2023-2-28 Operations Management Dr. Yinan Qi Business School Room 137, Xingzheng Building yinanqi@uibe.edu.cn 64494027 McGraw-Hill/Irwin Textbook Operations and Supply Chain Management: The Core, 3rd edition, Richard Chase and Robert Jacobs Office hour Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. 15:00pm-16:00pm, Thursday Evaluation scheme Attendance 20% Case Analysis 30% Final Exam 50% 1-2 2023-2-28 Topic 1 - Strategy McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Strategy, Processes, and Analytics Operations management involves Product design Purchasing Manufacturing Service operations Logistics Distribution Success depends upon Strategy Processes to deliver products and services Analytics to support the decisions needed to manage the firm 1-4 2023-2-28 What is Operations Management? The design, operation, and improvement of the systems that create and deliver the firm’s primary products and services Operations Management is A functional field of business Concerned with the management of the entire production/delivery system 1-5 Operations and Supply Chain Processes 1-6 2023-2-28 Transformation System Internal and external customers Processes and operations Inputs 1 3 5 2 Outputs • Services • Goods 4 Information on performance 1-7 Goods versus Services 1-8 2023-2-28 Options for increasing contribution Current Status: Sales: $100,000 COG: $80,000 Finance Cost: $6,000 Subtotals: $14,000 Contribution: $10,500 Taxes(25%): $3,500 1-9 Option 1: Marketing-Increase Sales by 50% Marketing: Sales: $150,000 COG: $120,000 Finance Cost: $6,000 Subtotals: $24,000 Contribution: $18,000 Taxes(25%): $6,000 1-10 2023-2-28 Option 2: Finance-Reduce finance cost by 50% Finance: Sales: $100,000 COG: $80,000 Finance Cost: $3,000 Subtotals: $17,000 Contribution: $12,750 Taxes(25%): $4,250 1-11 Option 3: Operation-Reduce COG by 20% Marketing: Operations: Contribution: $18,000 Sales: $100,000 COG: $64,000 Finance Cost: $6,000 Finance: Subtotals: $30,000 Contribution: $12,750 Contribution: $22,500 Taxes(25%): $7,500 1-12 2023-2-28 Impact on the supply chain A case of JD.com Available rate per page view is calculated as the monthly average of the percentage of the number of page views showing a specific product category in stock out of the total number of page views of that product category of a specific supplier on JD’s platform 1-13 Supply chain structure of eplatform JD JD 1-14 2023-2-28 Fundamental approach for improving resilience of JD.com 1-15 Warehouse network disruption and an alternative plan for Wuhan RDC 1-16 2023-2-28 Standard and Automatic procurement process 1-17 Efficiency, Effectiveness, and Value 1-18 2023-2-28 Operations Strategy Setting broad policies and plans for using the resources of a firm – must be integrated with corporate strategy Corporate strategy provides overall direction and coordinates operational goals with those of the larger organization Operations effectiveness – performing activities in a manner that best implements strategic priorities at a minimum cost 1-19 Operations Strategy Strategy Process Customer Needs Corporate Strategy Example More Product Increase Org. Size Operations Strategy Decisions on Processes and Infrastructure Build New Factory 1-20 2023-2-28 Competitive Dimensions 1-21 Cost Make it cheap Commoditylike, Cannot distinguish Fierce competition Large volume 1-22 2023-2-28 Quality & Reliability Design quality & Process quality Focus on requirements of customer Overdesign, Underdesign Process quality is related to reliability Produce error-free products 1-23 Delivery Speed Make it Fast Computer repair service 1 hr vs 24 hrs 1-24 2023-2-28 Delivery Reliability Deliver it when promised On or before a promised date JIT production system Delivery reliability is critical 1-25 Coping changes with demand Volume flexibility When increasing Ability to respond to increases and decreases Easy to handle When decreasing Difficult to make decisions 1-26 2023-2-28 New product introduction speed Change it Ability to offer a wide variety of products Time-to-market Convert old process to offer new product 1-27 Trade-Offs Management must decide which parameters of performance are critical and concentrate resources on those characteristics For example, a firm that is focused on low-cost production may not be capable of quickly introducing new products Straddling – seeking to match a successful competitor by adding features, services, or technology to existing activities Often a risky strategy 1-28 2023-2-28 Order Winners and Order Qualifiers Order qualifiers are those dimensions that are necessary for a firm’s products to be considered for purchase by customers Features customers will not forego Order winners are criteria used by customers to differentiate the products and services of one firm from those of other firms Features that customers use to determine which product to ultimately purchase 1-29 Order Qualifiers and Order Winners 1-30 2023-2-28 Assignment Questions What were the order winners/qualifiers of Galanz in the microwave oven business during the early stage of its development? Rank the importance of Galanz’s operations objectives of cost, quality, flexibility, delivery, service and innovations. How has the importance changed over time? What are the Galanz’s competitive and operations strategy? How does its operations strategy support its competitive strategy? What are the differences between ODM/OEM versus OBM in terms of production, design, marketing, distribution and customer service? Should Galanz develop its OBM business in the international market? Should the company change its overall cost leadership strategy? How should company gain competitive advantage? 1-31 Upgrading in GVC OEM-ODM-OBM OBM Valueadded ODM Service R&D Marketing OEM Design Deliver Purchase Manufact ure 1-36 2023-2-28 Digital economy of China is a story of commercial success In little more than a decade, China has come from almost nowhere to become the largest ecommerce market in the world, accounting for more than 40 percent of global e-commerce transactions source: Digital China: Powering the Economy to Global Competitiveness, 2017, MGI 1-37 China's mobile payments are 11 times the value of those in the United States thanks to consumers ' early embrace of the technology. And China now places in the top ranks of global venture-capital investment in virtual reality, autonomous vehicles, 3-D printing, robotics, drones, and artificial intelligence. Between 10 and 45 percent of revenue in China 's industries could shift from old business models to new ones enabled by digital by 2030. McKinsey Global Institute reports that, i n 2013, industries in the United States were 4.9 times more digitized than ones in China; in 2016, that figure had fallen to 3.7 times. 1-38 2023-2-28 Chinese companies developed greater processing capacities source: Digital Chia: Powering the Economy to Global Competitiveness, 2017, MGI 1-39 Case -- RedCollar 1-40 2023-2-28 Company Background A customized apparel manufacturer. In 2015, the sales revenue of apparel customization accounted for 96% of the total approximately 0.18 billion U.S dollars, with the net profit margin of 25%. Most of its sales are to overseas big retail chains, the tailor's and entrepreneurs such as designers, owners of small clothes shops, etc. 1-41 Upgrading Trajectory 1. Workshop producer (1980s 1994) 2. Mass producer (1995 - 2002) 3. Mass customizer (2003 - ) 1-42 2023-2-28 1-43 1-44 2023-2-28 RedCollar’s Operations Model 1-45 C2M platform reduces manufacturer’s dependence on the traditional sales channel. If the customer designs the suit, it removes designers from the system, which are expensive in traditional apparel manufacturing process. Redcollar can utilize the benefits of sharing economy to let thousands of free designers work for the company through the ecosystem centered with the C2M platform. 1-46 2023-2-28 Internet and Upgrading Valueadded ICT boom and knowledge economy (2000s) Pre-ICT boom (1970s/1980s) 1-47 Is it real? Value-added E-commerce/Internet era Value Chain 1-48
