Operations Management Rev for SU 1 & 2
SU 1
Chapter 1 <Introduction to OM>
- define OM
OM are activities that relate to the creation of goods and services through the transformation of inputs(resources that the firm employ) into outputs(finished goods/services performed).
- describe process of value creation by transforming inputs into outputs
This transformation process (from input to output) also brings about a creation of value. where the finished goods or service performed brings about a greater value to the customer.
- differences between goods and services from OM perceptive
GOODS
good can be defined as a tangible product that is something that you can touch such as your mobile phone.
goods possess a unique set of characteristics, such that you can define goods easily and its specification is consistent throughout. example: mobile phone is capable of making calls and sending text messages. what are two very basic functions which one can easily defined.
production of a goods takes place priority consumption and they are separate and distinct.
goods can be inventoried, meaning one can keep stock of goods.
customers are usually not involved in the production of goods. (very little customer interaction)
SERVICES
service is intangible because of its intangible nature which makes service hard to define and inconsistent. often unique.
example : education service, how do we define if a course is of good quality?
services are often knowledge based. These services are often scattered and are brought to the customer via numerous methods.
Unique characteristic of service is simultaneous production and consumption.
Services also involves a high degree of customer interaction.
service can also be explained as social interactions between the producer and customer.
In reality, almost all goods and services are a mix of service and tangible product.
TO CREATE GOODS AND SERVICES, firms must perform 3 basic functions:
function: OPERATION (product creation, service rendered)
function: MARKETING (create demand)
function: ACCOUNTS and FINANCE (tracks performance of the organisation, pay bills, collect money)
- compare 10 OM decisions
1. Design of products such as goods and services (what to kind of goods/services to offer; how can product/services be designed together)
2. Managing quality (how is quality defined, who is responsible for quality)
3. Process and capacity design (what is the process and quality required to produce the product/service, what equipment and technology is needed)
4. Location strategy (where to locate the facility, what is the location decision criteria)
5, Layout strategy (how should the facility be arrange and what size it should be)
6. HR and job design (what is needed for a reasonable work environment, what amount do our employees produce)
7. Supply chain management (make or buy component, who are the suppliers and how to integrate the supplies into the company)
8. Inventory/Material requirements planning, Just In Time (what is the amount of inventory, when is the next reorder level)
9. Intermediate and Short Term scheduling (are employees maintained on the payroll during downturns, when is the next job to be performed)
10. Maintenance (how to build reliability into processes, who is the person responsible for maintenance)
- discuss 5 general management processes that are applied to the 10 major OM decisions
Planning
Organizing
Leading
Controlling
Staffing
- discuss new challenges and trends in OM
new challenges in OM
From: local/national focus To: Global focus
From: batch shipments To: Just In Time
From: low bid purchasing To: supply chain partnering
From: lengthy product development To: Rapid product development and alliances
From: standard products To: mass customization
From: job specialization To: empowered employees, teams
New trends includes:
Ethics, Global Focus,
Environmentally sensitive production,
Rapid product development,
Mass customization
Empowered employees
Supply chain partnering
Just In Time performance
Chapter 2 <Global Environment & Operations Strategy>
> Developing the Mission and Strategy
Mission: inform an organisation where it is heading.
Strategy: guides the organisation on how to get there and articulate as plan
a mission statement defines an organisation existence, and informs the organisation where it is heading. it also provides the boundaries and focus for the organisation and the idea in which the firm can unite towards.
once a mission is established, the organisation can then begin organizing a strategy. which is the plan to achieve the objective.
the strategy guides the organisation on how to get there. Every function of the organisation will have their own strategies. Strategies must take advantage of the organisation opportunities and strength, minimize threats and prevents weaknesses.
- 6 possible reasons for companies to globalize operations
- reduce costs (labour, taxes, tariffs, etc.)
- improve supply chain
- provide better goods and services
- have better market understanding
- learn to improve areas in operations
- attract and retain global talent
- how competitive advantage can be achieved through OM
1. Differentiation: being better or different products that customers perceive as adding value, goes beyond mere characteristics of the goods or service attributes, it everything on the product and not just the physical characteristics of the goods or service attributes.
2. Cost Leadership: competing on cost often implies being able to provide the lowest possible cost possible while still meeting customers demands. It is to provide maximum value as perceived by the customer. Does not imply low quality or low value.
3. Response: being able to respond flexibility, reliably and timely
where flexibly: being able to match and adapt to changing customer demands
reliably: able to meet schedule
timely: being quick to respond to changes in customer demand
- appraise OM strategies and how they are aligned to company's mission (strategy)
The 10 OM Decisions (Product, Quality, Process, Location, Layout, HR, Supply Chain, Inventory, Scheduling, Maintenance)
are achieved by using the 3 different approaches to gain competitive advantage
- Differentiation --> better
- Cost --> cheaper
- Response --> faster
- strategy development and implementation
Strategy Development Process is made up of 3 processess
1. Environmental Analysis: determines the strengths, weaknesses, opportunities and threats, studies the environment, customers, industry and competitors
2. Developing the Corporate Mission: provide the reason for the firm's existence and determine the value it wishes to create
3. Develop a Strategy: build a competitive advantage following differentiation, low cost or response.
- appraise global operations strategy options and issues in operations strategy
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Chapter 5 <Product Design>
- justify selection and design of product or services
Objective: To develop and implement a product strategy that satisfies the needs of customers and also possess a competitive advantage.
*Product Strategy*
- discuss Product Life Cycle and how it is used in selection of products and services
Product Development Life Cycle (PDLC) Phase
- Discuss Product-by-value analysis
This method list products according to their individual monetary contribution to the firm.
It also list the total annual monetary contribution for each product.
This method allows management to evaluate the strategies.
Example:
- Discuss new product generation/opportunities
In order to come up with new product or find new opportunities, we need to first study the customers and understand their needs.
Other factors such as
changes to the economy (eg. increasing affluence the long run)sociological and demographic change (eg. decreasing family size)technological change (eg. more high-tech products introduced)political/legal change (eg. new trade agreement & government requirements)change in the market practice, professional standards, suppliers, and distributors
so that we can better understand customer needs and work towards the requirements of achieving it.
- Discuss Product Development System
- understand the issues for product design
SU 2
Chapter 4 <Forecasting Demand>
- describe forecasting and discuss the various forecasting time horizons
Forecasting is the process of anticipating a future event. The forecasting process involves using historical data and projecting them into the future.
They are applicable to all business decisions in the area of:
- Production
- Inventory
- Personnel
- Facilities
There are 3 types of Time Horizons
- discuss the stages of product life cycle in relation to forecasting decisions
Recap: Stages in Product Development Life Cycle (PDLC)
1. Introduction
2. Growth
3. Maturity
4. Decline
Usually products at the Introduction and Growth phases requires longer forecast than those in Maturity and Decline phases.
Forecasts are useful in projecting factory capacity and staffing and inventory levels.
3 Types of Forecasts
(1) Economic forecasts
address business cycle - inflation rate, money supply, housing starts, etc.
(2) Technological forecasts
predict rate of technological progress, impacts of development of new products
(3) Demand forecasts
predicts sales of existing products and services
- appraise the strategic importance of forecasting
Chapter 6 <Quality Management & International Standards>
- Describe Quality
Quality refers to the features and characteristics of a product or service that is able to satisfy customer needs.
- Discuss the Implications of Quality
1. Improved firm reputation (perception of new products, employment practices, supplier relations)
2. Decrease in product liability (reduce risk)
3. Resultant global implications (improved ability to compete)
- Discuss how Quality improves Profitability
Improved quality leads to
- Improvement in sales due to improved response, flexible pricing, improved reputation
- Reduced cost due to increased productivity, lower rework and scrap cost and lower warranty cost
Successful quality strategy follows an organization's culture that foster quality, posses principle of quality and engages employees to implement quality.
Quality strategies support differentiation, low cost, and response strategies by:
- developing quality products
- reducing cost
- improving production to better respond to customer needs
- International Quality Standards
There are many standards around the world the two popular ones are:
ISO 9000 series (product quality standard)
- common quality standard for product
- 2008 version focuses more on leadership, customer requirement and satisfaction.
ISO 14000 series (environmental standard)
- common environmental standard
Chapter 7 <Process Design>
- Process Strategy
Objective : To develop a production process that meets customer needs and product specifications within cost and other constrains.
Process Strategy (or Transformation) refers to an organisation's approach to transforming resources (inputs) into goods and services (outputs)
- appraise the 4 process strategies
(1) Process Focus
In process focus, the facilities are organised around specific activities or processes.
There is a high degree of product flexibility, meaning that the facilities are capable of producing a variety of products easily.
General purpose equipment are in use and the facilities are staffed with skilled employees.
Examples: Printing shop, carpentry, bakery, etc..
Planning and scheduling is challenging due to varying flow of products. This is a result of high cost and low utilization of equipment.
(2) Repetitive Focus
In repetitive focus, the facilities are oganised as classic assembly lines.
The process uses modules with parts and components previously maded.
The modules may be combined to produce many output options.
Example: classic assembly lines (cars, household appliances,etc..)
Repetitive focus processes has less flexibility than process-focused facility but they are more efficient
(3) Product Focus
In product focus, the facilities are oganised by products.
The process is capable of producing high volume but low variety of products.
The long and continuous productions runs enable efficient processes.
Product focus processes are typically characterized by high fixed cost but low variable cost.
It generally uses less skilled labor.
Example: glass, paper, light bulbs, beer, etc..
(4) Mass Customization Focus
Mass customisation refers to the rapid and low-cost production of goods and services to satisfy unique customer needs.
It combines the flexibility of a process focus with the efficiency of a product focus.
Example: BTO flats in singapore
- Process analysis and design
- examine customer interaction and process design
- describe the service process matrix
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