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 ----------------------------------------------------------------- Price -------------------- --------------------------------------- 199 900 Value ------------------------------------------------------------------------------------ ----------------------------------------------------------------------- -------------------------------------------------------------------- 680 000 ----------------------------------------------------- ------------------------------------------------------------------------------------- ----------------------------------------------------- 700 000 --------------------------------------------- --------------------------------------------------------------------------------------------- --------------------------------------- 1418 000 ----------------------------------------------------- -------------------------------------------------------------------------------------------------------- ------------------------------------------ 2156 000
