Introduction

1
Operations Management Introduction Strategy
Module

• Introduction Administrative
• Key Principles of Course
• Strategic role of Ops
• Process view of Ops
• Strategies, Capabilities and Operations
• Strategic Framework
• Wal-Mart
• Aligning strategy and operations
• Shouldice Hospital
• Focus
• Wriston Manufacturing

2
Key Principle of course 1. The Strategic Role
of Ops

• A companys operations function is
• either a competitive weapon
• or
• a corporate millstone.
• It is seldom neutral. Skinner 69

3
Key Principle of Course 2. The Process View of
Ops

• By rethinking the IBM Austin assembly plant and
  introducing cells,
• distance traveled by a card was cut from 1.5
  miles to 200 yards
• floor space was reduced to half
• production tripled with about the same number of
  workers.
• Chicago Tribune, July 1992

4
Operations the Process View What is a Process?
5
What defines a good process? Performance
Financial Measures

• Absolute measures
• revenues, costs, operating income, net income
• Net Present Value (NPV)
• Relative measures
• ROI, ROE
• ROA
• Survival measure
• cash flow

6
Firms compete on product attributes. This
requires process competencies.
7
Process Competencies are affected by Process
Structure and Management

• Process structure or architecture
• (1) inputs and outputs
• (2) flow unit (jobs)
• (3) network of activities buffers
• quantity location
• precedence relationships
• (4) resource allocation
• capacity throughput
• Operations Planning Control
• Organization

8
What defines a good operation? Achieving
alignment at FedEx
9
A Strategic Framework for Operations
Business Strategy
Desired Capabilities
Operations Structure
Resources
Processes
10
What defines a good operation? Achieving
alignment at IKEA
11
Shouldice Hospital
12
Wriston Manufacturing
13
Wriston Manufacturing
Burden Rates (total overhead cost / direct labor
cost)
7
6
5
4
3
2
1
0
Sanduski
Detroit
Lima
Lebanon
Saginaw
Essex
Tiffin
Freemont
Maysville
Free capacity and Throughput
160
140
120
100
80
60
40
20
0
Sanduski
Detroit
Lima
Lebanon
Saginaw
Essex
Tiffin
Freemont
Maysville
14
Focus and the Frontier In the health-care sector
15
Learning Objectives Operations Strategy

• An operation as a transformation process
• Product Attributes / Operational Capabilities
• Process Drivers / Operations structure
• Link between business strategy, operations
  strategy, and operations structure
• Strategy vs. Operational Effectiveness
• Operational Focus