Three core functions Of any organization I) Marketing function- responsible for communicating organization’s products and services to markets to generate customers 2) Product Development function- responsible for creating new, modified products in order to generate future customer requests (maintain, improve) market position 3) Operations function- responsible for organizing production and delivery processes of product and thus fulfilling customer requests Support functions of any organization 4) Accounting and Finance function- provides vital information for economic session making and manages financial resources 5) Human Resources function- recruits and develops organization’s staff Relationship between operations function and other core and supportive functions in organization General operations activity: uses resources to appropriately create outputs that fulfill defined market requirements. However, the specific role of operations activity varies from organization to organization Role of operations in different organizations 1. Small organizations- because of less division of labor, the role of operations management here often overlaps significantly with other functions
Cast Study: Acme Whistles One of biggest suppliers of whistles worldwide Over time, shape, performance and other treasures changed and the range of whistles increased Still keeping tradition of testing each whistle (today by machine) Large overlap of roles means that reaction to market demands are very quick Because of small culture, each individual has higher incentive to contribute idea, innovation 2. Non-profit organizations- operations decisions are the same in commercial and not-for profit organizations. However, strategic objective of Knops are more employ and involve a mixture Of political, economic, social, and environmental objectives. Thus operations decisions are usually made under conditions of conflicting Objectives. (i. Risk Of providing extra worker and child not cared for) Case study: Oxford International Confederation of 13 organizations with similar goals that is based around the world Together with partnerships, works directly with communities to ensure 3rd world people can improve livelihood and have greater say in decisions affecting them. Annual expenditure *mm dollar, Oxford has a wide range of focus targets Depends heavily on operations Resources must be allocated efficiently to be flexible to different changes in relevance of focuses (primary help for earthquake affected country) Input-transformation-output process Explains the resources and capital used in transforming inputs into outputs which is a common characteristic of each organization Although each organization conforms to this transformation process, they differ in nature of specific in-, and outputs.
Inputs to transformation process 1) Transformed resources- resources that are treated, transformed and converted in process. Usually mixture Of following: Materials (i. E. Inning, retail, trucking company). Could include changing physical properties, location, or possession, or storage Information(i. E. Accountant, bank, telecoms)- process could include transforming informational properties, the possession of information, storage of information, and change of location Customers (i. E. Hotel, hairdresser, dentist)- processes could include changing physical capacities, changing location, changing information, physiological state, Mostly, one of these transformed resources is dominant in an operation.
Other set of inputs into the transformation process are transforming resources resources that act upon the transformed resources). There are two types: Facilities- includes buildings, equipment, technology etc. Staff- includes the people who operate, maintain and manage operation The balance of staff and facilities in an operation is dependent on the type of product produced. Also, the level Of complexity (level Of skill for staff and level Of technology for facilities) is very variable. Outputs to transformation process Differentiated mostly in terms of tangibility (products tangible, service intangible). The spectrum of production varies from pure product producers to ere service producers However, most operations produce mixture of products and services.
However, one must distinguish between main process products and facilitating products services, which are produced to complement main product Spectrum of production output The Processes hierarchy Organization consists of collection of processes interconnected to form network Transformed resources flow between them and the transformation process consists of the enactment of the resources between theses processes Thus, they form an “internal network” in an operation where each unit is both an internal supplier as it takes on resources for further processing AND an internal customer as it consumes the WIPE resources from other departments The internal customer concept provides model to analyses internal activities Of an operation Each unit consists of further individual units made up of people and items where resourced flow between Thus, it consists Of an internal network (hierarchy) of processes However, an organization will also be part of a greater network consisting of external suppliers and customers (who may then be external suppliers to another company). This network is called supply network This analysis shows that the input-transformation. Output model can be used at different levels of analysis (The supply, then the operation, and then the process network etc. ). This is called hierarchy of operations Critical point: idea of internal network of processes is often being seen as over- simplistic. No free market within corporation, Internal consumers cannot switch to better internal suppliers.
Also, hinders the integration of the business thus lowering communication which can be vital, Important point to notice: While operations often is a separate part in an organization, every function manages processes and thus requires operations to a certain degree Need to distinguish between operations as a function- the part of organization which produces products and services for external customers Operations as an activity- management Of processes Within any function Characteristics of operations processes Operation process differences shown by 4 Vs. 1. Volume dimension 2. Variety of output dimension 3. Variation in demand for output dimension 4. Visibility in process for customers dimension Organizations like McDonald’s use repeatability and systemization to increase illume capacity by lowering unit cost 2. Variety dimension Taxi offers high variety (flexibility); however higher unit cost than transport with less variable transport measures (bus, tube) 3. Variation in demand dimension Summer holiday resort high demand in summer but low in winter 4.
Visibility dimension How much of operation’s activities its customers experience (process exposure) Many operations operate mixed high-and low visibility processes with a front office where employers have good customer contact skills and back office with low customer skills Cost implication Of four dimensions Trade off been 4 dimensions Activities of operations management While exact function of operation function’s responsibilities varies or the organization’s choices, there are some general activities 1. Understanding operation’s strategic performance objectives 2 Developing operations strategy for organization (Next chapter) 3. Designing operation’s processes, products, services 4. Planning and control of operation 5. Improving performance 6. Social responsibilities Week 2: Operations performance How measure operations performance?
Corporate Social Responsibility- how business considers the impact Of its operations on economic, social and environmental environment In terms of stakeholder interest compared to company’s Objectives As stakeholders interest are so different, they might collude and it is the operation’s task to prevent this from happening, cope With conflicting pressures and finding an optimum point where all stakeholders are satisfied to some extent. Of all stakeholder interests, its is the organization’s top management and shareholders that can have the most immediate impact. Represent interest of owners and are therefore direct agents of organizations basic goals.
Effective operations can have major advantages to company that can be categorized in 5 broad categories: 1) Cost reduction by increasing efficiency 2) Customer satisfaction 3) Reduce risk tot operational tailors 4) Reduce capital employed needed 5) Provide basis for future innovation 5 Operations performance objectives Although we said that there are broad stakeholder objectives that form basis of operations decision making, but the operational day-to-day level requires clearer defined set of objectives: 1) Quality- make things right to avoid operations failure and maintain customer attestation 2) Speed- minimize time lacks in process and customer contact 3) Dependability- reliable reputation for better supply network relations 4) Flexibility- react quick to changing demand patterns 5) Cost- Cut costs to increase profit Broadly, a firm can be measured against these 5 objectives an in the following each one is described in more detail 1 Quality Objective Quality- consistent conformance to customer’s expectations Because Of high visibility, quality is a major influence on customer satisfaction or dissatisfaction While quality is a major competitive advantage it also has many positive effects inside the operation: I) Quality reduces cost- Fewer mistakes means less disruptions and higher consistency 2) Quality increases dependability- Low quality means low planning and control which would in turn mean high variation in product standards as adjustments need to be made very quickly in short term. This makes company less predictable and can disrupt supply network relations 2. Speed Objective Speed- elapsed time been customers requesting products and receiving them Depending on industry, speed can have a wide ranging impact.
While in some operations like mining, speed is not one of the most determining actors, in hospitals as operations, speed can be the cause of life or death. The impact within the operation of speed must also be considered: 1) Speed reduces inventories- WIPE emcees faster through process (faster throughput time) and thus cost of storage is reduced. Also, higher speed means that different interdependent departments have to wait for less time and thus are more efficient, 2) Speed reduces risk- If products can be produced faster, firms have more time to adjust to forecasted changed in demand. Thus they are more flexible and if needed can produce more goods or decrease the amount of goods initially planned to produce. Therefore, they reduce their risk of viability to market fluctuations, 3.
Dependability Objective Dependability- doing things in time for customers to receiver their goods or service exactly When they are needed, or at lest When they promised First, customers can only judge this criterion after product received However, in the long term, dependability can be more important than any Other criteria because when customer had bad experience with supply in past, he is negligent to order from this supplier again Dependability is also important within the operation: ) Dependability saves time- low dependability means that different business units will be anxious in relying on other units thus activities may overlap, Also, with low dependability rhythm of production might be interfered so that units are hindered to work efficiently 2) Dependability saves money- Bad Planning means that for example some transformed or transforming resources needed for transformation process are missing, Thus they would have to be ordered at short notice and producer would have to suffer from higher costs because if planning is effective he enjoys economies of scale or discount because of ordering early. ) Dependability gives stability- disruption caused by lack of dependability reduces trust within operation and affects productive time of function units. 5. Flexibility Objective flexibility- being able to change operation process in some way to adapt to changing operational or market requirements. Generally, there are four types Of flexibility: 1) Product flexibility- ability to introduce new products 2) Mix flexibility. Ability to produce wide mix of products 3) Volume flexibility- ability to change level of output over time 4) Delivery flexibility. Ability to change timing of delivery respectively Benefits of flexibility: Mass customization One of the beneficial external effects of flexibility is increased ability of operation to increase variety for consumers while still keeping cost down.
This is called mass customization- the activity of achieve high-volume customizable products for customers From previous lectures we learned that normally variety and volume are opposite but high flexibility allows these two characteristics to come closer together (i. E. Dell) Agility Agility is a mixture of all 5 performance objectives but particularly flexibility ND speed Agility means having necessary operations to respond to market requirements by producing products fast and flexible Within the operation: 1) flexibility speeds up operation response- faster response to changing conditions 2) flexibility maintains dependability- operation schedule is kept flexible and accounts for possible disruptions so other departments rely on ability tot internal suppliers to cope with problems in a flexible manner S.
Cost Objective Many industries are heavily driven by price competition (price wars) The more the production cost can be cut, the higher the profit per Anita low cost is a universally attractive objective Wall-Mart is good example of effective cost-cutting Measures of cost objective Productivity-?Output/Input Single factor productivity= Output from operation “One input to operation As all previous performance Objectives also affect internal operations, they all affect cost. Thus important way to improve cost performance is to improve other performance Objectives Diagram to show both external and internal effect Of performance Objectives. Internally, they all affect cost Polar representation of performance objectives Useful way to illustrate importance tot performance objectives for an operation.
The closer line is to common origin, the less important is performance objective to overall success of operation Trade-offs between performance objectives Week 3: Operations Strategy Strategy -total pattern of decisions and actions that position the organization in its environment and that are intended to achieve its long-term goals Operations strategy- pattern of strategic decisions and actions, which set the role, objectives and activities of the operation Content vs.. Process of operations strategy Content of operations strategy- formulation of decision and actions, which set operation role, objective and activities Process of operations strategy- method used to make specific content decisions in other words the transformation of content into practice Progress of role of operations strategy 1.