Week 1
Operations definition
The activity of managing the resources and processes that produce and deliver goods and/or services
Input-transformation-output model
This model applies to all activities and functions in an organisation.
Primary process definition
All the resources and processes which are needed to produce products and services that are crucial for
a long-term sustainable character of a company
Example input, output and goal
Goal:
●
●
Education of students
Doing scientific research
Input:
●
●
Lecturers/students
Researchers
Output:
●
●
Graduated students
Knowledge
Conclusion about primary processes
- In many cases there are multiple primary processes
- There is not always a clear distinction between primary and secondary processes
- The importance of a primary process can change over time
The consequences of these conclusions influence how processes are being controlled and organised
Other conclusions
- The primary process encompasses machines, equipment, technology, knowledge
- The output of the primary process often is a mix of physical products and a service - the
product-service combination
- The reconciliation between markets and available resources is an ongoing process
- A change of strategy can have a huge impact on the primary process
- The primary process on the other hand can also be leading for the overall strategy of a
company
Week 2
Horizontal structure
-
Location of stockpoints
Physical processes
Sequence of materials
Vertical structure
- Levels of planning
- Decisions that have to be made
- Trade-off's
Organisation structure
- Relates to organisational entities
- Allocation of task/responsibilities and competencies
- How coordination is achieved
Operations performance
- Quality (doing things right)
- Speed (doing things fast)
- Reliability (doing things on time)
- Flexibility (changing what you do)
- Costs (doing things cheap)
- Dependability (keep delivery promises)
Methodology of Operations Management
Some important strategic questions
-
What is the overall strategy of the company?
How does the process of strategy formulation look like?
From an operations management perspective, what are the goals that need to be achieved?
Long-term and short-term and what are the opportunities and threats?
What is the role of operations strategy
How are resources linked to market requirements (reconciliation)?
Is there a fit (or misfit) between the overall strategy of the company and the operations
strategy?
Strategic decisions
- Focus on the long-term
- Cover the entire company
- Relate to goals to be achieved
Tactical decisions
- Focus on the medium long-term
- Cover areas within the company
- Relate to means
Operational decisions
- Focus on the short-term
- Cover small entities of the company
- Relate to operational planning and control
Operation strategy
Operation strategy is the total pattern of decisions that shape the long-term capabilities of any type of
operation and their contribution to overall strategy through ongoing reconciliation of market
requirements and operations resources.
The four perspectives on operations strategy
- Top-down: Operations strategy should interpret higher level strategy
- Bottom-up: Operations strategy should learn from day-to-day experiences
- Operations resources: Operations strategy should build operations capabilities
- Market requirements: Operations strategy should satisfy the organisation's markets
Strategic role of the operations function
Operations function can:
- Help implementing the business strategy (operations capabilities as effector)
- Support business strategy (operations capabilities as follower)
- Drive the business strategy (operations capabilities as leader)
Market perspective on operations strategy
- Customer needs
- Market positioning
- Competitors' actions
These are elements of understanding the markets that lead to required performance, of which
performance objectives is an element.
Operations resource perspective on operations strategy
- Tangible and intangible resources
- Operations capabilities
- Operations processes
These are elements of understanding resources and processes that lead to strategic decisions, of which
decision areas is an element.
Operations strategy is the strategi reconciliation of market requirements with operations
resources
Decision areas
Decision areas consists of:
- Capacity: including facilities in general
- Supply networks: including purchasing and logistics
- Process technology: which produces goods and services
- Development and organisations
Week 3
Methodology of Operations Management
- Horizontal structure
- Vertical structure
- Organisational structure
Focus of Operations Management
There are 3 components that together lead to performance.
- Transformation processes
- Organisational embedding
- Planning and control systems
Operations Strategy is
The total pattern of decisions that shape the long-term capabilities of any type of operation and
their contribution to overall strategy through the ongoing reconciliation of market requirements
and operations resources.
"Operations strategy is the strategic reconciliation of market requirements with operations resources"
Horizontal structure
Differs in level of detail from high to low. It goes from layout of the process to process schemes to
basic form (grondvorm).
Basic form
Above is an example of the basic form. It consists of:
- Sequence of the flow of materials
- Location of stock points
- Dominant transformation processes (subprocesses)
Important questions regarding horizontal structure
- Do the (sub)process support the strategic intentions of the operations?
- Do the sub processes add value?
- Is each subprocess in control?
- Are the stockpoints necessary? Why are there stockpoints?
- Who owns and has responsibility for the (sub)process?
- What are potential problems with each subprocess?
Characteristic of the horizontal structure
- Product variety: number of different products that can be manufactured
-
Material structure: is related to the complexity of the product itself. Example is the different
types of materials the products are made of.
Manufacturing structure: related to the complexity of the manufacturing structure
Specific character of resources: examples are the flexibility of employees, the multi purpose
of machines or the flexibility of machines
Commonality of raw material: can the raw material be applied for different products
Capacity cohesion: physical relations between capacities
Uncertainty: the degree of lacking information in order to make decisions
Week 4
Customer order decoupling point (CODP) - decoupling point
This addresses the influence of individual customer orders on the primary process. For products like
food products and standard houses, the decoupling point is later in the primary process. For products
like customer specific furniture and building yachts, the decoupling point is earlier in the primary
process.
Before the decoupling point in the primary process, the planning is based on forecast and stock levels.
After the decoupling point in the primary process, the planning is based on individual customer
orders.
Definition of the decoupling point
The point in the primary processes where the customer order penetrates.
- It is where the order driven and the forecast driven activities meet.
- Generally, the decoupling point corresponds with the last major stock point in the flow of
materials
- It allows for the opportunity to optimise upstream activities independently from uncertainties
in the market demand
- It separates two areas where the nature of decision-making is very different
What influences the position of the decoupling point
Upstream:
- Process constraints:
- Long lead time
- Bad process control
- Delivery service requirements
- Short delivery time
- High delivery reliability
Downstream:
- Product market constraints:
- Irregular market demand
- Specificity products
- Inventory cost considerations:
- Low stocks
- Reduce risk of obsolescence
Vertical structure
The vertical structure is about decisions regarding the primary process, the relationship between these
decisions and the required information to make these decisions. The planning rationale being used is:
- Logistical concept
- Decision-structure
- Control framework
Planning is not about planning tasks.
Week 5
Information technology IT
Is about:
- Collecting data
- Creation to information
- Processing, storage, provisioning
ICT
IT + communication technology = ICT
Innovative developments in IT
- Mobile communication
- Internet
- Digitalisation, IoT (Internet of Things)
IT and architectures
IT deals with architectures. Architectures are: design of business processes, systems, organisation,
delivery
Data and information
When data is processed, it is called information. Information is stored in an information system,
which underlies operation processes.
Key trends of digital transformation
Unlocking business value by data
- Use of low-code/no-code tools
- Use of analytics
- Use of Artificial Intelligence (AI)
- Use of Machine Learning (ML, machines applying AI)
Cybersecurity & privacy
- New technology needs to be secure by default
- Create awareness, compliance, zero-trust for cybersecurity
Remote & hybrid work
- Mix of office and home-based employees
- 75% of hybrid organisations will see revenue growth 25% faster than competitors
Automation
- Elimination of simple manual tasks
- Robotic Process Automation (RPA): more robots in processes that take over work of people.
Reduce shortages, avoid tiresome, heavy, dangerous work
- Three priorities:
- Improving quality of work
- Speeding up operation processes
- Enhancing the agility of decision-making
IT challenges
- Keeping up with constantly evolving technology
IT should focus on:
- Digital adoption & transformation processes
- Migration strategy and implementation
- Investments
- Security threats
- Employee recruitment & training
IT strategy
- Is part of Operations Strategy
- To achieve leadership, the IT helps to
- Leap ahead
- Solve for the combination of
- Digital core
- Digital ecosystems
- Digital edge
- Digital design for sustainability
IT implementation
- Ensuring data is reliable and explainable
- Using IoT (Internet of Things) to take control
- Getting the most out of the cloud
- Dealing with cybersecurity concerns
- Getting ready for the metaverse concerns
Enterprise Resource Planning (ERP)
This is an enterprise-wide business solution that integrates the planning, resource allocation and
control activities of all parts of the business.
ERP system = software + hardware.
Another definition: ERP is a system of integrated software applications that standardises, streamlines
and integrates business processes across different departments.
ERP Basics
The ERP system:
- Typically contains dashboard connected to a central database that lets users look at real-time
data across different business units
- Depending on its complexity it may have numerous submodules
Key ERP modules:
- Supply Chain Management
- Financial & Accounting Management
- Inventory Management
- CRM
- Human Resources
Benefits of ERP
- Greater visibility of what is happening in the business
- Forcing changes that make the business more efficient
- Improved control of operations
- More sophisticated communication with customers, suppliers and other business partners
- Integrating whole supply chains
Criticisms of ERP
- Practical implementation can be very complex and costly and time-consuming
- Other consideration of cost vs flexibility and technology dimension
- It is about improving performance vs rigid discipline
Billing
Billing is an example of ERP. This is about settlement/invoicing.
- It is an essential Information System withing a company that is critical for generating revenue
- Seems like a paradox within companies
- Little attention is paid to billing
- But if you can't bill it, you can't sell it
- Billing is the only frequent customer contact
- Billing provides money but it also costs money
Billing basics
Company sends invoice to user, user sends payment.
User has request for infrastructure of company, infrastructure provides with services.
Company monitors infrastructure, infrastructure gives control.
Where is billing
- Retail
- Telecommunications
- Health companies
- Public transport
Basics of billing: accounting
Input in billing from company is:
- Customer information
- Pricing information
- Usage details
The output is:
- The invoice
Billing models
- Prepaid
- Pay-now
- Post-paid (afterpay)
Billing steps
1. Registration of usage (accounting, metering)
2. Collection of usage records (mediation)
3. Determining prices (rating, tariffing, pricing)
4. Making up the bill (invoicing, billing)
5. Sending the invoices and collections (presentment, collections)
Billing on behalf of or PSP (Payment Service Provider)
Billing is also available on behalf of. There are also payment service providers like iDeal, Adyen
Transparent billing
- Pay per event
-
Easy to (un)subscribe)
Cost management
- Advice of charge
- Choice of payment methods
Week 6
Example of basic planning approach
Characteristic of inventory-driven system
- Inventory levels are leading for decisions
- Sub-processes are decoupled/separated by stock points
- Uncertainties are tackled by safety stock
- Disadvantages of this system:
- Different stock points/inventory costs
- Forrester-effect
- Delay in response
- Managing all the stockpoints can be complex
- Demand from the past is the starting point for production
MRP-1
MRP-1 means Materials Requirements Planning. It is a dependent demand system that can be used to
calculate material requirements in order to meet knows as well as a forecast of demand. MRP helps to
make volume and timing decisions.
Elements of MRP-1
The customer orders and prediction together create the master production schedule. This, together
with bill-of-material and stock-information goes into the MRP-1. The output is the purchasing orders
and work orders.
Basic assumptions of MRP-1
- Perfect information is assumed
- Underlying relations have to be known
- A realistic master production schedule is assumed
- Capacity restrictions are not taken into account
MRP-2/ERP
Can be seen as:
- A logistical information system
- A set of algorithms for planning calculations
- A framework for planning and control
MRP-2 as control concept
- Production and sales decisions are coordinated by means of a master production schedule
- Stability in the production process is often achieved by means of a 'fixed period’
- Operations are planned and controlled in a 'centralised' way
- At least two control levels
- Good flow control
- Detail planning
Implementing ERP-system implies
- Implementing a control concept
- Implementing a complex information system
- Alignment between planning and control and characteristics of business processes
- In many cases an organisational change process
- Power of stakeholders
- Interest of stakeholders