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LESSON 1-1
Role of Operations
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VIDEO 1-1.1
Lesson Objectives
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LESSON 1-1 OBJECTIVES
By the end of this lesson you will beable to:
Describe what operations management is
Understand the process view ofoperations management
Illustrate operations management basedsuccesses in different types ofbusinesses
Connect operations management tobusiness performance
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OPERATIONS MANAGEMENT
MODULE 1
Operations Strategy
with Gopesh Anand
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VIDEO 1-1.2
Describing Operations Management
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RECOGNIZING OPERATIONSMANAGEMENT
Take the device that you are using toview this
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RECOGNIZING OPERATIONSMANAGEMENT
Operations management impacted:
Product design
Assembly
Supplier selection
Employee training
Sales outlet
Troubleshooting support
Safe disposal
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OPERATIONS MANAGEMENTIN EVERYDAY PRODUCTS
Furniture that you are sitting on
Restaurant you eat at
Car or bicycle you use
(Mercat, 2009)
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OPERATIONS MANAGEMENTIN EVERYDAY PRODUCTS
Furniture that you are sitting on
Restaurant you eat at
Car or bicycle you use
Recyclable waste you dispose
News that you listen to or read
(U.S. Department of Defense, 2013)
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DEFINING OPERATIONSMANAGEMENT
Operations Management is aboutorganizations effectively andefficiently using their resources andactivities to transform materials andinformation into goods and services
for customers.
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEW OF OPERATIONS MANAGE
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PROCESS VIEWREFLECTION
Consider any organization – in otherwords, a company, business, or anon-profit entity.
Apply the Process View ofOperations to think of the main
inputs, processes, and outputs.
(commons.wikimedia.org/Pluke, 2011)
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IN-VIDEO QUESTION 1
Reflect on the sub-processes related
to the main products – goods andservices – of the business and thesupport processes that support theexistence of the business.
Left: (commons.wikimedia.org/Pluke, 2011) Right: (flickr.com/taymazvalley, 2015)
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IN-VIDEO INSIGHTS 1
Reflect on the sub-processes related
to the main products – goods andservices – of the business and thesupport processes that support theexistence of the business.
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FEATURES OF OPERATIONSMANAGEMENT
All goods, services, and informationexchanges involve operations.
We assess operations in relation toexpectations.
Many areas of an organization andmany organizations are involved.
Processes range from long-termstrategic to day-to-day operational,and can be completely internal.
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Image CreditsDorm room [Online image]. 2011. Retrieved September 10, 2015 fromhttps://www.flickr.com/photos/uofdenver/5710501931
Famous Dave's interior [Online image]. 2008. Retrieved September 10, 2015 fromhttps://commons.wikimedia.org/wiki/File:Famous_Dave's_interior.jpg
Hostutler, A. (2013). Woodruff interviews Chuck Hagel for PBS NewsHour [Online image]. Retrieve2015 from https://commons.wikimedia.org/wiki/File:Judy_Woodruff_interviews_Chuck_Hagel_for_PB
Mercat, C. (2009). Cambridge CMS bicycle racks [Online image]. Retrieved September 10, 2015 fhttps://commons.wikimedia.org/wiki/File:Cambridge_CMS_Bicycle_Racks.jpg
Ong, T. (2006). NEA recycling bins along Orchard road [Online image]. Retrieved September 10, 2
https://commons.wikimedia.org/wiki/File:NEA_recycling_bins,_Orchard_Road.JPGPluke, (2011). CPT Hardware Input output [Online image]. Retrieved September 10, 2015 fromhttps://commons.wikimedia.org/wiki/File:CPT_Hardware-InputOutput.svg
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 from
https://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attributiohttp://creativecommons.org/licenses/by/3.0/
REFERENCE
https://www.flickr.com/photos/uofdenver/5710501931https://commons.wikimedia.org/wiki/File:Famous_Dave's_interior.jpghttps://commons.wikimedia.org/wiki/File:Judy_Woodruff_interviews_Chuck_Hagel_for_PBS_NewsHour.jpghttps://commons.wikimedia.org/wiki/File:Cambridge_CMS_Bicycle_Racks.jpghttps://commons.wikimedia.org/wiki/File:NEA_recycling_bins,_Orchard_Road.JPGhttps://commons.wikimedia.org/wiki/File:CPT_Hardware-InputOutput.svghttps://commons.wikimedia.org/wiki/File:CPT_Hardware-InputOutput.svghttps://www.flickr.com/photos/taymazvalley/5209251530/https://www.flickr.com/photos/taymazvalley/5209251530/https://commons.wikimedia.org/wiki/File:CPT_Hardware-InputOutput.svghttps://commons.wikimedia.org/wiki/File:NEA_recycling_bins,_Orchard_Road.JPGhttps://commons.wikimedia.org/wiki/File:Cambridge_CMS_Bicycle_Racks.jpghttps://commons.wikimedia.org/wiki/File:Judy_Woodruff_interviews_Chuck_Hagel_for_PBS_NewsHour.jpghttps://commons.wikimedia.org/wiki/File:Famous_Dave's_interior.jpghttps://www.flickr.com/photos/uofdenver/5710501931
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OPERATIONS MANAGEMENT
MODULE 1
Operations Strategy
with Gopesh Anand
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LESSON 1-1
Role of Operations
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VIDEO 1-1.3
Operations Based Successes
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Faster claims turnaround
Better fraud detection
Lower costs of claims processing
Owed to operations managementfeature:
Customer claims process using mobilevans for adjusters
(Farris, Thompson, and Steenburgh, 2015; Hammer, 2004)
(progressive.com)
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Lower costs
Better utilization
Better labor productivity
Faster airplane turnaround
southwest.com
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Owed to operations managementfeatures:
Point-to-point routes
Smaller airports
One type of aircraft
Cross-trained staff
(Schmenner, 2004)
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Customized product – messengerbags
Quick delivery
Owed to operations management
features:Combining make-to-stock with make-to-order production
Efficient capacity utilization
(Cattani, Dahan, and Schmidt, 2005)
(timbuk2.com)
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Lower prices
Lower costs
Lower inventories
Owed to operations management
features:Cross-docking
Supply chain relationships
Information technology(Lu, 2014)
(walmart.com)
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Keeping up with changing fashions
Consistent reasonable pricing
Fewer inventory-clearance discounts
Owed to operations managementfeatures:
Quick response from design toproduction to distribution
Systematic timing of product release,followed by frequent updates
(Caro and Margalef, 2014)
(zara.com)
SUCCESS TIED WITH OTHER
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SUCCESS TIED WITH OTHERBUSINESS DECISIONS
Business strategy
Marketing
Economics
Finance
Human resource management
Managerial accounting
Information systems
IN VIDEO QUESTION 2
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IN-VIDEO QUESTION 2
What aspects of Dell’smanufacturing operations forpersonal computers could havecontributed to its past success?
Left: (dell.com) Right: (flickr.com/taymazvalley, 2015)
IN VIDEO QUESTION 2
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IN-VIDEO QUESTION 2
What aspects of Dell’smanufacturing operations forpersonal computers could havecontributed to its past success?
Left: (dell.com) Right: (flickr.com/taymazvalley, 2015)
IN VIDEO INSIGHTS 2
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IN-VIDEO INSIGHTS 2
What aspects of Dell’smanufacturing operations forpersonal computers could havecontributed to its past success?
ULTIMATELY ABOUT
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ULTIMATELY ABOUTBUSINESS PERFORMANCE
ULTIMATELY ABOUT
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ULTIMATELY ABOUTBUSINESS PERFORMANCE
ULTIMATELY ABOUT
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ULTIMATELY ABOUTBUSINESS PERFORMANCE
Adapted from: (Johnson, Christensen an
REFERENCE
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Academic CitationsCaro, F., & Martínez de Albéniz Margalef, V. (2014). How fast fashion works: Can it work for you, to(21), 58-65. Retrieved from http://www.ieseinsight.com/review/articulo.aspx?doc=114445&seccion=
Cattani, K., Dahan, E., & Schmidt, G. (2005). Offshoring versus "spackling". MIT Sloan managemeRetrieved from http://sloanreview.mit.edu/article/offshoring-versus-spackling/
Farris, P. W., Steenburgh, T. J., & Maiden, S. E. (2015). Progressive insurance: Making pay as youconsumers. Charlottesville, VA: Darden Business Publishing Case Collection.
Hammer, M. (2004). Deep change: How operational innovation can transform your company. HarvReview, 82(4), 84-93. Retrieved from https://hbr.or g/2004/04/deep-change-how-operational-innova
your-company/ar/1
Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008). Reinventing your business model. Hreview, 86(12), 57-68. Retrieved from https://hbr.or g/2008/12/reinventing-your-business-model/ar/1
Lu, C. (2014, May 08). Incredibly successful supply chain management: How does walmart do it? from https://www.tr adegecko.com/blog/incredibly-successful-supply-chain-management-Walmart
Schmenner, R. W. (2004). Service businesses and productivity. Decision Sciences, 35(3), 333-3477315.2004.02558.x
REFERENCE
REFERENCE
http://www.ieseinsight.com/review/articulo.aspx?doc=114445&seccion=6http://sloanreview.mit.edu/article/offshoring-versus-spackling/http://sloanreview.mit.edu/article/offshoring-versus-spackling/https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1https://hbr.org/2008/12/reinventing-your-business-model/ar/1https://hbr.org/2008/12/reinventing-your-business-model/ar/1https://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-Walmarthttps://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-Walmarthttps://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-Walmarthttps://hbr.org/2008/12/reinventing-your-business-model/ar/1https://hbr.org/2004/04/deep-change-how-operational-innovation-can-transform-your-company/ar/1http://sloanreview.mit.edu/article/offshoring-versus-spackling/http://www.ieseinsight.com/review/articulo.aspx?doc=114445&seccion=6
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Image CreditsDell [Online image]. Retrieved September 10, 2015 from https://reader015.{domain}/reader015/htm
Progressive [Online image]. Retrieved September 10, 2015 from https://www.progressive.com/
Southwest [Online image]. Retrieved September 10, 2015 from https://www.southwest.com/
Timbuk2 [Online image]. Retrieved September 10, 2015 from http://www.timbuk2.com/
Walmart [Online image]. Retrieved September 10, 2015 from http://www.walmart.com/
Zara [Online image]. Retrieved September 10, 2015 from http://www.zara.com/us/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attributiohttp://creativecommons.org/licenses/by/3.0/
REFERENCE
http://www.pngimage.net/dell-logo-png-2547/https://www.progressive.com/https://www.southwest.com/http://www.timbuk2.com/http://www.walmart.com/http://www.zara.com/us/http://www.zara.com/us/http://www.walmart.com/http://www.timbuk2.com/https://www.southwest.com/https://www.progressive.com/http://www.pngimage.net/dell-logo-png-2547/
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OPERATIONS MANAGEMENT
MODULE 1
Operations Strategy
with Gopesh Anand
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LESSON 1-1
Role of Operations
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VIDEO 1-1.4
Impact on Return on Assets
RETURN ON EQUITY
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RETURN ON EQUITY
SalesEBITx
AssetsSalesx
EquityAssets=ROE
Equity
multiplier
Asset
turnover
Operating
margin
ROAImpacted by operations
Relates tofinancialleverage
EquityEBIT=ROE
Broken into components using DuPont Analysis
(Bodie, Kane
ASSET TURNOVER
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SS U O
AssetsSales=
Ratio depicts revenues generatedrelated to assets employed
Ratio indicates efficiency orproductivity of assets
OPERATING MARGIN
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Sales
IncomeOperatingorEBIT
=
Ratio depicts profits related to sales
Ratio indicates profitability ofoperations
EFFECTS OF BETTER
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OPERATIONS MANAGEMENT
More sales from same assets
Equipment uptime
Overall equipment effectiveness
Set-up time
Part commonality
Inventory control
Higher operating margin from lowercosts
Yields and reject rates
IN-VIDEO QUESTION 3
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LET’S DO THE NUMBERS
Compute the return on assets, asset
turnover, and operating margin forHiTech and Luxor.
Reflect on the differences betweenthe two companies.
(Dugdale, 2010)
IN-VIDEO INSIGHTS 3
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Compute the return on assets, asset
turnover, and operating margin forHiTech and Luxor.
Reflect on the differences betweenthe two companies.
HiTech Luxor
Sales 2,000,000 1,000,000
Operating Income 200,000 60,000
Assets 1,650,000 495,000
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COMPARING ANHEUSER-
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BUSCH OVER TIME
2008 2009 2014
Asset Turnover 19.8% 32.7% 33.0%
Operating Margin 13.0% 16.0% 24.0%
Return on Assets 2.6% 5.2% 7.9%
(ab-inbev.com)
2008 Takeover By InBev
REFERENCE
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Academic Citations Amigobulls. (2015, July 31). Anheuser-Busch Balance Sheet - Annual (NYSE:BUD). Retrieved fromhttp://amigobulls.com/stocks/BUD/balance-sheet/annual
Bodie, Z., Kane, A., & Marcus, A. J. (2004). Essentials of investments (5th ed.). Columbus, OH: Mde la Merced, M. J. (2008, July 14). InBev to buy Anheuser-Busch for $52 billion, The New York T
http://www.nytimes.com/2008/07/14/business/worldbusiness/14iht-14beer.14460585.html?_r=1&
Leonard, D. (2012, October 25). The Plot to Destroy America’s Beer. Bloomberg Business. Retrievhttp://www.bloomber g.com/bw/articles/2012-10-25/the-plot-to-destroy-americas-beer
Image Credits Anheuser-Busch InBev [Online image]. Retrieved September 10, 2015 from
https://en.wikipedia.org/wiki/File:AB_InBev_logo.svg
Dugdale, D. (2010). Analyzing financial data [Online image]. Retrieved September 10, 2015 fromhttps://flic.kr/p/8LCNW2
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attributiohttp://creativecommons.org/licenses/by/3.0/
http://amigobulls.com/stocks/BUD/balance-sheet/annualhttp://amigobulls.com/stocks/BUD/balance-sheet/annualhttp://www.nytimes.com/2008/07/14/business/worldbusiness/14iht-14beer.14460585.html?_r=1&http://www.bloomberg.com/bw/articles/2012-10-25/the-plot-to-destroy-americas-beerhttp://www.bloomberg.com/bw/articles/2012-10-25/the-plot-to-destroy-americas-beerhttps://en.wikipedia.org/wiki/File:AB_InBev_logo.svghttps://flic.kr/p/8LCNW2https://flic.kr/p/8LCNW2https://en.wikipedia.org/wiki/File:AB_InBev_logo.svghttp://www.bloomberg.com/bw/articles/2012-10-25/the-plot-to-destroy-americas-beerhttp://www.nytimes.com/2008/07/14/business/worldbusiness/14iht-14beer.14460585.html?_r=1&http://amigobulls.com/stocks/BUD/balance-sheet/annual
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OPERATIONS MANAGEMENT
MODULE 1
Operations Strategy
with Gopesh Anand
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LESSON 1-1
Role of Operations
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VIDEO 1-1.5
Lesson 1-1 Recap
LESSON 1-1 RECAP
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In this lesson you learned how to:
Define operations management
Understand the prevalence of the input-process-output view in the way things getdone
Appreciate the role of operationsmanagement in different types ofbusinesses
Connect operations managementobjectives to financial performance
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OPERATIONS MANAGEMENT
MODULE 1
Operations Strategy
with Gopesh Anand
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VIDEO 1-2.1
Lesson Objectives
LESSON 1-2 OBJECTIVES(1 OF 2)
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(1 OF 2)
By the end of this lesson you will:
See the relationship between operationsstrategy, business strategy, and otherfunctional strategies
Relate through examples misalignmentsin strategy to business failures
Better understand the deliberate choicesfor formulating and implementingoperations strategy
LESSON 1-2 OBJECTIVES(2 OF 2)
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(2 OF 2)
By the end of this lesson you will:
Comprehend how some unconventionalchoices can be used to compete throughoperations
Recognize the differences betweenmanufacturing and service operations
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OPERATIONS MANAGEMENT
MODULE 1
Operations Strategy
with Gopesh Anand
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LESSON 1-2
Formulation and Implementation
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VIDEO 1-2.2
Focused Operations
STRATEGY
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“An integrated and coordinated set of
commitments and actions designedto exploit core competencies andgain a competitive advantage”
(Hitt, Ireland and Hoskisson, 1997; p. 115)
“Competitive strategy is about beingdifferent. It means deliberatelychoosing a different set of activitiesto deliver a unique mix of values.”
(Porter, 1996; p. 64)
ALIGNMENT AMONG STRATEGIES
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CHALLENGE OFALIGNMENT
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“… a fully consistent set of manufacturing policies resulti
congruent system is highly rare”(S
Reasons:
Focus on professional/functional goals and lack of coordination
Strategic direction never clarified/codifiedProduct proliferation without concern of focus
ALIGNMENT
ASKING THE RIGHTQUESTIONS
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QUESTIONS
How can we compete?
Not just how can we increase productivity
How can we improve systemefficiency?
Not just how can we improve labor
efficiencyWhat should we focus on?
Not just what else should we produce
(Skinner, 1974)
OPERATIONS STRATEGY ELEMENTS
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OPERATIONS STRATEGY ELEMENTS
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OPERATIONS STRATEGY ELEMENTS
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OPERATIONS STRATEGY ELEMENTS
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FORMULATINGOPERATIONS STRATEGY
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Begin with the customer
What does the market want?What do targeted customers value in each of the markets that weto pursue?
How is the market changing?
How are customer needs changing?
ORDER QUALIFIER &WINNER
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Order Qualifier
Minimum selection criterion that permitsproducts or service to be evenconsidered by potential customers
Order Winner
Criterion that differentiates the productsor services from competitors, thusresulting in winning orders of customers
(Hill, 1993)
COMPETITIVECAPABILITIES
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What is the current capability of the process?
What should the targeted capability of the process be?
In light of targeted customers
And considering competitors
Should we be targeting different customers?
Is the current market that we are serving changing and/oor declining?
TWO SIDES OF A COIN
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Order Qualifiers and
Winners Attractiveto Customers
Competitive
Capabilit ies Neededfrom Operations
Example
Companies
Low price Cost Walmart
Conformance quality Quality control Rolls Royce Added features Quality improvement Apple
Fast delivery Speed Amazon
Reliable delivery Dependability Southwest
Variety Mix flexibility Ikea
Personalization Customization Subway
IN-VIDEO QUESTION 4
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Take any fast food chain and luxurious sit-down restaura
Upper left: (mcdonalds.com) lower left: (subway.com) right: (Royan, 2008)
IN-VIDEO QUESTION 4
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Take any fast food chain and
luxurious sit-down restaurant.List the order qualifiers – essentialcriteria sought by customers – andorder winners – additional featuresthat would delight customers – forboth businesses.
Compare the two lists.
(flickr.com/taymazvalley, 2015)
IN-VIDEO INSIGHTS 4
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Take any fast food chain and
luxurious sit-down restaurant.List the order qualifiers – essentialcriteria sought by customers – andorder winners – additional featuresthat would delight customers – forboth businesses.
Compare the two lists.
OPERATIONS STRATEGYDECISION AREAS (1 OF 2)
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Size of facility and its capacity
Location and layout of facilityChoice of technology
Vertical integration(Hayes, Pisano, Upton, and Wheelwright, 2005)
OPERATIONS STRATEGYDECISION AREAS (2 OF 2)
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Salaries and incentives, and
employee trainingQuality management
Scheduling of production
Centralized versus decentralized
control (Hayes, Pisano, Upton, and Wheelwright, 2005)
MISALIGNMENTS WITHFATAL CONSEQUENCES
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Kmart
Product mix and sales process mismatchEmpty and overcrowded shelves
(Leinwand and Mainardi, 2010; Williams and Summer, 2010)
(kmart.com)
MISALIGNMENTS WITHFATAL CONSEQUENCES
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Kmart
Product mix and sales process mismatchEmpty and overcrowded shelves
(Leinwand and Mainardi, 2010; Williams and Summer, 2010)
Kodak
Changing technology(Anderson, 2012)
(kodak.com)
MISALIGNMENTS WITHFATAL CONSEQUENCES
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Kmart
Product mix and sales process mismatchEmpty and overcrowded shelves
(Leinwand and Mainardi, 2010; Williams and Summer, 2010)
Kodak
Changing technology(Anderson, 2012)
Nokia
Failure to be flexible for customers andemployees
(Anderson, 2012)
(nokia.com)
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MISALIGNMENTS AS WAKE-UP CALLS
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Starbucks
Temporarily lost sight of changing order qualifiersand winners of customers after expansion
Increased number of stores rapidly without consideration of delive
Toyota
Product choices and production competencies mismatch(MacDuffie
(toyota.com)
Academic Citations
REFERENCE
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cade c C tat o s Anderson, H. (2012, January 12). Why did Kodak, Motorola, and Nortel fail? Information Week. Rehttp://www.informationweek.com/it-leadership/why-did-kodak-motorola-and-nortel-fail/d/d-id/110224
Cooke, J. A. (2010). From bean to cup: How Starbucks transformed its supply chain. Supply Chain
55. Retrieved from http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/
Hayes, R. H., Pisano, G. P., Upton, D. M., & Wheelwright, S. C. (2005). Operations, strategy, and tthe competitive edge. Hoboken, NJ: Wiley.
Hill, T. (1993). Manufacturing strategy. Basingstoke, UK: MacMillan.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (1997). Strategic management: Competitiveness andCincinnati, OH: Southwestern Publishing.
Leinwand, P., & Mainardi, C. (2010). Why can’t Kmart be successful while Target and Walmart thriv
Business Review. Retrieved from https://hbr.org/2010/12/why-cant-kmart-be-successful-wPorter, M. E. (1996). What is a strategy? Harvard Business Review, (November-December), 61-78https://hbr.or g/1996/11/what-is-strategy/ar/1
Quelch, J. (2008, July 9). Starbucks: How growth destroyed brand value. Bloomberg Business. Rehttp://www.bloomber g.com/bw/stories/2008-07-09/starbucks-how-growth-destroyed-brand-valuebusbusiness-news-stock-market-and-financial-advice
Academic Citations
REFERENCE
http://www.informationweek.com/it-leadership/why-did-kodak-motorola-and-nortel-fail/d/d-id/1102245http://www.informationweek.com/it-leadership/why-did-kodak-motorola-and-nortel-fail/d/d-id/1102245http://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/https://hbr.org/2010/12/why-cant-kmart-be-successful-whttps://hbr.org/2010/12/why-cant-kmart-be-successful-whttps://hbr.org/1996/11/what-is-strategy/ar/1https://hbr.org/1996/11/what-is-strategy/ar/1http://www.bloomberg.com/bw/stories/2008-07-09/starbucks-how-growth-destroyed-brand-valuebusinessweek-business-news-stock-market-and-financial-advicehttp://www.bloomberg.com/bw/stories/2008-07-09/starbucks-how-growth-destroyed-brand-valuebusinessweek-business-news-stock-market-and-financial-advicehttp://www.bloomberg.com/bw/stories/2008-07-09/starbucks-how-growth-destroyed-brand-valuebusinessweek-business-news-stock-market-and-financial-advicehttp://www.bloomberg.com/bw/stories/2008-07-09/starbucks-how-growth-destroyed-brand-valuebusinessweek-business-news-stock-market-and-financial-advicehttps://hbr.org/1996/11/what-is-strategy/ar/1https://hbr.org/2010/12/why-cant-kmart-be-successful-whttp://www.supplychainquarterly.com/topics/Procurement/scq201004starbucks/http://www.informationweek.com/it-leadership/why-did-kodak-motorola-and-nortel-fail/d/d-id/1102245
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Skinner, W. (1974). The focused factory. Harvard Business Review, (May-June), 113-121. Retrievehttps://hbr.or g/1974/05/the-focused-factory/ar/1
University of Pennsylvania. (2010, March 31). Under the hood of Toyota’s recall: ‘A tremendous ex
complexity.’ Retrieved from http://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-reexpansion-of-complexity/
Williams, A. B., & Sumner, G. (2010). Kmart: A capstone case. Academic Forum (27), 39-48. Retrihttp://www.hsu.edu/academicforum/2009-2010/WilliamsSumner.pdf
Image Credits
REFERENCE
https://hbr.org/1974/05/the-focused-factory/ar/1https://hbr.org/1974/05/the-focused-factory/ar/1http://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-recall-a-tremendous-expansion-of-complexity/http://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-recall-a-tremendous-expansion-of-complexity/http://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-recall-a-tremendous-expansion-of-complexity/http://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-recall-a-tremendous-expansion-of-complexity/http://www.hsu.edu/academicforum/2009-2010/WilliamsSumner.pdfhttp://www.hsu.edu/academicforum/2009-2010/WilliamsSumner.pdfhttp://www.hsu.edu/academicforum/2009-2010/WilliamsSumner.pdfhttp://knowledge.wharton.upenn.edu/article/under-the-hood-of-toyotas-recall-a-tremendous-expansion-of-complexity/https://hbr.org/1974/05/the-focused-factory/ar/1
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gKmart [Online image]. Retrieved September 10, 2015 from http://www.kmart.com/
Kodak [Online image]. Retrieved September 10, 2015 from http://www.kodak.com/ek/US/en/corp/default.htm
Manske, M. (2009). 1937 Wheat penny front back [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:1937-Wheat-Penny-Front-Back.jpg
Mcdonalds [Online image]. Retrieved September 10, 2015 from https://en.wikipedia.org/wiki/McDonald's#/m90s-logo.svg
Nokia [Online image]. Retrieved September 10, 2015 from http://company.nokia.com/en
Royan, J. (2008). Obecni dum restaurant Prague [Online image]. Retrieved September 10, 2015 fromhttps://commons.wikimedia.org/wiki/File:Obecni_Dum_Restaurant,_Prague_-_8377.jpg
Starbucks [Online image]. Retrieved September 10, 2015 from http://www.starbucks.com/
Subway [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svgToyota [Online image]. Retrieved September 10, 2015 from http://www.toyota.com/
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 fromhttps://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0http://creativecommons.org/licenses/by/3.0/
OPERATIONS MANAGEMENT
http://www.kmart.com/http://www.kodak.com/ek/US/en/corp/default.htmhttps://commons.wikimedia.org/wiki/File:1937-Wheat-Penny-Front-Back.jpghttps://commons.wikimedia.org/wiki/File:1937-Wheat-Penny-Front-Back.jpghttps://en.wikipedia.org/wiki/McDonald'shttps://en.wikipedia.org/wiki/McDonald'shttps://en.wikipedia.org/wiki/McDonald'shttp://company.nokia.com/enhttps://commons.wikimedia.org/wiki/File:Obecni_Dum_Restaurant,_Prague_-_8377.jpghttps://commons.wikimedia.org/wiki/File:Obecni_Dum_Restaurant,_Prague_-_8377.jpghttp://www.starbucks.com/https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svghttp://www.toyota.com/https://www.flickr.com/photos/taymazvalley/5209251530/https://www.flickr.com/photos/taymazvalley/5209251530/http://www.toyota.com/https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svghttp://www.starbucks.com/https://commons.wikimedia.org/wiki/File:Obecni_Dum_Restaurant,_Prague_-_8377.jpghttp://company.nokia.com/enhttps://en.wikipedia.org/wiki/McDonald'shttps://commons.wikimedia.org/wiki/File:1937-Wheat-Penny-Front-Back.jpghttp://www.kodak.com/ek/US/en/corp/default.htmhttp://www.kmart.com/
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MODULE 1Operations Strategy
with Gopesh Anand
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LESSON 1-2Formulation and Implementation
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VIDEO 1-2.3Tradeoffs and Combinations
NOTION OF TRADE-OFFS INOPERATIONS CAPABILITIES
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Cannot achieve one capability
without sacrificing another To achieve high quality production, costswill increase
To achieve flexibility, costs will increaseand quality will decrease
PERFORMANCE FRONTIER
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Cost efficiency
R e s p o n s i v e n e s s
Emergency Room
SpecialtyHospital
Low
High
High
= Healthcare unit or organization
SACRIFICING ONE CAPABILITY FOR ANOT
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Cost efficiency
R e
s p o n s i v e n e s s
Low
High
Low High
= unit or organization
Tradeoffs
NOTION OF CUMULATIVECAPABILITIES
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Dependability
BUILDING ONCAPABILITIES
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Cost efficiency
R e
s p o n s i v e n e s s
Low
High
Low High
Cumulative
= unit or organization
MASS CUSTOMIZATION
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Modular designs
Postponement of finishing Assemble to order
Customer involvement
Using customer intelligence(Pine, 1999)
IN-VIDEO QUESTION 5
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You have probably come acrossproducts that are produced usingmass customization – combinationof mass production andpersonalization. Reflect on a coupleof these and relate to their
production processes.
(flickr.com/taymazvalley, 2015)
IN-VIDEO QUESTION 5
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You have probably come acrossproducts that are produced usingmass customization – combinationof mass production andpersonalization. Reflect on a coupleof these and relate to their
production processes.
(flickr.com/taymazvalley, 2015)
IN-VIDEO INSIGHTS 5
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You have probably come acrossproducts that are produced usingmass customization – combinationof mass production andpersonalization. Reflect on a coupleof these and relate to their
production processes.
MASS CUSTOMIZED PRODUCTS (1 0F 5)
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Hallmark’s recordable story books
(hallmark.com)
MASS CUSTOMIZED PRODUCTS (2 0F 5)
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Hallmark’s recordable story books
Nike’s customized shoes
(nike.com)
MASS CUSTOMIZED PRODUCTS (3 0F 5)
H ll k’ d bl b k
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Hallmark’s recordable story books
Nike’s customized shoesFord Fiesta’s combinations ofexterior appearances and interiortrims
(ford.com)
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MASS CUSTOMIZED PRODUCTS (5 0F 5)
H ll k’ d bl t b k
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Hallmark’s recordable story books
Nike’s customized shoesFord Fiesta’s combinations ofexterior appearances and interiortrims
Personalized M&Ms with messageand photo
Subway sandwiches
(subway.com)
Academic CitationsPine, B. J. (1999). Mass customization: The new frontier in business competition. Boston, MA: Ha
REFERENCE
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, ( ) p ,Press.
Image CreditsFord [Online image]. Retrieved September 10, 2015 from http://www.autobytel.com/ford/fiesta/2011guides/2012-ford-fiesta-gets-new-options-for-better-customization-105941/
Hallmark [Online image]. Retrieved September 10, 2015 from http://www.hallmark.com/recordable-
Mymms [Online image]. Retrieved September 10, 2015 from http://www.mymms.com/
Nike [Online image]. Retrieved September 10, 2015 from http://store.nike.com/us/en_us/pw/n/1j7?snikeid
Subway [Online image]. Retrieved September 10, 2015 from
https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svg
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 fromhttps://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attributio
http://creativecommons.org/licenses/by/3.0/
OPERATIONS MANAGEMENT
http://www.autobytel.com/ford/fiesta/2011/car-buying-guides/2012-ford-fiesta-gets-new-options-for-better-customization-105941/http://www.autobytel.com/ford/fiesta/2011/car-buying-guides/2012-ford-fiesta-gets-new-options-for-better-customization-105941/http://www.autobytel.com/ford/fiesta/2011/car-buying-guides/2012-ford-fiesta-gets-new-options-for-better-customization-105941/http://www.hallmark.com/recordable-storybooks/http://www.mymms.com/https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svghttps://www.flickr.com/photos/taymazvalley/5209251530/https://www.flickr.com/photos/taymazvalley/5209251530/https://commons.wikimedia.org/wiki/File:Subway_Eat_Fresh_Logo.svghttp://www.mymms.com/http://www.hallmark.com/recordable-storybooks/http://www.autobytel.com/ford/fiesta/2011/car-buying-guides/2012-ford-fiesta-gets-new-options-for-better-customization-105941/
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MODULE 1Operations Strategy
with Gopesh Anand
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LESSON 1-2Formulation and Implementation
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VIDEO 1-2.4Manufacturing and Service Orientation
MANUFACTURING & SERVICE ORIENTEDOPERATIONS
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MANUFACTURING & SERVICE ORIENTEDOPERATIONS
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MANUFACTURING & SERVICE ORIENTEDOPERATIONS
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MANUFACTURING & SERVICE ORIENTEDOPERATIONS
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MANUFACTURING & SERVICE ORIENTEDOPERATIONS
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Zeithaml, V. A
IN-VIDEO QUESTION 6
Consider Starbucks
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What are the physical goods andwhat are the intangible services thatcustomers expect?Left: (starbucks.com) Right: (flickr.com/taymazvalley, 2015)
IN-VIDEO QUESTION 6
Consider Starbucks
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What are the physical goods andwhat are the intangible services thatcustomers expect?Left: (starbucks.com) Right: (flickr.com/taymazvalley, 2015)
IN-VIDEO INSIGHTS 6
Consider Starbucks
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What are the physical goods andwhat are the intangible services thatcustomers expect?
EXAMPLE OF BUNDLINGSERVICES WITH GOODS
“At Caterpillar, service doesn't end
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t Cate p a , se ce does t e dat the sale. With every purchase,
Caterpillar offers you the full extentof our experience and legendarycustomer service. The deal and thehandshake isn't the end, it's thebeginning of a beautiful partnership.”
(caterpillar.com)
CHALLENGES FOROPERATIONS MANAGEMENT
Dimensions of quality
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q y
InventoryProduction & consumption
Customer involvement
Employee role
Returns and repairs
FRONT AND BACK OFFICE OPERATIONS
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Top: (Ortiz, 2012) Bottom: (www.flickr.com/star/star5122, 2007)
IMPLICATIONS OF FRONTOFFICE
Direct customer encounters
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Provide opportunities to delight
Increase uncertainties in service deliveryparameters
Result in inefficiencies in service delivery
Provide openings for hybrid strategies
SERVICE-PROFIT CHAIN
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SERVICE-PROFIT CHAIN
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SERVICE-PROFIT CHAIN
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(
SERVICE ENCOUNTER TRIAD
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(Co
TRADING OFF SERVICE LEVEL & COST
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SOURCES OF CUSTOMERVARIABILITY IN SERVICES
Arrival
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RequestCapability
Effort
Subjective preference
(Frei, 2006)
CLASSIC TRADEOFF IN SERVICES – EFFICVERSUS SERVICE
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BREAKING THE TRADEOFF
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BREAKING THE TRADEOFF
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BREAKING THE TRADEOFF
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Academic CitationsCook, L. S., Bowen, D. E., Chase, R. B., Dasu, S., Stewart, D. M., & Tansik, D. A. (2002). Human design. Journal of Operations Management, 20(2), 159-174. doi: http://dx.doi.org/10.1016/0162288
Frei F X (2006) Breaking the trade off between efficiency and service Harvard business review
REFERENCE
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Frei, F. X. (2006). Breaking the trade-off between efficiency and service. Harvard business review, 101.Retrieved from https://hbr.or g/2006/11/breaking-the-trade-off-between-efficiency-and-service/a
Heskett, J. L., Jones, T. O., Loveman, G. W., Sasser, W. E., & Schlesinger, L. A. (2008). Putting thto work. Harvard Business Review, 118-129. Retrieved from https://hbr.or g/2008/07/putting-the-serwork/ar/1
Zeithaml, V. A. (1981). How consumer evaluation processes differ between goods and services. M
9(1), 25-32. Retrieved from http://www2.fiu.edu/~ereserve/010019222-1.pdf
Image CreditsMario. (2012). Juan Valdez Cafe store at El Dorado Airport, Bogota [Online image]. Retrieved Sepfrom https://commons.wikimedia.or
g/wiki/File:BOG_04_2012_Juan_Valdez_1334.JPG
In the Ad Hoc kitchen [Online image] (2007) Retrieved September 10 2015 from
REFERENCE
https://hbr.org/2006/11/breaking-the-trade-off-between-efficiency-and-service/ar/1https://hbr.org/2006/11/breaking-the-trade-off-between-efficiency-and-service/ar/1https://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1https://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1https://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1https://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1https://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1https://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1http://www2.fiu.edu/~ereserve/010019222-1.pdfhttp://www2.fiu.edu/~ereserve/010019222-1.pdfhttp://www2.fiu.edu/~ereserve/010019222-1.pdfhttps://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1https://hbr.org/2006/11/breaking-the-trade-off-between-efficiency-and-service/ar/1https://commons.wikimedia.org/wiki/File:BOG_04_2012_Juan_Valdez_1334.JPGhttps://commons.wikimedia.org/wiki/File:BOG_04_2012_Juan_Valdez_1334.JPGhttps://commons.wikimedia.org/wiki/File:BOG_04_2012_Juan_Valdez_1334.JPG
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In the Ad Hoc kitchen [Online image]. (2007). Retrieved September 10, 2015 fromhttps://www.flickr.com/photos/24509941@N00/1437458598/
Thomas, A. (2005). Starbucks [Online image]. Retrieved September 10, 2015 fromhttps://www.flickr.com/photos/anyaka/22331380
Valley, T. (2010). Think [Online image]. Retrieved September 10, 2015 fromhttps://www.flickr.com/photos/taymazvalley/5209251530/
"Bass Vibes" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attributiohttp://creativecommons.org/licenses/by/3.0/
https://www.flickr.com/photos/24509941@N00/1437458598/https://www.flickr.com/photos/anyaka/22331380https://www.flickr.com/photos/taymazvalley/5209251530/https://www.flickr.com/photos/taymazvalley/5209251530/https://www.flickr.com/photos/anyaka/22331380https://www.flickr.com/photos/24509941@N00/1437458598/
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LESSON 1-2
Formulation and Implementation
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VIDEO 1-2.5
Lesson 1-2 Recap
LESSON 1-2 RECAP
In this lesson you learned how to:
A i h i f li
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Appreciate the importance of alignment
of business and functional strategies
Identify the need for tradeoffs inoperations strategy
Make operations strategy choices tocompete
Recognize the goods and servicescontinuum and its implications for makingoperations strategy choices