Thought for the day:

“Think ahead. Don't let day-to-day operations drive out planning.”

OPERATIONS

OPERATIONS STRATEGIES

GET AN A

Knowledge

Application & Analysis

Evaluation

A

Grade

Understand

Define, Clarify, describe, extract, identify, outline, recall,

recount, state summarie

Compare, Contrast, distinguish,, construct,

calculate, explain.

Apply, Examine, Analyse, Interpret, Formulate.

To what extent, Evaluate, discuss, justify, advise, recommend.Band 6

Band 5

Band 4

Band 2/3

OPERATIONS STRATEGIES-SYLLABUS

performance objectives – quality, speed, dependability, flexibility, customisation, cost

new product or service design and development supply chain management – logistics, e-commerce, global sourcing outsourcing – advantages and disadvantages technology – leading edge, established inventory management – advantages and disadvantages of holding stock,

LIFO (last-in-first-out), FIFO (first-in-first-out), JIT (just-in-time) quality management Control Assurance improvement overcoming resistance to change – financial costs, purchasing new

equipment, redundancy payments, retraining, reorganising plant layout, inertia

global factors – global sourcing, economies of scale, scanning and learning, research and development

OPERATIONS STRATEGIES

• To achieve operations goals and broader business goals, operations managers can apply numerous operations strategies.

• Overview of the operations strategies

Operations strategies are based around the need to achieve performance objectives.

These performance objectives help define what inputs are required and influence all aspects of the transformation processes.

PERFORMANCE OBJECTIVES

When dealing with the operations function of business, there are particular performance objectives that are targeted by managers.

Performance objectives are goals that relate to particular aspects of the transformation processes.

These objectives or targets will be set so that the business becomes more efficient, productive and profitable.

PERFORMANCE OBJECTIVES

The six main performance objectives that can be allocated to particular

key performance indicators (KPIs) are:

• quality • speed • dependability • flexibility • customisation • cost.

KPIs – a specific criteria used to measure the efficiency and effectiveness of the businesses’ performance (pg 46)

PERFORMANCE OBJECTIVES

– Quality including:

• design — how well a good is made or a service is delivered• conformance—how well the good or service meets a prescribed design with a certain specification• service — how reliable, suitable and timely the service delivery is.

– Speed: the time it takes for the production and the operations processes to respond to changes in market demand.

PERFORMANCE OBJECTIVES

–  Dependability: how consistent and reliable a business’s goods or services are.

–  Flexibility: how quickly operations processes can adjust to changes in the

market.

–  Customisation : the creation of individualised goods or services to meet the

specific needs of the customers.

–  Cost: the minimisation of expenses so that operations processes are

conducted as cheaply as possible.

• Each of the performance objectives will be allocated targets or goals.

ACTIVITY:

#3. (pg 77)

Complete a concept map to summarise the three quality performance objectives.

………The concept map has been started for you.

ACTIVITY:

(pg 77)

4  Demonstrate what is meant by the term ‘speed’ in relation to operations processes.

5  Recall three goals for speed.

7  Explain the relationship between dependability and the number of warranty claims or complaints received.

8  Describe how flexibility of processes is linked to market demand.

9  Explain why full customisation of products is rare.

10  Account for why many businesses offer mass customised products.

 Identify three operational strategies a business can use to reduce cost.

EXTENSION:

Class discussion:

Account for why Apple is successful even though it does not base its product design and development on market research.

ACTIVITY – PG 81

NEW PRODUCT OR SERVICE DESIGN AND DEVELOPMENT

An important strategy for the operations processes of business is the creation, or design and development, of new products (goods and services).

The design, development, launch and sale of new products enables a business to grow and to attain a competitive advantage.

Activity: Note key points - Pg 78 –> 80 – 4.2

New product or service design and development

A business needs to design and develop new products and services.

There are two different approaches that determine product design and

development: –  consumer preferences –  changes and innovations in technology.

Important factors in new product design and development include: –  quality –  supply chain management –  capacity management –  cost.

Service design and development differs from the design and development of products as services are intangible and ‘consumed’ as they are produced.

A service can be: –  explicit — the application of time, expertise, skill and effort –  implicit — the feeling of being looked after.

NEW PRODUCT DEVELOPMENT PROCESS

1. Concept development – Many ideas are discussed and assessed and screened to reduce the list to more viable ideas.

2. Cost benefit analysis – Economic analysis to determine if the product is worth pursuing based on estimated sales and costs.

3. Production design – Engineers design the product, work through technical difficulties and create features that meet predicted customer wants. Production costs determined.

4. Product testing – feedback from testing and market research may indicate further changes to design are needed.

3  Summarise the four factors that must be given consideration when undertaking new product design and development.

4  Explain the role of the customer or client in the design and development of a service.

5  (a) Compare explicit service with implicit service.

(b) Outline the relationship between explicit service and implicit service.

Extension

2  We figure out what we want... So you can’t go out and ask people, you know, what’s the next big [thing]. There’s a great quote by Henry Ford, right? He said, ‘If I’d have asked my customers what they wanted, they would have told me “A faster horse”’.

Steve Jobs, Apple CEO.

Assess the accuracy of this statement.

ACTIVITY – PG 81

GUESS WHO

Pick a definition

Group asks questions

– can only answer yes or no.

Work around the circle.

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

Write which you think is the odd one out and why…..

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

KeyOutsourcingPerformanceIndicators

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

–Key Performace objective (KPIs)KeyOutsourcingPerformanceIndicators

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

DesignConformanceServiceTransformation

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

–Performance objective of qualityDesign ConformanceServiceTransformation

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

Quality TechnologyFlexibilitySpeed

ONE OF THESE THINGS IS NOT LIKE THE OTHERS...

Play

–Performace objective KPIsQuality TechnologyFlexibilitySpeed

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) involves integratingand managing the flow of supplies throughout the inputs,

transformation processes (throughput and value adding) and outputs in order to best meet the needs of customers.

SUPPLY CHAIN MANAGEMENT Note 4.3 - Pg 81 – 87 ‘4 – 5 key words under each heading’

• Sourcing

-supplier rationalization

-Backwards vertical integration

-cost minimization

• Global Sourcing

• Ecommerce

-Business sourcing & ecommerce

- Ecommerce & the consumer

• Logistics

-distribution

-transportation & distribution

-storage, warehousing & distribution centers

-Materials handling and packaging

Pictionary – Operation Business words

 

 

 

 

write down everything you ‘know/ can think of’ about outsourcing

 

 

 

 

Read:

 

 

http://www.wisegeek.org/what-is-outsourcing.htm

(google ‘wise geek outsourcing’ first hit)

OUTSOURCING

Outsourcing involves the use of external providers to perform business activities.

The theory behind outsourcing is that when a service is performed by an external provider that specialises in a particular business function, it will do so at a lower cost and with a greater effectiveness than the same task done within the business hierarchy.

The term ‘outsourcing’ is often called business process outsourcing (BPO).

OUTSOURCING

Business process outsourcing is a term that captures a range of outsourced business processes including:

• operations such as manufacturing, value-adding manufactures, design, merchandising, sourcing, distribution and logistics

• human resources including employee remuneration, employee counselling, pensions, data management, training and development, and travel and expenses management

• administrative work including data entry and ‘back office’ work

• information technology (IT) including data work, desktop outsourcing and network outsourcing (remotely hosted software applications)

OUTSOURCING

Other types of outsourcing include:

• Finance and accounting outsourcing (FAO)including preparation of financial accounts and reports, analytics, and taxation compliance

• Knowledge process outsourcing (KPO) including the outsourcing of managerial work such as marketing strategy, public relations and management decision making

• Legal process outsourcing (LPO) including paralegal support, legal support (including drafting, research and counsel) and other legal services (such as patents and trademarks).

THE OUTSOURCING DECISION

Before a business decides to use outsourcing as an operations strategy,

operations managers need to assess whether the use of outsourcing is viable.

THE OUTSOURCING DECISION

What are the factors that must be considered when assessing whether and when to use outsourcing (pg 89 – 90) – next slide…

THE OUTSOURCING DECISION

The factors that must be considered when assessing whether and when to use outsourcing are:

Whether to outsource or not: this requires assessing whether the use of outsourcing is cheaper and more efficient that performing the work in-house.

If deciding to outsource, the managers must decide which geographical location is favoured.

The managers must also decide which vendors to use. If the decision is to outsource then details such as the management of

the outsourcing contract, the length of contract, the KPIs and service levels are required.

THERE ARE FOUR DIFFERENT OUTSOURCING OPTIONS THAT CAN BE USED:

OUTSOURCING OPTIONS… QUESTIONS…

Which outsourcing service can then outsource the service?

Which is offshore and uses external organisations?

Which is a short term stratagey?

Which is in-house?

Which is the lowest risk?

Which involves re-locating services?

Which is best if you want to ‘test the water?” of outsourcing?

OUTSOURCING OPTIONS… ANSWERS…

Which outsourcing service can then outsource the service? (Joint venture)

Which is offshore and uses external organisations? (Build-operate-transfer)

Which is a short term stratgey? (Fee-for service)

Which is in-house? (Creation of shared Centers)

Which is the lowest risk? (Fee-for service)

Which involves re-locating services? (Build-operate-transfer)

Which is best if you want to ‘test the water?” of outsourcing? (Fee-for service)

The incidence of outsourcing, either domestically or globally, is increasing worldwide, with business structures changing to benefit from lower cost and greater efficiency.

Outsourcing can be highly beneficial for businesses, but it also can present a number of significant challenges or issues.

OUTSOURCING: THE ADVANTAGES AND DISADVANTAGES

P L A Y ( 7 M I N S 3 0 S E C )

OUTSOURCING: THE ADVANTAGES AND DISADVANTAGES

A D V A N T A G E S

–  simplification

–  efficiency and cost savings

–  increased process capability

–  increased accountability

–  access to skill/resources lacking within the business

–  provides a capacity to focus on core competencies thus improvingin-house

performance and several strategic benefits.

D I S A D V A N T A G E S

–  the cost and uncertainty associated with payback

–  issues with communication and language

–  loss of control of standards and information security

–  loss of corporate memory and costs associated with IT, organisational

change, redesign and management of hierarchies.

Class E/B

Class B

TECHNOLOGY — LEADING EDGE, ESTABLISHED Outcome: You can explain the difference between leading

edge and established technology .

TECHNOLOGY — LEADING EDGE, ESTABLISHED External influence: Technological change.

Technology – the equipment and knowledge that are available to help the business perform certain functions or make products.

Technology can result in:

• The development of new methods of production

• Allows the business perform tasks quicker & lower cost!

TECHNOLOGY — LEADING EDGE, ESTABLISHED The Oper Mgr needs to be aware of technology and assess its application in the business.

Mgr must weigh up the costs (upgrade vs long term benefit).

These notes come from: Pg 71 Cambridge

When making the decision – must take into consideration:

• The speed of change taking place in that area of technology

• The technology that competitors are using

• The finance available for change in technology

• How long it will take to introduce the technology

• Whether staff need to be retrained or made redundant.

TECHNOLOGY — LEADING EDGE, ESTABLISHED

Some technological changes can not be ignored.

Eg:

the evolution of computer has resulted in major changes for most business

• Word processors

• Storage systems

• Communication systems

Changed the way business record and process information about transactions, employees and data (allowing people to work from home)

TECHNOLOGY — LEADING EDGE, ESTABLISHED

TECHNOLOGY — LEADING EDGE, ESTABLISHED The thoughtful application of technology helps a business create a

competitive advantage. (pg 94 – 96)

Leading edge technology —the most advanced or innovative at any point in time

• Cutting edge

• (Bleeding edge – so new high level of risk & uncertainty)

— can help businesses to:

create more products quickly and to higher standards reduce waste operate more effectively. Gives a competitive advantage (being first to develop, first to implement

new technology)

TECHNOLOGY — LEADING EDGE, ESTABLISHED

Established technology —that is widely accepted and used—helps to establish

basic standards for productivity and speed.

• In operations technology usually has three broad aims:

• Remove geographical barriers, find cost savings and time savings, give business better control over operations.

• CAD,CAM & robotics (chapter 2)

• Intranet, smart phones, EFTPOS: better service & faster delivery – anywhere in the world

• EDI (electronic data interchange): barcodes & scanner systems for inventory

• Project management software: Gannt charts, CPA – allow for planning & Schedules.

Both forms of technology give businesses efficiencies ,productivity gains and

a capacity to improve operations processes.

1  Distinguish between leading edge and established technology.

2  (a) Identify two (i) leading edge and (ii) established technologies within your school.

(b) Deduce the benefits these technologies provide to your learning environment.

3  Outline two benefits of leading edge technology.

4  Explain the relationship between innovation and technology.

5  ‘Businesses need to acquire leading edge technology in order to compete effectively.’ Discuss.

6  Recall four forms of established technology.

(pg 94 – 96)

TECHNOLOGY — LEADING EDGE, ESTABLISHED

OUTCOME:

Over the next few lessons you will be able to:

• Explain different types of inventory management

Including:

• LIFO (last-in-first-out), FIFO (first-in-first-out), JIT (just-in-time)

• and the advantages and disadvantages of holding stock,

• You will understand the importance of quality management (control, assurance and improvement).

• You can discuss the balance between cost and quality in operations strategy.

INVENTORY MANAGEMENT

In groups - Plan

You have four minutes to explain the concept of:

• Holding stock (adv & disadv)

• LIFO

• FIFO

• WAC

• JIT

• Quality Control

• Quality assurance

• Quality Improvement

QUALITY

QUALITY CONTROL

AND QUALITY ASSURANCE

STOCK CONTROL

STOCK CONTROL

Costs: Storage costs – warehousing, etc. Depreciation costs – wear and tear, perishability, shelf-life, etc. Opportunity cost – zero revenue earned on stocks sitting around! Administration costs – monitoring stock levels, ordering and

processing, etc.

STOCK CONTROL

Benefits: Availability of stocks to meet customer needs Buffer stocks help to cope with unplanned changes in demand Smoothes out the volatility of lead times

STOCK CONTROL

Stock Level

Time

Maximum Stock Level

Minimum Stock Level

Re-order level

The Traditional Stock Control Model Maximum stock levels achieved after stock delivery. Stock levels decline during production.

When the stock level reaches the re-order level, it triggers a new order. The difference between the time of re-order and delivery is the ‘lead time’.

Lead Time

Re-order triggered

ALTERNATIVESComputerisation – The functionality and power of

computers allow companies to be able to keep accurate stock control processes in place.

Use of bar codes has facilitated this. Allows constant flow of information to distribution centres.

Just-In-Time – Minimise the amount of stock held – in pure systems, the stock arrives as it is needed.

JIT – relies on excellent relationships with suppliers JIT – requires excellent communication and infrastructure links

between suppliers and businesses

QUALITY

WHY IS QUALITY A CONCERN?Gives competitive

advantage

Encourages return purchases

Provides customer with information and builds consumer confidence in the brand

Reduces costs incurred in solving post sales problems

Helps improve efficiencyIf quality control breaks down,

the cost can be severe.Source: Photolibrary Group

QUALITY CONTROL

QUALITY CONTROL

The responsibility of every member of the workforce for the quality of products and services provided by the business.

Emphasis on reducing defects, etc. before it gets to the final stage of production and certainly to the consumer.

TQM (TOTAL QUALITY MANAGEMENT)Name given to quality control

Features of TQM: Quality Circles – meetings of relevant workers

to discuss issues relating to maintenance and improvement of quality in the business – may also double as a form of empowerment and motivation.

Statistical Process Control – statistical data generated to inform the evaluation of processes within the business.

Zero defects – systems in place to ensure that no product leaves the business with a defect – important in building supplier relationships, image, reputation.

QUALITY ASSURANCE

QUALITY ASSURANCE

The process whereby quality is at the forefront of every stage of the development, design, marketing, manufacturing and selling process.

‘Quality’ is influenced by the internal philosophy of the business and the external influences -

OUTCOME:

You can give suggestions for overcoming resistance to change

Considering– financial costs, purchasing new equipment, redundancy payments, retraining, reorganising plant layout, inertia

RESISTANCE TO CHANGE

Why do you like/dislike change?

Explain what this tells you about the strategy a manger could best use to help overcome resistance to change.

Play: 6 mins: http://www.youtube.com/watch?v=hcz1aZ60k7w&feature=related

RESISTANCE TO CHANGE

Was covered in primilary course.

Businesses change in response to the external environment, globalization and the need to maintain a competitive advantage through operations.

Driving Forces – Push towards the need for change

Restraining forces - those that hold the business back and resist any change that is attempted.

Mgt challenge = to identify and develop strategies to overcome the resistance to change.

The driving forces for change must outweigh the resisting forces.

Force Field anayslis: http://www.youtube.com/watch?v=64t_NIAG2QY&feature=related

Change in 30 seconds: http://www.youtube.com/watch?v=fpuHUiy_xog&feature=fvwrel

In operations the resisting forces will be related to cost and inertia.

Cost: purchasing new equipment, redundancy payments, training, changing layout.

Inertia: people react emotionally, not embracing the opportunity, wishing things remain the same.

Note: Cambridge pg 82 – 84

Group Spider diagram: resistance to change.

(redo trial exam essay with the resistance question)

RESISTANCE TO CHANGE

OUTCOME:

You can examine the impact of globalisation on operations strategy.

Considering– global sourcing, economies of scale, scanning and learning, research and development

GLOBAL FACTORS

• There are four key global factors that affect operations strategy and provide

opportunities for operations managers: global souring, economies of scale,

scanning and listening, and research and development (R&D).

• Global sourcing is a broad reference to sourcing business supplies or services

without being constrained by location and it therefore includes all outsourcing.

GLOBAL FACTORS

• Economies of scale can lead to significant cost saving in various aspects of the

business enterprise.

• Scanning the global environment and learning from the best practice of businesses around the world can be a very valuable operations management tool as it can help managers adapt best practice to the business operations (Kaizen).

• R&D can make a very big difference

GLOBAL FACTORS: DISCOVERY LEARNING1 Recall four global factors that affect operations strategy and that provide

opportunities for operations managers.

2 Demonstrate, using examples found in your home, how your family uses global

sourcing.

3 State the benefits and challenges associated with global sourcing.

4 Distinguish between financial and contractual concerns associated with global

sourcing.

5 Define the term ‘economies of scale’.

6 Explain the relationship between economies of scale and profitability.

7 Clarify why an effective manager should continuously scan the business environment.

8 Outline the importance of R&D as an operations strategy.

(pg 115)

Theory finished

CAN YOU?

Explain how operations strategy can help a business sustain its competitive advantage?

Considering…. performance objectives – quality, speed, dependability, flexibility, customisation, cost new product or service design and development supply chain management – logistics, e-commerce, global sourcing outsourcing – advantages and disadvantages technology – leading edge, established inventory management – advantages and disadvantages of holding stock, LIFO (last-in-

first-out), FIFO (first-in-first-out), JIT (just-in-time) quality management Control Assurance improvement overcoming resistance to change – financial costs, purchasing new equipment,

redundancy payments, retraining, reorganising plant layout, inertia global factors – global sourcing, economies of scale, scanning and learning, research

and development

Make a CASE STUDY Folder.

Matching Syllabus to Case Study.

New product or service design and development

Podcast:

An important strategy for the operations processes of business is the creation, or design and development, of new products (goods and services).

VERBAL SOCCER

Teacher questions

Kick-off

Three questions = a goal

Answer incorrectly it is a tackle and possession goes to the other team.

Fouls – shouting out/ arguing with the umpire.