Operations Management
Lecture 2 – Shouldice Hospital
(Chapter 2 & 3)
Dr. Ursula G. Kraus
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Review
•
•
Manufacturing Game
Introduction Operations Management
- Process View of Operations
2/20
Agenda
•
•
Shouldice Hospital
Introduction Operations Management
- Product/Process Attributes
- Process Characterization
- Strategic Positioning
4/20
Operations Management
Lecture 1 - Agenda
•
•
Shouldice Hospital
Introduction Operations Management
- Process View of Operations
- Product/Process Attributes
- Process Characterization
- Strategic Positioning
5/20
What is a Process?
“ … a network of activities performed by resources that transform inputs to outputs”
Information
structure
Inputs
Process
Management
Network of
Activities and Buffers
Outputs
Goods
Services
Flow units
(customers, data,
material, cash, etc.)
Labor & Capital
Resources
Source: Managing Business Process Flows (1999)
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Operations & the Process View:
Shouldice Hospital
Information
structure
Process
Management
Process Flow Chart
Inputs
Outputs
……………..
………………
Flow units
……………
……………………………..
Resources
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Product and Service Attributes
Cost
Time
Variety
Quality
Source: Operations Management, NPS 2003
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From Product Attributes to Process
Attributes
Product Attributes
Process Attributes
Cost
Time
Cost
Time
Variety
Quality
Flexibility
Quality
Source: Operations Management, NPS 2003
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Classification of Processes by:
I. Process Architecture
Process Types
Examples
.
 Project
Construction, Consulting
 Job Shop
Machine Shop, Beauty Shop
 Batch
Bakery, Classroom
 Line Flow
Assembly Line, Cafeteria Line
 Continuous Flow
Paper mill, Central heating
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low
medium
high
Characteristics of Processes:
Job Shop vs. Flow Shop
Type of
Process
Product
Volume
Specialized
Equipment
Product
Variety
Machine
Setup
Frequency
Labor
Skills
Variable
Cost
Job Shop
Flow Shop
Source: Managing Business Process Flows (1999)
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Matching Product with Process Choice:
Product-Process Matrix
Process
Flexibility
High
JOB SHOP
Jumbled Flow.
Process segments
loosely linked.
(Commercial Printer,
Architecture firm)
BATCH
Disconnected Line
Flow/Jumbled Flow
but a dominant flow
exists.
(Heavy Equipment,
Auto Repair)
LINE FLOWS
Connected Line
Flow (assembly line)
Continuous, automated,
rigid line flow.
Process segments tightly
linked.
Low
(Auto Assembly,
Car lubrication shop)
CONTINUOUS
FLOW
(Oil Refinery)
Low
High Standardization
Commodity Products
High volume
High
Few Major Products
Source: Managing Business Process Flows (1999)
Many Products
Low Standardization
One of a kind
Low Volume
Product
Variety
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Classification of Processes by:
II. Positioning Strategy
 Functional Focus:
Product 1
… grouping by resource type
• Job shop
• General purpose resources
Product 2
 Product Focus:
… grouping by product
• Flow shop
• Specialized resources
Product 1
Product 2
A
B
C
D
A
D
B
C
B
A
= resource pool (e.g., X-ray dept, billing)
Source: Managing Business Process Flows (1999)
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Classification of Processes by:
III. Customer Interface
 Make to Stock
 Make to Order
For Mr. Foley
Source: Managing Business Process Flows (1999)
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Comparison of Goods and Services
Services
Goods
100%
75%
50%
25%
0%
25%
50%
75%
100%
Self-service groceries
Automobile
Installed carpeting
Fast-food restaurant
Gourmet restaurant
Auto maintenance
Haircut
Consulting services
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Characteristics of Services

Typically labor intensive
- difficult to automate

Frequently individually processed
- low scale economies

Often an intellectual task performed by
professionals
- expensive resources and variable output

Often difficult to evaluate for quality
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Focus of course
A Strategic Framework for Operations
Corporate
Strategy
Business
Unit Strat.
Operations Operations
Strategy
Structure
–Businesses in
which the
corporation
will participate
–Acquisition &
allocation of
key corporate
resources to
each business
–Scope of business
(product/market/
service segments)
–Basis on which
BU will achieve
and maintain
competitive
advantage
–What must
–How should
operations do
operations
particularly well?
processes be
Which capabilities structured to
must operations
develop
develop?
capabilities that
support strategy?
Source: Based on Managing Business Process Flows (1999)
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Representation of BU Strategy:
Current Position and Strategic Directions of Movement in the
“Competitive Product Space”
Responsiveness
(Time)
fast
B
A
slow
High
Low
Price (or Cost)
Source: Managing Business Process Flows (1999)
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Strategy vs. Operational Effectiveness:
The Operations Frontier as the minimal curve containing all
current positions in an industry
Responsiveness
High
A
B
Operations
Frontier
C
Low
High
Low
Price
Source: Managing Business Process Flows (1999)
19/20
Focus and the Frontier
In the health-care sector
Responsiveness
World-class
Emergency Room
General
Facilities
Operations
Frontier
World-class
(non-emergency)
Hospital
Cost efficiency
Source: Managing Business Process Flows (1999)
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