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Summary Operations Management IBA 2
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Operations ManagementLecture 1: Chapter 1
Price of vanilla ice cream increased:
- Take vanilla off menu: variety
- Until 2017 crop becomes available: planning
- 10-fold price increase: risk management
- Diversified vanilla suppliers: supply network design
- Sold vanilla at last year’s price: inventory management
Operations management is the activity of managing the
resources which are devoted to the production and delivery of
products and services.
- Operations management uses resources to appropriately
create outputs that fulfill defined market requirements.
o Operations can be very different!
o All organizations have ‘operations’ that produce
some mix of services and products
To be a good operations manager, you need to:
- Enjoy getting things done
- Understand customer needs
- Communicate and motivate
- Learn all the time
- Commit to innovation
- Know your contribution
- Be capable of analyzing
- Keep cool under pressure
Operations can be analyzed at three levels:
- The level of supply network
o Analysis of suppliers
- The level of the operation
o Analysis of the activities in the production plants
- The level of the process
o Mixing process, resources
,The 4 V’s typology of operations:
1. Volume: the level or rate of output from a process
2. Variety: the range of different products and services
produced by a process
3. Variation in demand: the degree to which the level of output
from a process varies over time
4. Visibility: the amount of value-added activity that takes place in the (virtual) presence of the
customer (coca cola is low) → a service process cannot be low in visibility!
a. Front office = Visible to customers; Back office = Not visible to customers
Characteristics of goods/products:
- Tangible
- Production proceeds consumption
➔ Facilitating products: produced by an operation to support its services, e.g. reports prepared
by a consultancy firm.
Characteristics of services:
- Intangible
- Production at the same time as consumption, cannot be stored
➔ Facilitating services: services that are produced by an operation to support its products, e.g.
technical advice provided by an aluminum smelting firm.
Chapter 2
, How operations can impact triple bottle line (TBL) performance:
The five performance objectives:
- Quality → Being right This is what you need to state when
- Speed → Being fast they ask for a brief description!
- Dependability → Being on time Competitiveness
- Flexibility → Being able to change
- Cost → Being productive
➔ Benefits of excelling at the five objectives:
You cannot improve cost on its own!
Two common meanings of ‘quality’
1. Quality as the specification of a product or service
a. E.g. low quality in the sense of cheap products, or high quality in the sense of
expensive, design products.
2. Quality as the conformance with which the product or service is produced
a. E.g. fast food restaurants have to deliver the same product over and over again
3. OM definition of quality: consistent conformance to customer’s expectations → being right
➔ Error-free products and services
, Speed: the elapsed time between a customer asking for a product or service and getting it (in a
satisfactory condition). E.g. fire brigade, ambulance hotel (front office), not airline!
➔ Short delivery lead-time
Dependability: delivering, or making available, products or services when they were promised to the
customer. E.g. Airlines, railways (+ the case of the dabbawallas in Mumbai)
➔ Reliable/on time delivery
Flexibility: has several distinct meanings but is always associated with an operation’s ability to change.
Change what?
- The products and services it brings to the market → Product/service flexibility
- The mix of products/services it produces at any time → Mix flexibility
- The volume of products and services it produces → Volume flexibility
- The delivery time of its products and services → Delivery flexibility
➔ Frequent new products/services; wide range; volume and delivery changes
Cost is defined as being productive. Productivity is output from the operation divided by input to the
operation. All of the performance objectives affect cost.
➔ Low price; high value; or both
Polar diagrams are used to indicate the relative importance of each performance
objective to an operation or process. They can also be used to indicate the difference
between different products and services produced by an operation or process.
Chapter 3
What is strategy?
- Setting broad objectives that direct an enterprise towards its overall goal
- Planning the path (in general rather than specific terms) that will achieve these goals
- Stressing long-term rather than short-term objectives
- Dealing with the total picture rather than stressing individual activities
- Being detached from, and above, the confusion and distractions of day-to-day activities
Strategic decisions are those decisions which are widespread in their effect on the organization to
which the strategy refers, define the position of the organization relative to its environment and move
the organization closer to its long-term goals.
- The three key attributes of operations strategy: Operations contribution:
1. Implementing → Be dependable
Operationalize strategy
Explain practicalities
2. Supporting → Be appropriate
Understand strategy
Contribute to decisions
3. Driving → Be innovative
Provide foundation of strategy
Develop long-term capabilities
4 stage model of operations contribution
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