copyright ©2013 pearson education, inc. publishing as prentice hall 1 operations d30 managing...

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall 1

Operations D30Managing Business Process Flows: Ch 1 + 2

Processes and Strategy Module Introduction Key Principles of Course

» Strategic role of Ops

» Process view of Ops

What Defines a Good Process?» Product attributes and the Competitive Product Space

» Strategic Operational Audit

Aligning strategy and operations:» Focus

» Relationship between process choice and strategy

» Shouldice Hospital

» Wriston Manufacturing

Classification of Processes

1


Key Principle 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]

2


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

USA Today reported that Sealy dramatically improved its operations:

– Each bed is completed in four hours, down from 21. – Median delivery times have been cut to 60 hours from 72. – Plants have cut their raw-material inventories by 50% to 16 days' worth. – By moving workers closer together, the Williamsport facility last year freed

enough space to combine two shifts, slicing costs.

3


Operations & the Process View:What is a Process?

Inputs OutputsGoods

Services

Labor & Capital

Informationstructure

Network ofActivities and Buffers

Flow units(customers, data, material, cash, etc.)

Resources

ProcessManagement

4


What defines a “good process”? Delivered value

Delivered value of process = benefit to process customers – total process

cost

Benefit driven by customer value

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

Assets Total Average

TaxEBIT

T

tt

t

r

C

0 1

6


Firms compete on product attributes.This requires process competencies.

Product Attribute (External) Process Competency (Internal)

Cost Cost

Response time Flow time

Variety Flexibility

Quality Quality

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

– (5) information structure Operations Planning & Control Organization

8


A Framework for Designing an Operations Strategy and Structure

Business UnitStrategy

DesiredCompetencies

Processes ResourcesOperationsStructure

Corporate Strategy

9


What defines a good operation?Achieving alignment at IKEA

10


Linking the strategic role & process view:Strategic Operational Audit

DesiredBusiness Strategy

Operations Strategy

DesiredCapabilities

Marketing, …, Financial Strategy

Desired Oper’l Structure:

Processes & Infrastructure

Product Attributes

P, T, Q, V

Process Attributes

C, T, Q, Flex

Existing Capabilities

Operational Structure:

Processes & Infrastructure

Existing Desired

FeasibleBusiness Strategies

Strategy Gap?

Measures

Capability Gap?

Process Gap?

11


Shouldice Hospital

12


Wriston Manufacturing

13


Focus and the FrontierIn the health-care sector

Cost efficiency

ResponsivenessWorld-classEmergency Room

World-class(non-emergency)Hospital

One generalfacility

operations frontier

14


Classification of Processesby process architecture

Project

Job Shop

Batch

Line Flow

Continuous Flow

Job Shop

Flow Shop

15


Characteristics of Processes:Job Shop vs. Batch vs. Flow Shop

Type ofProcess

ProductVolume

SpecializedEquipment

ProductVariety

MachineSetup

Frequency

LaborSkills

VariableCost

Job Shop

Batch

Flow Shop

16


ProcessFlexibility

Jumbled Flow.Process segmentsloosely linked.

Disconnected LineFlow/Jumbled Flowbut a dominant flowexists.

JOB SHOP

(Commercial Printer,Architecture firm)

BATCH

(Heavy Equipment,Auto Repari)

LINE FLOWS

(Auto Assembly,Car lubrication shop)

CONTINUOUSFLOW

(Oil Refinery)

ProductVariety

LowLow Standardization

One of a kindLow Volume

Many ProductsFew Major Products

High volume

High StandardizationCommodity Products

Connected LineFlow (assembly line)

Continuous, automated,rigid line flow.Process segments tightlylinked.

Oppor

tunity

Costs

Out-of

-poc

ket

Costs

High

Low

High

Matching Process Choice with Strategy:Product-Process Matrix

17


Classification of Processes:by Positioning Strategy

Functional Focus:

Product Focus:

A B

C D

Product 1

Product 2

A D B

C B A

Product 1

Product 2

= resource pool (e.g., X-ray dept, billing)

18


Classification of Processes:by Customer Interface

Make to Stock

Make to Order

19


Learning Objectives Operations & Strategy (Chapter 1 & 2)

An operation as a transformation process

Product attributes / process competencies– A good process attempts to grow delivered value

– Delivered value grows by aligning process competencies with desired product attributes

Process improvement attempts to change processes and resources to improve alignment between process competencies and strategy

– Shouldice: Alignment when strategic focus is narrow

– Wriston: Alignment when desired product attributes vary over product life cycle

Process types20


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copyright ©2013 pearson education, inc. publishing as prentice hall 1 operations d30 managing...

Documents

productprocess matrix

process view of opsusa

strategic role process

product focus

good operation

characteristics of processes

customer value

cash flow