lOMoARcPSD|15781725
Week 1: Chapter 1: operations and productivity ( **)
To produce goods and services and to survive in the long term an organisation must perform:
1. Marketing → generates demand
2. Production/operations → creates, produces and delivers product
3. Finance/accounting → Evaluates the performance of the organisation and handles money.
Value is assigned to a product through three different functions an organisation undertakes. → they
do not always occur within the company itself.
- The whole network is called the supply chain.
Companies that produce physical product = goods
- A physical product = tangible
- Services = intangible
Operations managers
→ uses the management process: planning, organising, staffing, leading and controlling. → applies it
to the 10 OM decision areas
1. Design of goods and services = defines what is required of operations in the other
decision areas
2. Managing quality: determines customer quality expectations and establishes framework
to deliver that quality
3. Process and capacity strategy = determines the process of production and encourages
management to focus on technology, quality, HR, and capital investments to determine
the firm's cost structure.
4. Location strategy: analyses the accessibility of customers, suppliers and talent whilst
looking at costs, infrastructure, logistics and government.
5. Layout strategy: combines capacity needs, personnel levels, technology and
inventory requirements to set out the efficient flow of materials, people and
information
6. Human resources and job design: recruits, motivates and keeps talent
7. Supply chain management: integrates the supply chain into the firms strategy
8. Inventory management: consists of material requirements planning (JIT→ just in time)
and ordering and holding decisions
9. Scheduling: (short and intermediate term)
10. Maintenance
History of OM
Cost focused → quality focused → customization → globalisation
Productivity
= the measure of efficiency and effectiveness with which companies use production means.
- It is the ratio of outputs divided by the ratio of inputs.
When efficiency improves production improves.
Productivity variables:
1. Labor
2. Capital
3. Management
, lOMoARcPSD|15781725
Productivity measurement:
- Single-level productivity = units produced (output) : input used
- Multifactor/total factor productivity = Units produced (output) : labour + materials +energy
+ capital + miscalculations
→ all factors in denominator need to be in the same unit (e.g. euros)
- Changes in quality over time may lead to misinterpretations
- External elements may have an impact on productivity
- There is a possible lack of precise units of measurement
Productivity is harder to analyse in the service sector → no fixed definition of the end product. →
more difficult to improve the productivity in that sector
OM and its challenges:
- Globalisation: operations managers need to embrace and make use of
international collaboration
- Supply chain partnering: pay close attention to the demands of the end users. It results
in more outsourcing and builds long-term partnerships
- Sustainability: ecological sustainability is at the heart of operations managers battle for
improved productivity
- Rapid product development: Operations managers need to adjust quickly to changes
- Mass customisation: customers now require products that are customised to their wishes
but companies still need to produce products with a high volume quickly.
- Lean operations: standard of competition for operations managers. Lean operations
address the issues of improvement of the production process and elimination of waste.
, lOMoARcPSD|15781725
Week 1: Chapter 2: Globalisation and international strategies (*) THEORY
6 main reasons why domestic businesses implement some form of international operations:
1. Improvement of the supply chain
2. Cost and exchange rate risk reduction → Organisations like the World Trade Organisation,
the European Union and trade agreements like the North American Free Trade Agreement
NAFTA provide an advantage as they reduce tariffs and other trade barriers
3. Providing better goods and services
4. Understanding markets
5. Learning to improve operations
6. Attracting and retaining global talent
Mission: purpose or rationale for organisations existence
Strategy: action plan that determines how an organisation expects to achieve its mission and goals.
Firms can achieve their mission by creating a competitive advantage. → can be created through:
- Differentiation → establishing uniqueness of the offerings
- Low-cost leadership → max value as perceived by customer whilst keeping costs low
- Responsiveness → set of values related to:
● Flexibility: responding to market changes
● Reliability: meeting schedules
● Timelines: not lagging behind the competition in terms of product design
production and delivery times.
Alternative perspectives to implement strategy:
1. Resource view: evaluate resources at disposal and manage or alter the mto
achieve competitive advantage
2. Value-chain analysis: identify the elements in the product or service chain that add value to
the chain uniquely through product research, design, HR, supply chain management,
process innovation and quality management
3. Porter's five forces model: analysing: competitors, suppliers, potential new entrants,
buyers and substitutes.
Outsourcing
= assign internally carried out activities to external parties risks of outsourcing include untimely
delivery, low quality and negative impact on employees if there is poor planning and analysis
beforehand.
- Motivation comes from the theory of comparative advantage.
Global operations strategies!!!!!!
A multinational corporation (MNC) presents extensive international business involvement. A business
can approach global opportunities using 4 strategies:
1. Global strategy: a strategy where operating decisions are centralised. →
generates economies of scale → reduces costs but evokes little local
responsiveness.
- E.g. Pfizer, Otis Elevator
2. Transnational strategy: a strategy that combines the benefits of efficiencies generated by
the opportunity to pursue all three operation strategies and have an interdependent network of
worldwide operations
- E.g. Coca-Cola, Nestlé
Week 1: Chapter 1: operations and productivity ( **)
To produce goods and services and to survive in the long term an organisation must perform:
1. Marketing → generates demand
2. Production/operations → creates, produces and delivers product
3. Finance/accounting → Evaluates the performance of the organisation and handles money.
Value is assigned to a product through three different functions an organisation undertakes. → they
do not always occur within the company itself.
- The whole network is called the supply chain.
Companies that produce physical product = goods
- A physical product = tangible
- Services = intangible
Operations managers
→ uses the management process: planning, organising, staffing, leading and controlling. → applies it
to the 10 OM decision areas
1. Design of goods and services = defines what is required of operations in the other
decision areas
2. Managing quality: determines customer quality expectations and establishes framework
to deliver that quality
3. Process and capacity strategy = determines the process of production and encourages
management to focus on technology, quality, HR, and capital investments to determine
the firm's cost structure.
4. Location strategy: analyses the accessibility of customers, suppliers and talent whilst
looking at costs, infrastructure, logistics and government.
5. Layout strategy: combines capacity needs, personnel levels, technology and
inventory requirements to set out the efficient flow of materials, people and
information
6. Human resources and job design: recruits, motivates and keeps talent
7. Supply chain management: integrates the supply chain into the firms strategy
8. Inventory management: consists of material requirements planning (JIT→ just in time)
and ordering and holding decisions
9. Scheduling: (short and intermediate term)
10. Maintenance
History of OM
Cost focused → quality focused → customization → globalisation
Productivity
= the measure of efficiency and effectiveness with which companies use production means.
- It is the ratio of outputs divided by the ratio of inputs.
When efficiency improves production improves.
Productivity variables:
1. Labor
2. Capital
3. Management
, lOMoARcPSD|15781725
Productivity measurement:
- Single-level productivity = units produced (output) : input used
- Multifactor/total factor productivity = Units produced (output) : labour + materials +energy
+ capital + miscalculations
→ all factors in denominator need to be in the same unit (e.g. euros)
- Changes in quality over time may lead to misinterpretations
- External elements may have an impact on productivity
- There is a possible lack of precise units of measurement
Productivity is harder to analyse in the service sector → no fixed definition of the end product. →
more difficult to improve the productivity in that sector
OM and its challenges:
- Globalisation: operations managers need to embrace and make use of
international collaboration
- Supply chain partnering: pay close attention to the demands of the end users. It results
in more outsourcing and builds long-term partnerships
- Sustainability: ecological sustainability is at the heart of operations managers battle for
improved productivity
- Rapid product development: Operations managers need to adjust quickly to changes
- Mass customisation: customers now require products that are customised to their wishes
but companies still need to produce products with a high volume quickly.
- Lean operations: standard of competition for operations managers. Lean operations
address the issues of improvement of the production process and elimination of waste.
, lOMoARcPSD|15781725
Week 1: Chapter 2: Globalisation and international strategies (*) THEORY
6 main reasons why domestic businesses implement some form of international operations:
1. Improvement of the supply chain
2. Cost and exchange rate risk reduction → Organisations like the World Trade Organisation,
the European Union and trade agreements like the North American Free Trade Agreement
NAFTA provide an advantage as they reduce tariffs and other trade barriers
3. Providing better goods and services
4. Understanding markets
5. Learning to improve operations
6. Attracting and retaining global talent
Mission: purpose or rationale for organisations existence
Strategy: action plan that determines how an organisation expects to achieve its mission and goals.
Firms can achieve their mission by creating a competitive advantage. → can be created through:
- Differentiation → establishing uniqueness of the offerings
- Low-cost leadership → max value as perceived by customer whilst keeping costs low
- Responsiveness → set of values related to:
● Flexibility: responding to market changes
● Reliability: meeting schedules
● Timelines: not lagging behind the competition in terms of product design
production and delivery times.
Alternative perspectives to implement strategy:
1. Resource view: evaluate resources at disposal and manage or alter the mto
achieve competitive advantage
2. Value-chain analysis: identify the elements in the product or service chain that add value to
the chain uniquely through product research, design, HR, supply chain management,
process innovation and quality management
3. Porter's five forces model: analysing: competitors, suppliers, potential new entrants,
buyers and substitutes.
Outsourcing
= assign internally carried out activities to external parties risks of outsourcing include untimely
delivery, low quality and negative impact on employees if there is poor planning and analysis
beforehand.
- Motivation comes from the theory of comparative advantage.
Global operations strategies!!!!!!
A multinational corporation (MNC) presents extensive international business involvement. A business
can approach global opportunities using 4 strategies:
1. Global strategy: a strategy where operating decisions are centralised. →
generates economies of scale → reduces costs but evokes little local
responsiveness.
- E.g. Pfizer, Otis Elevator
2. Transnational strategy: a strategy that combines the benefits of efficiencies generated by
the opportunity to pursue all three operation strategies and have an interdependent network of
worldwide operations
- E.g. Coca-Cola, Nestlé
