments and functions in a business. Operations is  one of the key functions within an organization is part of the circular relationship with the three mainline functions of any business, namely, (1) operations, (2) marketing, and (3) finance.

Operations Management – Historical Evolution and Perspectives

The history of modern operations and supply chain management is rich and over two hundred years
old, even though its practice has been around in one form or another for centuries. The engineering developments that gave machines that made mass production possible is part of operations technology development history.

As part of management ideas evolution, Adam Smith and Charles Babbage (early part of the nineteenth century)  get the credit for the concept of division of labor.

American Society of Mechanical Engineers (ASME) focused on economy of production and management of production (1881) and this led to development of productivity management and industrial engineering. Frederick Taylor advocated study and evaluation of engineering elements in production processes and systems to improve productivity by reducing time taken to complete operations and to reduce cost. He also developed time study of human effort at element level to analyze the method of each element and improve it. Frank Gilbreth developed motion study procedure to examine human motions even at micro level and reduce their time. Scientific management (1911) is the name under which Taylor’s contribution became popular. Industrial engineering became the second branch to develop in mechanical engineering and is now an independent engineering branch applicable in all engineering branches providing productivity management support.

Three other landmark events from the twentieth century define the history of operations and sup ply chain management. First is the invention of the assembly line for the Model T car by Henry Ford in 
1909. The era of mass production was born, where complex products like automobiles could be manufactured in large numbers at affordable prices through repetitive manufacturing. Second, Alfred Sloan in the 1930s introduced the idea of  planning for product variety for achieving product proliferation and variety to satisfy the varying needs of segments of customers in the market along with achieving required profit, with the newly founded General Motors Corporation offering “a car for every purse and purpose.” Finally, with the publication of the Toyota Production System book in Japanese in 1978, Taiichi Ohno laid the groundwork for removing wasteful inventory from the processes. The efforts of Ohno, a production manager and Shigeo Shingo (an industrial engineer) gave birth to Toyota Production System (TPS) which became the role model World Class Manufacturing System.

The recent history of operations and supply chains over the past three decades has been development management practices steeped in technological advances. The 1980s were characterized by wide availability of computer-aided design (CAD), computer-aided manufacturing (CAM), and automation. Machine component’s role increased in operations.  Information technology applications
started playing an increasingly important role in the 1990s and started connecting the firm with its extended enterprise through Enterprise Resource Planning Systems and outsourced technology hosting for supply chain solutions. Supply chain visibility increased and development of supply chain management became possible and its use has  increased. Service organizations like Federal Express, United Parcel Service (UPS), and Walmart also became sophisticated users of information technology in operations, logistics, and management of supply chains.

In the new millennium, IoT and resulting Industry 4.0 movement is driving change in operations and SCM. Also there is an increased focus on sustainability of environment, firm and society.

A Process View
How Processes Work
Nested Processes
Service and Manufacturing Processes

Krajewski et al. remark that  a process view of the firm provides a much more relevant picture of the way firms actually work. Any process has inputs and outputs. Inputs can include a combination of human resources (workers and managers), capital (equipment and facilities), purchased materials and services, land, information and energy. Managers need all types of information to manage processes most effectively.

Processes can be broken down into subprocesses, which in turn can be broken down further into still
more subprocesses. This concept of a process within a process is termed a nested process. Operations constitute a process in process charts.

A Supply Chain View
Core Processes
Support Processes
Supply Chain Processes

Supply chain consists of a firm’s facilities, supplier firms and channel partners on the distribution side and customers. Supply chain processes are business processes that have external customers or suppliers.

In this text  four core processes are discussed.

1. Supplier Relationship Process. Employees in the supplier relationship process select the suppliers
of services, materials, and information and facilitate the timely and efficient flow of these items into
the firm. Negotiating fair prices, scheduling on-time deliveries, and gaining ideas and
insights from critical suppliers etc, help to create value.
2. New Service/Product Development Process. Employees in the new service/product development
process design and develop new services or products.  Customer requirements are to be gathered for product development.
3. Order Fulfillment Process. The order fulfillment process includes the activities required to produce and deliver the service or product to the external customer.
4. Customer Relationship Process: Employees involved in the customer relationship process identify, attract, and build relationships with external customers and facilitate the placement of orders by customers. Marketing and sales have an important role in  this process.

These supply chain processes have to designed, documented and analyzed for improvement, examined for quality improvement and control, and assessed in terms of capacity and bottlenecks.

Operations Strategy
Corporate Strategy
Market Analysis

Operations strategy specifies the means by which operations implements corporate strategy and helps
to build a customer-driven firm. It links long-term and short-term operations decisions to corporate
strategy.  Strategy  is at the heart of managing processes and supply chains. A firm’s internal processes  need to be organized to  be effective in a competitive environment. Operations strategy is the linchpin that brings these processes together to form supply chains that extend beyond the walls of the firm, encompassing suppliers as well as customers. Since customers constantly desire change, the firm’s operations strategy must be responsive.

Competitive Priorities and Capabilities
Managerial Practice 1.1 Zara
Order Winners and Qualifiers
Using Competitive Priorities: An Airline Example
Identifying Gaps between Competitive Priorities and Capabilities

Competitive priorities are the critical operational dimensions a process or supply chain must
possess to satisfy internal or external customers, both now and in the future. Competitive priorities
are planned for processes and the supply chain created from them.

Nine competitive priorities

1. Low cost operations
2. Top quality
3. Consistent quality
4. Delivery speed
5. On-time delivery
6. Development speed
7. Customization
8. Variety
9. Volume flexibility

Addressing the Trends and Challenges in Operations Management

Productivity Improvement

Productivity is a basic measure of performance for economies, industries, firms, and processes.
Improving productivity is a major trend in operations management because all firms face pressures to improve their processes and supply chains so as to compete with their domestic and foreign competitors.

Global Competition

Most businesses realize that, to prosper, they must view customers, suppliers, facility locations, and competitors in global terms. Global supply chains are to be used.

Ethical, Workforce Diversity, and Environmental Issues

Society and people demand more  ethical decisions and practices from business firms now and are penalizing more vigorously digressions.

The Internet of Things
Developing Skills for Your Career
Adding Value with Process Innovation

Process innovation can make a big difference to competitive advantage of organizations. IoT driven innovations are increasing in operations processes and even management practices are changing because of IoT based data collection and analysis using machine learning.

Learning Goals in Review
Video Case Using Operations to Create Value at Crayola
Case Chad’s Creative Concepts

Index to Summaries of all Chapters of Krajewski’s Book

Operations Management – Krajewski – 12th Edition – Chapter Summaries – Important Points

SUPPLEMENT A Decision Making
Break-Even Analysis
Evaluating Services or Products
Evaluating Processes
Preference Matrix
Decision Theory
Decision Making under Certainty
Decision Making under Uncertainty
Decision Making under Risk
Decision Trees
Learning Goals in Review