Introduction & Strategy Module
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OPNS 430
Introduction & Administrative
Goals and Key Paradigms of Course
q Strategic role of Ops
q Process view of Ops
§
A Strategic Framework for Ops
q Strategy: Product attributes and the Competitive Product Space
q Ops: competencies and Processes
§
Aligning strategy and operations:
q Chronodrive
q Focus
q Wriston Manufacturing
Operations Management OPNS-430
Process View & Strategy
Slide 0
© Gurvich
1.
2.
3.
4.
5.
Strategic Differentiation is Key
Connections are Worth Gold
Operations Management is
Fundamental
You Need Teamwork
Personal Experiences Lead to
Different Viewpoints
Process View & Strategy
Opportunity Cost
7. Communication is Key
8. No Growth in Comfort
9. Confidence in Numbers is Important
10. Experience Trumps Everything
6.
Slide 2
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What is Kellogg’s MBA about?
Mastery in multiple disciplines
Today’s leaders will be asked to confront
increasingly complex problems. These problems
require them to bring together insights from multiple
disciplines.
Process View & Strategy
Slide 3
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Replacing the irreplaceable
Source: Adam Lashinsky “The genius behind Steve” Fortune, 2008
Process View & Strategy
Slide 5
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Apple and Supply Chain Management
§ Apple began innovating on the nitty-gritty details
§
§
§
§
of supply-chain management almost immediately
upon Steve Jobs’s return in 1997.
At the time, most computer manufacturers transported products
by sea, a far cheaper option than air freight.
To ensure that the company’s new, translucent blue iMacs
would be widely available at Christmas the following year, Jobs
paid $50 million to buy up all the available holiday air freight
space, says John Martin, a logistics executive who worked with
Jobs to arrange the flights.
The move handicapped rivals such as Compaq that later
wanted to book air transport”
They did the same with production of flash memory for iPod
Source: Business Week, “Apple’s Supply-Chain Secret? Hoard Lasers”, November 2011
Process View & Strategy
Slide 6
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Is ZARA really a fashion (design) company?
Armancio Ortegra Gaona
“The secret of Zara’s success is its speed—four weeks for a new
fashion idea to hit the shops—and the feedback that store
managers send to head office, to help it fine-tune its ideas.”
Source: “When will Zara hit its limits?” The economist
Process View & Strategy
Slide 7
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Humanitarian Logistics
Process View & Strategy
Slide 8
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Healthcare Operations
Dr. Devi Shetty (Narayana Hrudayalaya Hospital), aka
“The Henry Ford of Heart Surgery”
Source: “Production line heart surgery”, BBC news
https://www.youtube.com/watch?v=HJnI3hRt6kQ
Process View & Strategy
Slide 9
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What do you mean by “Operations”?
Process View & Strategy
Slide 10
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What is Operations?
§
Opus: (early 18th century) from Latin, literally means
‘work’.
§
Opus: (contemporary meaning) an artistic work,
especially one on a large scale
§
Our view: the science/art of doing repetitive work
“better”
Process View & Strategy
Slide 11
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Innovation is often PROCESS innovation
Technology supported by market-place
engineering: supply-demand matching
via dynamic pricing
Process View & Strategy
Slide 12
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Process Innovation
Process View & Strategy
Slide 13
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Why is process design important?
Process View & Strategy
Slide 14
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Why is process design important?
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Offering products online may be easy, but getting the goods to consumers can
be a burden on the bottom line. Some believe that having customers pick up
purchases at the stores can cost less than packing and delivering goods to
homes. Retailers may be experiencing service failures because picking products
from storage and packing them into unique combinations for customers is
significantly easier in a streamlined warehouse than in a chaotic store, where
other customers need to be helped and orders can be misplaced, Mr. Usie said.
–
Retailers Struggle Getting E-Commerce Goods to Customers, Study Says, WSJ, Nov
3, 2015
Process View & Strategy
Slide 15
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Why is process design important?
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“The average time patients spend waiting to see a health-care provider
is 22 minutes, and some wait stretch for hours, according to a 2009
report by Press Ganey Associates, a health-care consulting firm, which
surveyed 2.4 million patients at more than 10,000 locations.
Orthopedists have the longest waits, at 29 minutes; dermatologists the
shortest, at 20. The report also noted that patient satisfaction dropped
significantly with each five minutes of waiting time.
– The Wall St. Journal Oct 18, 2010.
Who waits
for whom?
Process View & Strategy
Slide 16
Year = 1966
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Interfaces
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Operations - Marketing
§
Operations - Finance
Process View & Strategy
Slide 17
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Rising to any
challenge,
such as managing
across business
functions
Process View & Strategy
Slide 18
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Introduction & Strategy Module
§
§
OPNS 430
Introduction & Administrative
Goals and Key Paradigms of Course
q Strategic role of Ops
q Process view of Ops
§
A Strategic Framework for Ops
q Strategy: Product attributes and the Competitive Product Space
q Ops: competencies and Processes
§
Aligning strategy and operations:
q Chronodrive
q Focus
q Wriston Manufacturing
Process View & Strategy
Slide 19
© Gurvich
Goals
Operations as a managerial integration function
2. Evaluation and Improvement
1.
Ø
Course is structured to answer:
1. What is an improvement?
q
Strategic role of Ops + Process view
2. Where to target improvement?
q
Identify metrics by linking process flows with financial flows
3. How to improve?
q
Process View & Strategy
Improve each metric
Slide 22
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Key Paradigm of Course:
1. The Strategic Role of Ops:
“A company’s operations function is
either a competitive weapon
or
a corporate millstone.
It is seldom neutral.” [Skinner ‘69]
Process View & Strategy
Slide 23
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What is the objective/goal?
Process View & Strategy
Slide 24
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1. The Strategic Role of Ops means that:
§ Most operational decisions have strategic impact
– Truck dispatching at USPS
– IT at Walmart
– Honda flexibility
§ Strategic decisions impact operations
– FedEx-USPS
– AA-Southwest
– ZipCar-Hertz
Process View & Strategy
Slide 26
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Key Principle of Course:
2. The Process View of Ops: motivating quote
§
USA Today reported that Sealy dramatically improved its operations:
Each bed is completed in four hours, down from 21.
– Median delivery times have been cut to 60 hours from 72.
– Plants have cut their raw-material inventories by 50% to 16 days’ worth.
– By moving workers closer together, the Williamsport facility last year
freed enough space to combine two shifts, slicing costs.
–
Process View & Strategy
Slide 27
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What is Operations?
“ The process of bringing
goods and services
to customers/markets”
Process View & Strategy
Slide 28
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What is a Process?
Transformation: Activities & Buffers
Inputs
Outputs
Resources
We will return to Process View in Module 2
Process View & Strategy
Slide 29
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What is Good Operations Management?
§ Management of business processes
§ How to structure processes and manage resources to develop
the appropriate capabilities to convert inputs to outputs.
What is an appropriate capability?
What is a “good” process?
Process View & Strategy
Slide 30
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What defines a “good process”?
Performance: Financial Measures
§
Absolute measures:
revenues, costs, operating income, net income
– Net Present Value
–
§
Relative measures:
–
§
Survival measure:
–
§
Return on assets (ROA), ROI, ROE
cash flow
Problems with financial measures:
Infrequent
– Aggregate
– Lagging
–
Process View & Strategy
Need operational or process measures
Slide 31
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Let us go back to DESIGN
§ A design is a plan or specification for the construction of an
object or system or for the implementation of an activity or
process.
(Wikipedia)
What are the sequence of questions you ask yourself in designing
a product?
Process View & Strategy
Slide 32
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What defines a “good process”? Ultimately, all
organizations compete on delivered value
Delivered value of process =
benefit to process customers – total process cost
Benefit driven by
customer value
Variety V
(flexibility)
Price p
(Cost)
Quality Q:
•of product or
outcome
•of service
Process View & Strategy
Time T:
•Rapid, reliable delivery
•New product development
Slide 33
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A Strategic Framework for Process Design and Improvement:
Three questions
1.
competitive
strategy
q
Ø
2.
operations
strategy
Process View & Strategy
What is the value proposition to our customers?
Rank (p, T, Q, V)
Given our strategic position, what must
operations do particularly well?
q
Ø
3.
Process
structure & mgt
What is our strategic position: how do we
compete & provide value in the market?
Which competencies must ops develop?
Rank (c, T, Q, Flex)
Given needed competencies, how should
operations processes be structured to develop
competencies that support strategy?
Ø
Process choice (structure) and management
Slide 34
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What defines a good Operations?
A good Operations
structures the processes and resources to
align and adapt
the operational competencies
with the needs of its customers
and market conditions.
Process View & Strategy
Slide 35
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For Next Class
1.
2.
Chronodrive (short newspaper piece)
Wriston Case. A very interesting read.
Make sure you do the NPV calculation. Data for this at the very end
of the case. You can use perpetuity.
à Canvas Survey
Process View & Strategy
Slide 36
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Process View & Strategy
Slide 37
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The Fundamentals: Competitive Strategy
1.
Defines your sand box
– Your market
– Your core activities in the value chain
2.
Prioritizes your value proposition
– Cost, Quality, Variety, Time
Time
Speed
Cost efficiency
§
What are your priorities?
Process View & Strategy
Slide 38
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Representation of Strategy:
Current Position and Strategic Directions of Movement in the competitive product space
Responsiveness
B
A
High
Low
Price
Process View & Strategy
Slide 39
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Strategy vs. Operational Effectiveness:
The Operations Frontier as the minimal curve containing all current positions in
an industry
New technology expands
Operations frontier
Responsiveness
Operations
frontier
High
Low
Price
Process View & Strategy
Slide 40
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An operations frontier for Cook County Elementary Schools
Process View & Strategy
Slide 41
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Let’s talk about Chronodrive
1.
competitive
strategy
q
Ø
2.
operations
strategy
Process View & Strategy
What is the value proposition to our customers?
Rank (p, T, Q, V)
Given our strategic position, what must
operations do particularly well?
q
Ø
3.
Process
structure & mgt
What is our strategic position: how do we
compete & provide value in the market?
Which competencies must ops develop?
Rank (c, T, Q, Flex)
Given needed competencies, how should
operations processes be structured to develop
competencies that support strategy?
Ø
Process choice (structure) and management
Slide 42
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Wriston Manufacturing
Process View & Strategy
Slide 44
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What is “Good” OPS.? Summary
§ “Good” operations maximizes delivered value, which is the difference
between the benefit delivered to the customer minus total process cost
§ Value improves when process competencies are aligned with targeted
customer value proposition. A simple framework asks three questions:
1. What is the value proposition to our patients?
→ Rank (P, T, Q, V)
2. Given this proposition, which competencies must the process have?
→Rank (C, T, Q, Flex)
3. Given needed competencies, which process design is best?
→ Build appropriate capabilities
§ How to design processes?
– Focused processes are easiest to get to the “frontier”; integrated ones may be
needed because of financial investments and economies of scale.
Process View & Strategy
Slide 57
© Gurvich