- Describe the role of operations in an organization and its historical evolution over time.
- Describe the process view of operations in terms of inputs, processes, outputs, information flows, suppliers, and customers.
- Describe the supply chain view of operations in terms of linkages between core and support processes.
- Define an operations strategy and its linkage to corporate strategy and market analysis.
- Identify nine competitive priorities used in operations strategy, and explain how a consistent pattern of decisions can develop organizational capabilities.
- 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.
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.
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
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
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 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
9. Volume flexibility
Addressing the Trends and Challenges in Operations Management
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.
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
SUPPLEMENT A Decision Making
Evaluating Services or Products
Decision Making under Certainty
Decision Making under Uncertainty
Decision Making under Risk
Learning Goals in Review