Operations Management: Strategies, Processes, and Supply Chain Integration
Operations Management
Operations management involves managing the transformation process (production function), converting inputs into outputs, usually goods and services. All operations should meet customer requirements and “hear the voice of the customer.” Decision-making is an important element. This decision focus provides a basis for dividing operations into parts according to major decision types: process, quality, capacity, and inventory.
Three main dimensions: decisions, functions, process
Example Operations:
- Bank: Inputs are tellers, staff, computer equipment; outputs are financial services.
- Restaurant: Inputs are cooks, waiters, food, facilities; outputs are meals, entertainment.
- Manufacturing plant: Inputs are equipment, facilities, labor, energy, raw materials; outputs are finished goods.
Supply Chain Transformation Processes
- Planning: Processes needed to operate an existing supply chain strategically.
- Sourcing: Selecting suppliers that will deliver the goods and services needed to create the firm’s product.
- Making: Where the major product is produced or the service is provided.
- Delivering: Carriers are chosen to move products to warehouses and customers.
- Returning: Processes for receiving worn-out, defective, and excess products back from customers.
Goods:
Tangible objects; easily transferable from one person to another; have physical dimensions and take up space; often acquired in exchange for money or another good; do not require interaction with the customer.
Services:
Intangible commodities; when you hire a person to do something; are hired or rented and cannot be owned; requires interaction with people; intangibility, perishability, inseparability, simultaneity, and variability.
Quiz
Supply chain management includes integrating suppliers, manufacturers, and customers. The process view provides a basis for viewing an entire business as a system of interconnected processes. The contemporary operations themes signify that every operation should be externally directed to meet customer requirements. Best practices in operations are not best for all organizations.
Operations Strategy
A consistent pattern of decisions for operations and the associated supply chain that links to the business strategy and other functional strategies, leading to a competitive advantage for the firm. A strategy describes how you are different from the competition and should describe how a firm intends to create and sustain value for its shareholders.
Four Elements:
- Operations Mission
- Operations Objectives: Cost, quality, delivery, flexibility (more specific than the mission, frequently measured for compliance).
- Strategic Decisions: Process, quality, capacity, inventory, sustainability.
- Distinctive Competence: A competency unique to a business organization, a competency superior in some aspect to the competencies of other organizations, which enables producing a unique value proposition in the function of the business. A distinctive competency is the basis for developing an unassailable competitive advantage. The uniqueness differentiates this competency from all others. What operations do better than everyone else (differentiator). For example, McDonald’s unique service and supply chain transformation system (drive-thru).
Three Basic Types of Generic Business Strategies:
- Lower Cost: The ability of a firm to design, produce, and market a comparable product more efficiently than its competitors.
- Differentiation: The ability to provide unique and superior value to the buyer in terms of production quality, special features, or after-sale service.
- Focus: The geographic or product portfolios can be narrow or broad.
Supply Chain Strategy
Includes considering customers, suppliers, purchasing, and logistics in addition to operations. There is a focus on inventories, material flow, and information throughout the supply chain from suppliers to the end-user. It considers not only the operations strategy of the firm but also the strategies and capabilities of suppliers and customers in the supply chain. It allows the supply chain to compete, not just the firm. The supply chain strategy should aim to achieve a sustainable competitive advantage for the entire supply chain. There are two fundamentals of supply chain strategies: imitation and innovation. Imitators have products similar to those of their competitors and are oriented to efficiency and low costs. Innovators differentiate their product as a way of competing and charge higher prices.
