Dr. Ron Lembke, Ph.D.
University of Nevada, Reno
Reaching me
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Email:
Phone:
WWW:
ronlembke@unr.edu
(775) 682-9164
http://coba.unr.edu/faculty/ronlembke
When emailing, please include “701” in the subject line.
Don’t call my house, and I won’t call yours. Deal?
Who Are You? (This is Homework)
In an email, please tell me the following:
 Your name
 Major
 phone #’s to reach you at
Where From
Interests / Hobbies
Musical interests
 email address
 when you anticipate graduating
 any experience you have had that might be relevant to this
course
The Goal
What is the goal of a company?
Efficent & Effective
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Efficiency: Doing things with the least use of resources
Effectiveness: Doing the right thing at the right time.
Value = Quality / $
What is Operations Management?
 “The design, operation, and improvement of the
systems that create and deliver the firm’s primary
products and services.” p. 6.
 Operations research / management science
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Applying quantitative methods to decision making
 Industrial Engineering
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Engineering discipline
 OM is a field of management that may use some tools
from OR/MS and IE.
What is OM?
 Manage entire system for delivering service or product
for OEM
 Original Equipment Manufacturer
 Brand name on the product. Probably doesn’t produce
Suppliers, vendors, Third party logistics providers (3PLs)
Contract manufacturers – Solectron, Flextronics
Why OM is the most important area
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Marketing gets people to buy our product
Finance makes sure we have the money to operate
Accounting keeps track of what we spend
Management keeps people on task
I/S makes sure systems work to support everyone else
Operations actually makes the thing we sell. Without
operations, you can’t have a company.
Why Do You Care?
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Satisfying Customers depends on Operations
You must understand and work in or with Operations:
 Finance: Depr, Cash Flow, Make vs. Buy
 Acctg: Cost estimates, Overhead, Inv valuation
 Mktg: What can be done?
 HR: job descr, standards, incentives
 MIS: production, shipping, billing, receiving
Operations as Service
Everybody’s in service
Core services: done correctly, customized to their needs,
delivered on time, priced competitively
Value-added services: make life easier, help do jobs
easier:
Information on product – data, specs
Problem solving – help internal, external customer
Sales support – demo product trying to sell
Field support – replace parts quickly
Decisions of OM
1. Quality: what do customers want?
2. Goods & Service Design: what to sell?
3. Process & Capacity Design: how to make it and how
much capacity to have? When add more? Where?
How?
4. Location Selection: where to build?
5. Layout Design: how to design facilities?
Decisions of OM
6. Human Resource & Job Design: what skills and how
many people needed?
7. Supply chain management: vendor management, who
use as suppliers?
8. Inventory: how much and where?
9. Scheduling: HR, facility needs, when?
10. Maintenance: how much, when?
Current OM Issues
Flexible supply chains for mass customization of
products and services
Global supplier, production, and distribution networks
Commoditization of suppliers – “plug compatibility”
Enhancing value-added services
Maximizing use of internet to share information,
coordinate production
Continuous Process Improvement
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It used to be you had to be “good enough”
Now, you must be looking for ways to make your
customer happy, and meet their future needs
If you aren’t someone else is, and is going to take your
business
What is strategy?
 How a firm intends to create and sustain value for its
shareholders (p. 24)
 Major components:
 Operations effectiveness
 Customer management
 Product innovation
 Competitiveness:
 A firm’s relative position in comparison to other firms in
the marketplace
Satisfying the Customer
 Mission: the organization’s purpose, what it
hopes to achieve; rationale for its existence.
To provide society with superior products and services-innovations and solutions that improve the quality of life
and satisfy customer needs--to provide employees with
meaningful work and advancement opportunities and
investors with a superior rate of return.
(Merck mission statement)
Mission Statement
 “Without a clear mission, an
organization is unlikely to achieve its
true potential, because there is little
direction for formulating strategies.”
 Wouldn’t the same be true about people?
My Favorite Guru
 When you think of
something, put it on a
list.
 Check your lists
regularly.
 Don’t get sucked into
email distractions.
 Get rid of the clutter
you don’t need.
Strategy
 Strategy: a plan for achieving the mission
 Each functional area (accounting, finance, marketing)
determines its “supporting mission”
 Tactics: the methods to be used to achieve the strategic
goals.
 Must support mission, corporate values
Michael Porter
Three ways to achieve corporate mission:
1. Differentiation: Make your product different and / or
better
2. Cost Leadership (lower prices): Wal- Mart, Southwest
Airlines
3. Quick Response: Pizza Hut, FedEx
Purchasing Triangle
Quality
Price
Speed
“Don’t be sad; two out of three ain’t bad”
-- Meatloaf
Competitive Dimensions
 Cost -- make it cheap
 Quality and Reliability -- make it good
 Speed -- make it fast
 Reliability -- deliver when promised
 Cope with Change -- change volume
 New product speed
 Customer support
Focus
 What is Merck’s strategy?
To provide society with superior products and services--innovations and
solutions that improve the quality of life and satisfy customer needs--to
provide employees with meaningful work and advancement
opportunities and investors with a superior rate of return.
Impact of Life Cycle
iTunes
CDs
DVD
Audio
Cassettes
Records
MiniDisc
DAT
8-Tracks
Introduction
Growth
Maturity
Decline
Impact of Life Cycle
Records
DAT
Introduction
Growth
Maturity
Decline
Impact of Life Cycle
 Introduction: develop product, small-scale production
 Growth: ramp up production, marketing
 Maturity: standardized, volume production,
optimization
 Decline: cost minimization, eliminate unprofitable
products
Competitiveness
 Order qualifiers: screening criterion that allows your
products to be considered
 deliver on-time, reliability, general quality
 Order Winners: criterion that differentiates your
service/product above the competition
 price, quality, reliability
Balanced Scorecard – track performance from
following perspectives:
 Financial: revenue or productivity growth
 Customer: Product leadership, customer intimacy,
operational excellence
 Internal: innovation, customer management,
operational excellence, corporate citizenship
 Learning and Growth: strategic competencies and
technologies, climate for action
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Kaplan and Martin, 1992, “The Balanced Scorecard: Measures
that Drive Performance” Harvard Business Review
Operations Strategy
 Core capabilities: the skills that differentiate the firm
from its competitors.
 What is the thing you do better than everyone else,
that you could never dare trust to anyone else?
 Soft drinks: the secret sauce
 Automobiles: designing engines
Productivity
 Productivity = Outputs / Inputs
 Partial:
Output/Labor or Output/Capital
 Multifactor:
Output / (Labor + Capital + Energy )
 Total Measure:
Output / Inputs
Productivity
 Services have always been a large portion of U.S.
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economy
Services’ share continues to grow
U.S. has higher service % than others
U.S. productivity growth has lagged other countries in
past.
What explains this phenomena?
Improving Productivity
 Develop productivity measurements– you can’t
improve what you can’t measure
 Identify and Improve bottleneck operations first
 Establish goals, document and publicize
improvements