Operations Management,
Competitiveness, and
Operations Strategy
Lecture 1
1
Operations Function
Transformation from inputs to outputs
Inputs
Labour
Materials
Capital
Operations
Outputs
Products
Services
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Operations Function
Interfaces
Personnel
Purchasing
Operations
Marketing
Finance
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Operations Manager
• Manages the transformation process
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setup the processes
monitors the process
makes key decisions
develops strategy to manage changes
objective: system runs on its own
• Employs bulk of the staff
• Great opportunities to cut costs and beat
competition
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Operations Management
Body of knowledge to help Operations Managers
• Modern history
– Taylor, Gantt, Hawthorne studies, Henry Ford
• 80’s
– realization mass production not flexible
– insufficient quality control
• 90’s
– TQM revolution
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Adoption of modern IE techniques
Globalization,
Growth of Service Sector
Increased competition
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Increased Globalization
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Falling trade barriers and protected markets
More export business
Table 1.3
Internet and e-commerce
Remaining bottlenecks:
– distribution channels and infrastructure
– political stability
• Downside: regional problems affect all
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Increased Service Sector
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Overtakes manufacturing
Employs ~80% labour worldwide
75% of US GDP
Sole source of net employment gain
Same OM techniques being applied
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Increased Competitiveness
• Defined as
– degree to which a nation can, under demanding and rapidly
changing market conditions, produce goods and services that meet
the test of international markets while simultaneously maintaining
or expanding the real incomes of its citizens.
• Effect of Globalization
– more customers
– more competitors
• Effect of Service Sector
– more eagerness to please
– increased customer focus
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Competitiveness Measures
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GDP
Import/Export Ratio
Output/Input Ratio (Productivity)
Fig 1.8
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Changes In Input and Output
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© 2000 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 3/e
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Ch 1 - 25
Trends and Issues in OM
Operational Strategies needed to address
1. Industrial Competition
2. Distances
3. Partnership and Alliances
4. Mass Customization
5. Services
6. Quality
7. Flexibility
8. Technology
9. Human Resources concerns
10. Environment
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Operational Strategy
Formulation Must Determine:
1. Primary task of firm
2. Core competencies
3. Order qualifiers and winners
4. Position of the firm in the marketplace
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Primary Task of Firm
• Beyond Vision and mission statements
– HR tools for aligning staff on common course
– Vision statement: general future direction
– Mission statement: current state
• Exploit current
– competencies for customers
– internal competencies
• Consider new
– products and services
– competencies
– markets
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Core Competencies
• What are we best at?
• What competency beats the competition?
• What process (not product) are we good at?
– Requires change in focus from What to How
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Order Qualifiers and Winners
• Order Qualifiers
– how do we get the customer’s attention
• Order Winners
– how do we get the purchase from the customer
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Positioning the Firm
How Do We Compete?
• Minimize Cost
– within quality limits
• Maximize Quality (e.g. customer satisfaction)
– within cost limits
• Maximize Flexibility (e.g. mass customization)
– within cost and quality limits
• Maximize Speed of Delivery
– within cost and quality limits
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Operational Strategy
Must address decisions related to:
1. Products and services
2. Process and Technology
3. Capacity and Facilities
4. Human Resources
5. Quality
6. Sourcing
7. Operating Systems
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Products and Services
• Make-to-order vs.
• Make-to-stock vs.
• Assemble-to-order
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Process and Technology
• Products
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Projects
Batch Production
Mass Production
Continuous Production
• Based on
– Volume
– Standardization
• Services
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Professional Service
Service Shop
Mass Service
Service Factory
• Based on
– Labour Intensity
– Customization
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Capacity and Facilities
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Demand: All, Average or Given
Granularity: Large or small
Excess: Overtime, extra shift or subcontract
Centralized vs. Distributed
General vs. specialized
Location: labour, market or supply
Globalization: where and how.
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Human Resources
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Skill levels
Training
Compensation
Incentives
Profit Sharing
Management style
Levels of management
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Quality
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Targets
Measures
Conformance
Areas of focus
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Sourcing
• Vertical integration vs.. Outsourcing
• Supply management
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Operating Systems
• IT Support for
– customers
– workers
– management
• Planning and Control Systems
• Inventory Systems
• Training in Decision Analysis
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