Transcript link - Kellogg School of Management
OPNS 430
Professor Wuqin Lin
Class Material + Grading • Course Pack 1
(Cases & Readings)
• Course Pack 2
(Slides)
• The Goal • Managing Business Process Flows (MBPF) • The Course Web-Page Group Assignments 20%, Midterm 30%, Final 40%, Class Participation 10% Lin/Operations/Strategy 2
Topics – 6 Modules Module 1 : Operations Strategy (Shouldice, Wriston) Module 2 : Process Analysis ( CRU -Pizza Pazza, NCC ) Module 3 : Lean Operations ( Toyota ) Module 4 : Supply Chain Management (Palu Gear) Module 5 : Services ( The BAT case ) Module 6 : Quality (Quality Wireless, FlyRock) Lin/Operations/Strategy 3
Introduction & Strategy Module Introduction Goals and Key Paradigms of Course » Strategic role of Ops » Process view of Ops A Strategic Framework for Ops » Strategy: Product attributes and the Competitive Product Space » Ops: Capabilities and Processes Aligning strategy and operations: » Focus » Relationship between process choice and strategy » Shouldice Hospital » Wriston Manufacturing Lin/Operations/Strategy 4
What do
you
mean by “Operations”?
Lin/Operations/Strategy 5
What Is Meant by “Operations”?
“New York-based Merrill, the world's largest brokerage firm and a major investment bank, has been overhauling
operations
…” “Microsoft splits into five groups in reorganization” – Microsoft announced a long-awaited reorganization, dividing the company to five major groups and naming two veteran executives to head its online
operations
.
Lin/Operations/Strategy 6
Goals of this course 1.
2.
Introduction to operations as a
managerial integration
function Evaluation and Improvement We will adopt two paradigms Lin/Operations/Strategy 7
Key Paradigm of Course: 1. The Strategic Role of Ops “A company’s operations function is either a
competitive weapon
or a
corporate millstone
.
It is seldom neutral.” [
Skinner ’69
] Lin/Operations/Strategy 8
The Strategic Role of Ops… Most operational decisions have strategic impact – IT at Walmart Strategic decisions impact operations – FedEx-USPS Lin/Operations/Strategy 9
Key Principle of Course: 2. The Process View of Ops
Chicago Tribune
reported: 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.] Lin/Operations/Strategy 10
1. What is a Process?
Lin/Operations/Strategy 11
Operations & the Process View: What is a Process?
Information
structure
Inputs Process Management
Network of
Activities
and
Buffers
Flow units (customers, data, material, cash, etc.)
Outputs
Goods Services Labor & Capital
Resources
Lin/Operations/Strategy 12
Advantages of Adopting a Process View of Organizations Properties: – Applies to any organization » Service operations (health care), manufacturing operations – Applies at any level » 1 activity, 1 clinical service group, 1 hospital, 1 health care supply chain – Is always “customer aware” and focused on outcomes Key Property: focus on
flows
rather than
snapshots
Lin/Operations/Strategy 13
What is Operations Management?
Management of business processes How to structure the processes and manage resources to develop the
appropriate capabilities
to convert inputs to outputs.
– What is
appropriate
?
Lin/Operations/Strategy 14
2. What is a “good” Process?
Lin/Operations/Strategy 15
What defines a “good process”?
Performance: Financial Measures Absolute measures: – revenues, costs, operating income, net income – Net Present Value (NPV) = Relative measures:
t T
0 1
C t
r
t
– ROI, ROE EBIT Tax – ROA = Average Total Assets Survival measure: – cash flow Lin/Operations/Strategy 16
What defines a “good process”? All organizations compete on delivered value Delivered value of process = benefit to process customers – total process cost
Price p
(Cost) Benefit driven by customer value
Quality Q:
•of product or outcome •of service
Time T:
•Rapid, reliable delivery •New product development
Variety V
(flexibility) Example: patient value priorities for – Emergency care Lin/Operations/Strategy 17
A Strategic Framework for Process Design and Improvement:Three questions competitive strategy 1.
What is our strategic position: how do we compete & provide value in the market?
» What is the value proposition to our customers?
Rank (
p, T, Q, V
) operations strategy 2.
Given our strategic position, what must operations do particularly well?
» Which
competencies
must ops develop?
Rank
(c, T, Q, Flex
) Process structure & mgt 3.
Given needed competencies, how should operations processes be structured to develop competencies that support strategy?
Process choice (structure) and management Lin/Operations/Strategy 18
Representation of Strategy: Current Position and Strategic Directions of Movement in the competitive product space
Responsiveness B
High
Price A
Low Lin/Operations/Strategy 19
Strategy vs. Operational Effectiveness: The Operations Frontier as the minimal curve containing all current positions in an industry
Responsiveness C B A
operations frontier High Low
Price
Lin/Operations/Strategy 20
Shouldice Hospital Lin/Operations/Strategy 21
Question 1: Representation of Strategy: Strategic Position in customer value space
Variety in care B
High
Price A
Low Lin/Operations/Strategy 22
Question 2: Need competencies to deliver value proposition
Variety
High
Customer
value proposition
Price
Shouldice Low
Flexibility
Needed
Process
Competencies
B
High
Cost A
Low Lin/Operations/Strategy 23
Question 3: what is the best process design that has the right process competencies to deliver customer value proposition?
Flexibility (responsiveness)
World-class Emergency Room Productivity frontier = current state of best practice One general hospital Needed competencies for a given patient type/segment World-class specialty non-emergency Shouldice Hospital
Cost efficiency
A
focused
process attempts to deliver one specific and narrow customer value proposition (i.e., its priority ranking is clear and constant for all patients) – – It is optimized to deliver the needed competencies for one narrow patient segment Focus does
not
imply standardization: ER is focused on providing timeliness and flexibility to patient needing emergency care Lin/Operations/Strategy 24
Wriston Manufacturing Lin/Operations/Strategy 25
Wriston’s HED Division Plant Network
7 6 5 4 3 2 1 0
Sandusky, OH Exhibit 2A
Total Burden Rates (total overhead cost / direct labor cost)
Essex, Canada Detroit, MI Saginaw, MI Lima, OH Lebanon, PA Tiffin, OH Fremont, OH Maysville, KY
Free capacity and Throughput $200 $150 $100 $50 $0 Sandusky, OH
Lin/Operations/Strategy
Essex, Canada Detroit, MI Saginaw, MI Lima, OH Lebanon, PA Tiffin, OH Fremont, OH Maysville, KY
26
Classification of Processes by process architecture Project Job Shop Batch Line Flow Continuous Flow Job Shop Flow Shop Lin/Operations/Strategy 27
Characteristics of Processes: Comparison of Process Types Type of Process
Job Shop Product Volume Specialized Equipment Product Variety Machine Setup Frequency Labor Skills Flow Shop Variable Cost
Q: what are the typical managerial challenges in JS vs FS?
Lin/Operations/Strategy 28
Matching Process Choice with Strategy:
Process
Product-Process Matrix
Flexibility
Jumbled Flow.
Process segments loosely linked.
High JOB SHOP
(Commercial Printer, Architecture firm) Disconnected Line Flow/Jumbled Flow but a dominant flow exists.
BATCH
(Heavy Equipment, Auto Repair) Connected Line Flow (assembly line)
LINE FLOWS
(Auto Assembly, Car lubrication shop) Continuous, automated, rigid line flow.
Process segments tightly linked.
Low CONTINUOUS FLOW
(Oil Refinery)
Low
High Standardization Commodity Products High volume Lin/Operations/Strategy Few Major Products Many Products
High
Low Standardization One of a kind Low Volume
Product Variety
29
Learning Objectives
Operations & Strategy
What is operations?
What makes a good operations?
Two key paradigms of course Link between business strategy, operations strategy, and operations structure – Product Attributes / Operational Capabilities/Operations structure – Strategy vs. Operational Effectiveness – Trade-offs: – Operational Focus – Process Classification and Relationship with strategy Lin/Operations/Strategy 30