The Nature Of Operations
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- Pages: 27
Chapter 1
The Nature of Operations
Chapter 1: The Nature of Operations
1
Introduction
Chapter 1: The Nature of Operations
2
McDonald’s Corp
Facing increased competition Smarter and more demanding customers Less brand loyal Switched to hamburger bun that does not require toasting. Customers prefer taste of new bun Saves time and money Chapter 1: The Nature of Operations
3
Olympic Flame
10,000 runners 15,000 miles through 42 states in 84 days Two years of planning Must plan for no-show runners and rush hour traffic Cost of this operation in the neighborhood of $20 million Chapter 1: The Nature of Operations
4
Kmart Versus Wal-Mart
Both chains started in 1962 In 1987, Kmart had 2,223 stores to WalMart’s 1,198. Kmart’s sales were $25.63 billion to WalMart’s $15.96 billion By 1991, Wal-Mart’s sales exceeded Kmarts Kmart still had more stores Chapter 1: The Nature of Operations
5
Kmart Versus Wal-Mart continued
In year ending January 1996, WalMart’s sales were $93.6 billion to Kmart’s $34.6 billion. During this time Kmart emphasized marketing and merchandising (such as national TV ad campaigns). Wal-Mart was investing millions in its operations to lower cost. Chapter 1: The Nature of Operations
6
Kmart Versus Wal-Mart continued
Wal-Mart developed sophisticated distribution system that integrated its computer system with its distribution system. Kmart’s employees lacked skills needed to plan and control inventory. Period from 1987 to 1995 Kmart's market share declined from 34.5 percent to 22.7 percent. Wal-Mart's increased from 20.1 percent to 41.6 percent Chapter 1: The Nature of Operations
7
Kmart Versus Wal-Mart continued
Fast forward to 2004
Kmart appears to have adopted a new strategy
Merge with Sears, Roebuck & Co.
Potential synergies between Kmart’s convenient locations and Sears’ strong brands
Chapter 1: The Nature of Operations
8
Diversity and Importance of Operations
Improvements in operations can simultaneously lower costs and improve customer satisfaction. Improving operations often dependent on advances in technology. Can obtain competitive advantage by improving operations. Diversity of operations Chapter 1: The Nature of Operations
9
Operations
Heart of every organization Operations are the tasks that create value
Chapter 1: The Nature of Operations
10
The Production System
Chapter 1: The Nature of Operations
11
Systems Perspective
Inputs Transformation System
Alter Transport Store Inspect
Outputs Environment Chapter 1: The Nature of Operations
12
Inputs
Inputs include facilities, labor, capital, equipment, raw materials, and supplies. A less obvious input is knowledge of how to transform the inputs into outputs.
Chapter 1: The Nature of Operations
13
Transformation System
The part of the system that adds value to the inputs. Four major ways
Alter – physical change Transport - relocate Store - protect Inspect – better understanding Chapter 1: The Nature of Operations
14
Outputs
Two types of outputs commonly result from a production system
Services (abstract or nonphysical) Products (physical goods)
Chapter 1: The Nature of Operations
15
Chapter 1: The Nature of Operations
16
Facilitating Good Concept
Often confusion in trying to classify organization as manufacturer or service Facilitating good concept avoids this ambiguity All organizations defined as service The tangible part of the service is defined as facilitating good Pure services
Chapter 1: The Nature of Operations
17
The Range From Services to Products
Chapter 1: The Nature of Operations
18
Classification and Evolution of Economic Offerings
Chapter 1: The Nature of Operations
19
Comparison of Alternative Economic Offerings Economic Offering
Commodities
Goods
Services
Experiences
Value added by Extracting
Producing
Delivering
Staging
Form of output
Fungible
Tangible
Intangible
Memorable
Key characteristics
Natural
Standardized
Customized
Personalized
Buyer
Market
User
Client
Guest
Chapter 1: The Nature of Operations
20
Chapter 1: The Nature of Operations
21
Operations Activities
Strategy Output Planning Capacity Planning Facility Location Facility Layout Aggregate Planning
Inventory Management Materials Requirements Planning Scheduling Quality Control
Chapter 1: The Nature of Operations
22
Functional View of Organizations
Three Core Functions
Operations Marketing Finance/Accounting
Other Important Functional Activities
Human Resource Management Information Systems Engineering Chapter 1: The Nature of Operations
23
Chapter in Perspective
Two alternative ways for organizing work activities
Functional approach, companies organize activities on the basis of the type of work performed Organizing activities on the basis of specific value-creating processes.
Chapter 1: The Nature of Operations
24
Process View of Organizations An Evolution
Chapter 1: The Nature of Operations
25
Traditional Functional Organization
Chapter 1: The Nature of Operations
26
Value Chain Approach
Chapter 1: The Nature of Operations
27
The Nature of Operations
Chapter 1: The Nature of Operations
1
Introduction
Chapter 1: The Nature of Operations
2
McDonald’s Corp
Facing increased competition Smarter and more demanding customers Less brand loyal Switched to hamburger bun that does not require toasting. Customers prefer taste of new bun Saves time and money Chapter 1: The Nature of Operations
3
Olympic Flame
10,000 runners 15,000 miles through 42 states in 84 days Two years of planning Must plan for no-show runners and rush hour traffic Cost of this operation in the neighborhood of $20 million Chapter 1: The Nature of Operations
4
Kmart Versus Wal-Mart
Both chains started in 1962 In 1987, Kmart had 2,223 stores to WalMart’s 1,198. Kmart’s sales were $25.63 billion to WalMart’s $15.96 billion By 1991, Wal-Mart’s sales exceeded Kmarts Kmart still had more stores Chapter 1: The Nature of Operations
5
Kmart Versus Wal-Mart continued
In year ending January 1996, WalMart’s sales were $93.6 billion to Kmart’s $34.6 billion. During this time Kmart emphasized marketing and merchandising (such as national TV ad campaigns). Wal-Mart was investing millions in its operations to lower cost. Chapter 1: The Nature of Operations
6
Kmart Versus Wal-Mart continued
Wal-Mart developed sophisticated distribution system that integrated its computer system with its distribution system. Kmart’s employees lacked skills needed to plan and control inventory. Period from 1987 to 1995 Kmart's market share declined from 34.5 percent to 22.7 percent. Wal-Mart's increased from 20.1 percent to 41.6 percent Chapter 1: The Nature of Operations
7
Kmart Versus Wal-Mart continued
Fast forward to 2004
Kmart appears to have adopted a new strategy
Merge with Sears, Roebuck & Co.
Potential synergies between Kmart’s convenient locations and Sears’ strong brands
Chapter 1: The Nature of Operations
8
Diversity and Importance of Operations
Improvements in operations can simultaneously lower costs and improve customer satisfaction. Improving operations often dependent on advances in technology. Can obtain competitive advantage by improving operations. Diversity of operations Chapter 1: The Nature of Operations
9
Operations
Heart of every organization Operations are the tasks that create value
Chapter 1: The Nature of Operations
10
The Production System
Chapter 1: The Nature of Operations
11
Systems Perspective
Inputs Transformation System
Alter Transport Store Inspect
Outputs Environment Chapter 1: The Nature of Operations
12
Inputs
Inputs include facilities, labor, capital, equipment, raw materials, and supplies. A less obvious input is knowledge of how to transform the inputs into outputs.
Chapter 1: The Nature of Operations
13
Transformation System
The part of the system that adds value to the inputs. Four major ways
Alter – physical change Transport - relocate Store - protect Inspect – better understanding Chapter 1: The Nature of Operations
14
Outputs
Two types of outputs commonly result from a production system
Services (abstract or nonphysical) Products (physical goods)
Chapter 1: The Nature of Operations
15
Chapter 1: The Nature of Operations
16
Facilitating Good Concept
Often confusion in trying to classify organization as manufacturer or service Facilitating good concept avoids this ambiguity All organizations defined as service The tangible part of the service is defined as facilitating good Pure services
Chapter 1: The Nature of Operations
17
The Range From Services to Products
Chapter 1: The Nature of Operations
18
Classification and Evolution of Economic Offerings
Chapter 1: The Nature of Operations
19
Comparison of Alternative Economic Offerings Economic Offering
Commodities
Goods
Services
Experiences
Value added by Extracting
Producing
Delivering
Staging
Form of output
Fungible
Tangible
Intangible
Memorable
Key characteristics
Natural
Standardized
Customized
Personalized
Buyer
Market
User
Client
Guest
Chapter 1: The Nature of Operations
20
Chapter 1: The Nature of Operations
21
Operations Activities
Strategy Output Planning Capacity Planning Facility Location Facility Layout Aggregate Planning
Inventory Management Materials Requirements Planning Scheduling Quality Control
Chapter 1: The Nature of Operations
22
Functional View of Organizations
Three Core Functions
Operations Marketing Finance/Accounting
Other Important Functional Activities
Human Resource Management Information Systems Engineering Chapter 1: The Nature of Operations
23
Chapter in Perspective
Two alternative ways for organizing work activities
Functional approach, companies organize activities on the basis of the type of work performed Organizing activities on the basis of specific value-creating processes.
Chapter 1: The Nature of Operations
24
Process View of Organizations An Evolution
Chapter 1: The Nature of Operations
25
Traditional Functional Organization
Chapter 1: The Nature of Operations
26
Value Chain Approach
Chapter 1: The Nature of Operations
27
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