Operations Management

EBE NSW Professional Development Event – “Teaching the HSC Course (Year 12) in Business Studies for the First

Time?” held on 14 September 2017

Ben Andersen MBA, Engadine High School

The Plan

• Cover sections of the course

• Make links to other functions (M), (F) and (H)

• Provide hyperlinked examples and case studies

• Ask questions at any stage!

• Access this presentation afterwards, with hyperlinks to articles / videos / podcasts to use with your students

Operations Management - Role • Making products / delivering services

• Coordinating resources, process-orientation

• Core act of the business

• Major cost centre (F) - inputs, labour, processing, inventory, QM costs…

• Seeking innovation (M) and efficiency (F)

• Ever-evolving, continual adaptation and investment (F)

• Model under threat from continual improvement / change

Cost Leadership

• Refining and squeezing all costs from an existing model in order to:

• Compete on price (M), undercut competitors and capture market share and growth (M) (F)

• Maximise profit margins, keep price same and target costs (F)

• Systems-focused (O) (F)

• ALDI – enormous growth, streamlined model, dedication to customer

• Here, here and here for ALDI articles

Product Differentiation

• Dedication to continual advancement in product offering (M)

• Competitive advantage through:

• Innovation and new products (first-mover)

• Premium positioning - margins high (M) (F)

• R&D (F) / human-focused (H)

• Google (Alphabet) – Core business plus range of ‘projects’ (bets on the future)

• Here and here for Google links

Most companies pursue BOTH

• Few firms have a single focus upon ONE

• Most aim to simultaneously:

• Target costs and improve synergies AND

• Innovate and differentiate

• This is very hard to do – consolidation and disruption at the same time!

• Domino’s – new menu (M), higher positioning (M) (F) and new systems / technologies to cuts costs (O) (F)

• Domino’s articles here and here.

Interdependence

• Indicated throughout presentation with (O), (M), (H) and (F)

• Brief mention and overview at start, but continual weaving throughout topic

Influences on Operations

• Factors that force firms to alter their operational systems and processes

• External influences - beyond control of firm

• Firms relentlessly and ruthlessly seek competitive advantage over rivals (M)

• Change is imperative (M), hard to manage (H), expensive (F) and risky

Influences on Operations

• What students need to know:

• Memorise and identify influences

• Definition of each influence

• How each might be impacting specific businesses

• Evaluate impact

• Then, perhaps, recommend strategies to counteract the influence…

• Know difference between legal compliance and ethical responsibility…

Influences on Operations

• Globalisation –

• Amazon, Fast Fashion, Containerisation.

• Technology –

• Uber Vs Cabcharge, Tesla Vs Carmakers, Purplebricks Vs Estate agents

• Quality expectations –

• Woolworths culls Homebrand

• Cost-based Competition –

• Amazon Vs Retailers, ALDI Vs duopoly

Influences on Operations

• Government policies –

• Clean Energy Target, Intervention in gas market, Trump

• Legal regulation –

• Lock-out laws in Sydney, WHS

• Sustainability –

• Managing climate risk, Qantas

• CSR –

• K-mart’s supply chain, K-Mart policy

Operations Process

• The systematic process through which various resources are combined and utilised to produce output

• Every business (even direct rivals) have differences in process

• HUGE difference between goods manufacturing and service provision

• Capital intensive (good)

• Labour intensive (service)

• Inputs – Transformational Process - Output

Operations Process

• What students need to know:

• Memorise and use key terminology

• Relationship between variables

• Apply 4 Vs to a variety of businesses

• Key differences between a service process and manufacturing process – inputs, tech, tasks, layout

• How to interpret CPA sequencing / scheduling tools

Inputs

• Transformed – undergo change (F) (O)

• Transforming – performs that change (F) (H)

Transformational Process

• 4Vs

• Volume – how much?

• Variety – level of customisation and complexity?

• Variation in demand – seasonal?

• Visibility – customer presence?

• Technology, task design, layout

• Critical Path Analysis (CPA)

Transformational Process

• Volume / variety trade-off • Usually inversely proportional

• High volume = low level customisation

• High level customisation = low volume

• Impacts technology required, layout utilised and task design of human resources

• More complexity slows things down… but can offer more value (M) (F)

• Mass-customisation is a possibility; listen here.

Operations Process

Operations Process

Operations Process

Operations Process

Transformational Process

• Consider the retail operations of the local branch of the Commonwealth Bank…

• Range of output / services provided - ?

• Inputs - ?

• Layout - ?

• Technologies - ?

• 4 Vs - ?

Transformational Process

• Critical Path Analysis (CPA) identifies the sequence of activities upon which, if there are delays in an individual activity on the path, it delays the entire project.

• Other paths have ‘slack’ – there can be delays without affecting overall project delivery

• 0-1-8 = 35 days

• 0-2-5-6-7-8 = 83 days

• 0-3-5-6-7-8 = 78 days

• 0-4-5-6-7-8 = 73 days

Transformational Process

• National Geographic Megafactories Series ONE

• Search YouTube for ‘How stuff is made’ … millions of cool vids

Monitoring and Controlling

• Linear process – unlike other circular processes

• Identify problems and apply interventions along the sequence to improve process efficiency / performance / remove bottlenecks

Operations Strategies

• Proactive interventions made to operational processes to improve firm performance and efficiency

• What students need to know:

• Memorise and define each strategy

• Use terminology relevant to each strategy

• Apply strategies to a range of case studies

• Evaluate strategies in a range of contexts

• Draw implications from the application of operations strategies on other key functions (high order)

Operations Strategies

• Performance objectives

• Measure KPIs to determine weaknesses / opportunities to make efficiency gains (F)

• Set targets / performance benchmarks (H)

• Must be relevant to firm

• McDonald’s increasing drive-thru speed

• Qantas reducing costs

• Microsoft Surface fail on reliability

• Centrelink dependability fail

Operations Strategies

• New Product Design

• Operational tinkering through R&D

• Adaptations / innovations to drive sales and profitability (M) (F)

• Dedicated team of researchers (H)

• Risky if failure to gain traction

• 3M culture of innovation

• Google’s Nest

Operations Strategies

• Supply Chain Management

• Relationships between upstream and downstream firms

• Logistics / administration / reliability / lead times / quality

• Cost of Goods Sold (F) and Accounts Payable (F)

• Global sourcing and ethics

• Oz retailers shamed for low transparency of SCM

• Vertical integration

• Apple’s epic supply chain

Operations Strategies

• Outsourcing

• Non-core functions to specialist firms

• Cost advantages (F) and higher quality (O) (M)

• Loss of IP control – redundancies / retraining (H)

• Global outsourcing – currency risk (F)

• Gone too far?

• Boeing’s difficulties

• Outsourcing victories

Operations Strategies

• Technology • Utilise new technology to drive down costs (F) and gain

competitive advantage (M)

• Leading edge (first mover)

• Source of finance / Leasing (F)

• Speed, quality, reliability of output (M)

• Redundancies (H)

• Aurizon – driverless trains

• Fortescue – technology productivity gains

• Impact of automation – article and video

Operations Strategies

• Inventory Management • Acquisition and storage of stock

• Both ends of production (input and output)

• Various sub-strategies to apply in different contexts

• Liquidity and Working Capital Management (F)

• Costs of holding stock (F)

• Dick Smith’s woes

• Toyota and JIT

• Disadvantages of JIT

Operations Strategies

• Quality Management

• Methods to ensure output dependability

• Reduction in defects (F) (M)

• Lower unit costs of production (F) (M)

• TQM – employee involvement (H)

• Victorinox Swiss Army Knife

• Tesla ensuring quality

Operations Strategies

• Resistance to change

• Not really a strategy in and of itself

• All operations strategies DO require change

• Best to consider ways to introduce that change to minimise negative impact on firm (H)

• Toyota’s retrenched workers still love the company…

Ideas, assessment and tools • Use ‘Lotto’ PPT to prompt students to

consider differences between operations in a variety of businesses..

• Assessment tasks: • Comparison research report between secondary

and tertiary operations

• Global operations research report on business of students’ choosing

• Use previous HSC style questions to create your own weekly short response session..

• Use these study note templates for students to ensure they have information for the whole course.

goo.gl/9Wxi6X