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Introduction to operations management

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Introduction to Operations Management
KEY CONCEPTS
What is retail?
What is the production process?
What is value?
KEY CONCEPTS EXPLAINED
What is retail business?
1. A retailer sells value-adding products and services to customers which the retailer
sources from the supplier-market.
2. Retailers mostly sell products manufactured by others. Some of these products
may offer exclusivity, but it is not a substantial competitive advantage because of
comparable offers elsewhere. Thus, the focus of the retailer is not only on what
he sells but also how he sells it.
3. Retailers engage in direct interactions with large volumes of customers. Much
more than the manufacturer. This means that the focus shifts from selling goods
and services to the customer to enhancing the customer experience. It is
important to build strong relationships with the customer through optimising
interactions with the customer.
MODERN EMPHASIS: SUPERIOR
CUSTOMER EXPERIENCE
AROMATHERAPY AS A PLEASANT
CUSTOMER EXPERIENCE
• Customers prefer pleasant smelling businesses
• Scents are associated with people, places, experiences or products
• Scent is the most powerful trigger of memory to recall associations
6 Olfactory ‘primary colours’ families
1. Citrus = lemon, lime, mandarin, orange, grapefruit, bergamot, clementine = crisp
and clean = high-energy retail store environment
2. Floral = jasmine, rose, gardenia, orange blossoms, violet = innocent & sweet =
fashion boutiques & jewelry stores
3. Outdoorsy = cedar, tar poles, pine, mint, fresh cut grass = clean and refreshing =
outdoor retail & environmentally friendly
4. Fruity = peach, pear, apple, apricot & plum = relaxing and de-stressing = fashion
retail
5. Ozonic = after thunderstorm smell = use in conflicting retail space
6. Gourmand = coffee and chocolate = warm & cozy = speciality food shops,
kitchenware & homeware
RETAILING FURTHER EXPLAINED
Retailing further consists of 2
components:
1.
•
•
•
•
Retailing format:
Product assortment (What to sell)
Pricing strategy
Customer interface (interaction)
Location of trade (Where)
2. Retailing activities:
• Sourcing and procurement
• Stocking, displaying, merchandising.
• Sales to satisfy customer needs and
customer experience
• Decide what technologies to use
VALUE EXPLAINED
Human resources
Financial resources
Information
Machinery
Technology
Org Functions
Purchasing
Operations/production
Marketing
Financial
Generic Man Functions
General management
Human resources
Communications
Info management
E-business
OUTPUTS
Raw materials
PROCESSES
INPUTS
Value added can be defined as the additional value of goods over the cost used to
produce it.
Need-satisfiers
(products/services)
Profit
VALUE EXPLAINED
Lecturers
Information
Class fees & remuneration
Transformation of inputs
Lectures
Assignments
Lab experiments
Buildings
Tests
Technology
Exams
OUTPUTS
Students
PROCESSES
INPUTS
Value added can be defined as the additional value of goods over the cost used to
produce it.
Graduated students with a
better prospect of
employability, economic
contribution and
responsible citizenship
VALUE TRANSFORMATION
8 M’s of Operations Management
1. Money: Financial resources available to produce goods and services. Operations
manager facilitates this process by means of budget.
2. Manpower (HR): Selection, mentoring, training and rewarding of workforce.
Operations manager does job structuring, performance management, counselling
and discipline.
3. Materials: Obtain and store the right quality of materials.
4. Methods: Choose and design systems and methods for the production of goods and
services.
5. Management: Operational manager assists with setting up organisational structures
that can assist with planning, organising, leading and control.
6. Machines: Operations manager must be acquainted with latest technology, achieve
lowest possible waste, maintain machinery and ensure reliability at all times.
7. Messages: Communication between employees, management and departments.
Communicate via MRP, MPS & budget.
8. Markets: Operations manager must be aware of which markets are being targeted
and provided for.
VALUE EXPLAINED
Value added can be defined as the additional value of goods over the cost used to
produce it.
Out of a customer perspective:
• Customer perceived, not seller defined
• Perceived usefulness of product/service
• Evaluation of ‘what do I give versus what I receive in return’
• What do I give? Money, time, energy, psychological cost
•
•
•
•
•
PRODUCT/SERVICE UNIQUENESS (IMAGE)
ORGANISATIONAL FLEXIBILITY
COST/PRICE
CUSTOMER EXPERIENCE
QUALITY of product/service
• Functionality (Performance ability)
• Appearance (Aesthetic attractiveness)
• Reliability and guarantees (Continuous performance capability)
• Durability (Total life expectancy)
• Serviceability and support(Reparability)
• Contact (Convenience & experience of interaction)
DETERMINE THE VALUE-ADD
https://www.youtube.com/watch?v=vWLpsdSg5ec
https://www.youtube.com/watch?v=MpYrJs0rX
84
WHAT VALUE DO THE FOLLOWING BRANDS HOLD?
Evaluate the Value Perception of the
Customer
https://www.youtube.com/watch?v=uu-g6Opuj24
https://www.youtube.com/watch?v=MjJweWi1Fi8
https://www.youtube.com/watch?v=B8Y3uTHOs
D0
Evaluate the Value Perception of the
Customer
https://www.youtube.com/watch?v=_q13VbbwIt4
https://www.youtube.com/watch?v=q3fitRX6y
bQ
https://www.youtube.com/watch?v=FiUqAdBEBa8
What is Customer Satisfaction
Feelings of pleasure or disappointment resulting from a comparison between
perceived and actual performance.
Expectations vs Actual performance
Actual performance vs As advertised
What is the production process for the
Cake Boss shop of Buddy Valastro?
THE RETAIL PRODUCTION PROCESS
Gather
ingredients
needed to
make a
pizza
Decorate
and
assemble
Packaging
Turn raw
materials
into finished
pizza
SELL!
What is Operations Management then?
Operations management can be defined as the management of processes exploited
to conceive, deliver, create and distribute goods that are value adding. The
management of these processes is done by planning, organising, leading and
controlling the processes that transforms inputs into required outputs.
Let’s have a closer look:
• Management of processes (what processes?)
• Processes that conceive (think of), deliver (R&D), create and distribute goods
• That are value adding
• These processes are managed through planning (What should be done)
• Organising (How it should be done)
• Leading (How and when it should be done)
• Control (Has it been done correctly)
• Of processes that turns inputs (material/customers/information)
• Into outputs (products/services)
What is Operations Management then?
Definition 2: It can be defined as all activities involved in the creation, operation and
improvement of the processes and procedures devoted to the production and
delivery of an organisations principal products or services.
IMPORTANCE OF OPERATIONS
MANAGEMENT
• Effective operations management will ensure that more value is added to the
product/service offering enabling it as an order qualifier.
• An order qualifier means customers will consider buying the product or service
because it adds enough value to grab their interests and attention.
• Competitive pricing, quality, speedy delivery etc are all order qualifiers. Order
qualifiers does not mean than you have got the sale.
• The product must have all the uniqueness the customer desires in order for the
order qualifier to turn into an order.
• Because order-winner characteristics can change very swiftly, products will quickly
become order-qualifiers instead of order winners.
• Why? Customer requirements will change continuously and competitors will
incorporate similar characteristics into their products.
VIEW THE FOLLOWING: ARE THEY ORDER-WINNERS
OR ORDER-QUALIFIERS?
https://www.youtube.com/watch?v=-CYT4PFV_Hs
https://www.youtube.com/watch?v=Le46ERPMlW
U
https://www.youtube.com/watch?v=MXo_d6tNWu
Y
https://www.youtube.com/watch?v=CKwOoOXYiis
https://www.youtube.com/watch?v=2NnUGx4gjw
U
OPERATIONS MANAGEMENT IS A PROCESS
The process must be:
1. Effective:
• Product / service produced in a reliable manner
• The product meets or exceeds customer expectations
• It is achieved by listening to the voice of the customer
2. Efficient:
• Produce product/service in less time
• Wider range of products produced
• Product customisation possible
• Minimise the cycle time in the production process
3. Low cost:
• Balance supply and demand
• Reducing non-value adding processes
4. Robust:
• Safety & health
• Environmentally friendly & Sustainable
EFFECTIVENESS OF THE OPERATIONS
MANAGEMENT PROCESS
Read the 2015 interview
with Harley-Davidson
President & CEO, Matt
Levatich. How does he listen
to VOC and meet and exceed
customer expectations?
http://www.cycleworld.com/2015/04/30/cycl
e-world-interview-matt-levatich-harleydavidson-president-and-ceo/
http://www.cycleworld.com/2015/05/01/cycl
e-world-interview-matt-levatich-harleydavidson-president-and-ceo-part-2/
http://www.cycleworld.com/2015/05/05/cycl
e-world-interview-matt-levatich-harleydavidson-president-and-ceo-part-3/
MAJOR FUNCTIONAL AREAS OF A BUSINESS
• Operations
• Finance
• Marketing
All 3 of the above form part of a combined system. The purpose of the system is to
be profitable.
They are interlinked! See next slide for example.
OPERATIONS, MARKETING & FINANCE ARE
LINKED
EXAMPLE:
In the Japanese 4x4 SUV market, the following four compete for market share:
Suzuki:
Jimny
Toyota:
Land Cruiser
Hilux
Fortuner
FJ Cruiser
Prado
Nissan:
Patrol
Navara
Hardbody
Pathfinder
Mitsubishi:
Pajero
Pajero Sport
Triton
The 5th Japanese competitor, Honda, does not
manufacture a real 4x4 SUV. It’s marketing
department considers the benefits of moving into
the real 4x4 sector as Honda is a very strong and
reliable brand with a healthy following. On the JD
Powers index, Honda is rated as the most reliable
motor-vehicle brand in the world and it feels it can
strengthen that image in the 4x4 market.
Indicate how this consideration will impact the
organisation.
STEP 1: MARKETING MUST DECIDE WHERE TO POSITION THE
SUV Bakkie
NEW ADDITION TO THE PRODUCT RANGE 4x4 market
Small True 4x4
market
Big True 4x4
market
True 4x4 pickup market
SUV 4x4
market
514 000
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Price
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199 900
Value
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680 000
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700 000
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1418 000
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2156 000
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