introduction to operation management
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Introduction to Operation ManagementTRANSCRIPT
Introduction to Operation Management
By: Ot Chan Dy, BE & Msc.Instructor, Management Institute of Cambodia
After finish this chapter…
Explain what is “process”
Describe OM as function
Differentiate of VA, SVA, NVA
Describe trends and challenges in managing operation
Identify some decisions make by operation manager
Contents
Operation Management as Process
Value Chain Management
What is operation management?
Scope of responsibility of operation manager
Trends and challenges in OM
Operation Management as Process
Operation Management deal with PROCESS that produce “Goods” & “Service”
?
ADD VALUE ?
OUT PUT
IN P
UT
Operation Management as Process
PROCESS should be design with according to customer “Needs” and “Wants”
CustomerInternal
External
Operation Management as Process
Manufacturing vs. Service Process
Process
The main differences between the two:
Nature of their output
Degree of customer contact
Manufacturing: without it there will be “products”
Services: 80% of job in business
Operation Management as Process
Manufacturing and Service is difficult to distinguish
Total Customer Offering Automobile is not just manufacture a car but also provide after sale
service like arrange finance, offering warranties and guarantees. Computer industry, customer is paying both hardware and software
but after sale service is very important like help-line for troubleshooting.
Therefore, operation management should not see as manufacturing vs. service BUT as joint effort in the whole supply chain to provide total customer satisfaction.
Operation Management as Process
Manufacturing and Service some other example:
1. The product is intangible for service operation Is this still true? Service companies speak a lot about their “products”
“intangible” become “tangible”
2. Service can not be kept in the stock? Let’s examine the cases In “tangible” services business such as the Pizza Company, KFC, Lucky
Burger, the supporting elements of the service (supplies) is clear and will be kept in stock.
Pachem dental clinic must have their doctors ready to provide service to customers, therefore “kept stock”
Some products can not be stock that long i.e. perishable foods BUT even CD music can last for years, it is not advised to keep it that long.
Operation Management as Process
Manufacturing and Service some other example:
3. Service vary and can not be mass-produce Depend on where and how we view the service. KFC is consider
service but still can produce large volume and diverse types
4. There is high customer contact It is estimated that there is less than 5 min contact between
passengers and flight attendances from Phnom Penh to Singapore Crown (Cambodia) spend a lot of time visiting their customers The introduction of ATM machines by ANZ and other banks has
reduce tremendous amount of contact between customer and bankers.
Operation Management as Process
Manufacturing and Service some other example:
5. Customers participate in the service Not really necessary and always the case! With IT system customer
could check in without having to see the counter staffs, therefore reduce check in time process for air transport companies.
6. Facilities are located near to customers That was really in the past! Still true for some cases… With modernization of IT, Angkor Home Hotel in Siem Reap can be
book from Tokyo, Operation Management books can be bought from Amazon.com and have it ship straight to office door in Phnom Penh.
Operation Management as Process
Manufacturing and Service some other example:
7. Quality is difficult to measure and depends on the server In services industry, time is an important dimension in measure
quality – speed and reliability of response are measurable and quantifiable…
Gone in 60 seconds! By McDonald fast food chain… vs. long line up of Lucky Burger, KFC, Pizza Company… during peak time!
Operation Management as Process
The service management system
1. Culture &
Philosophy
5. Service Delivery System
4. Service Concept
2. Market Segment
3. Service Image
Service Management System (Norman, 2000)
Who we target for?Where we choose to be and not to be?
External environmentInternal environment
Specification that describe the benefit offered by service.
The way service concept is delivered.
Operation Management as Process
Manufacturing and Service – the key points
Ü It is not always helpful when trying to manage operation by making a total distinction between service and manufacturing
Ü Manufacturing and service is about the collaboration activities in providing customers the goods or services
Ü The effort should use to distinction between input that manufacturing & service process (materials & customers)
Ü Remember: materials do not think or act for themselves while customers can and do. Service companies that forget this would die soon…
Contents Map
Operation Management as Process
Value Chain Management
What is operation management?
Scope of responsibility of operation manager
Trends and challenges in OM
Value Chain Management
What is value chain?
Process must add value to their customers Activities that are necessary for adding values Therefore, It is about value chain management!!! See: Value Innovation
Value Chain Management
It is about management of “value added activities” in the whole supply chain (supply chain management)
Processes are resource consumer , therefore its activities of converting input to output must be examine carefully. They should value added!
A business is profitable if the value it creates exceeds the cost of performing the value activities (Porter, 2001)
Process 1 Process 2 Process 3 Process 4 Process 5 Process 6
Core processes
The Value Chain (Porter, M. 2001)
A company’s value chain is a system of interdependent activities which are connected by linkages.
Linkages exist when the way in which one activity is performed affects the cost or effectiveness of other activities. Therefore need to be trade-off & coordination!
Contents Map
Operation Management as Process
Value Chain Management
What is operation management?
Scope of responsibility of operation manager
Trends and challenges in OM
Definition of Operation Management
Systematic design, direction, and control of process that transforming input into product/service for external & internal customers
In large organization, operation is usually responsible for the actual transformation of input into services & products.
Therefore, it is consisted of series of small operation which work as function.
Some firms do not own the function but “contracting” Most of senior level executive have their work experience in operation
i.e. VP Operation or Production, Chief Operation Officer (COO) Typical report function to COO include Customer Service, Production,
Logistic, QA, Inventory, Maintenance & Reliability etc.
Contents Map
Operation Management as Process
Value Chain Management
What is operation management?
Scope of responsibility of operation manager
Trends and challenges in OM
Scope of responsibility of OM
Decision COO makes both Strategic and Tactics
Decision making process:
1 •Recognize & Clearly define the problems
2 •Collect information to be analyzed
3 •Choose the most attractive solutions
4 •Implement chosen alternatives
Scope of responsibility of OM
Strategic vs. Tactics decision Strategic decision include:
• Development of new capabilities• Maintaining of existing ones• Process design• Value chain linkage development• KPIs development (finance and non finance matrices)
Tactics decision include:• Process improvement• Performance measurement & management (see: Kaplan & Norton, Davenport-
analytical performance management)• Managing projects• Planning• Inventory
Supplement docs: The three level of decision making
Scope of responsibility of OM
2 Principles must be kept in mind as COO:
1. Must design and operate processes deal with Quality, Technologies, and staffing issues
2. Each part of organization has its own identity
Contents Map
Operation Management as Process
Value Chain Management
What is operation management?
Scope of responsibility of operation manager
Trends and challenges in OM
Trends & Challenges in managing operation
ProductivityGlobal competitionTechnologies changesEnvironmental issuesEthicalDiversity
Trends & Challenges in managing operation
Productivity
Four strategies to consider:
Value of output (services or products)
Value of input (wage, cost of equipment,
materials etc.)
Trends & Challenges in managing operation
Global competitionIt is agreed that to “prosper & survive” business have to view customers, suppliers, facilities location, and competitor in global terms
Feature articles: “What it take to compete in flat world” “Global competition for resources”
Trends & Challenges in managing operation
Technological changes:Thus, the first and critical point about why we fail to see the need for change stems from the fact that we stand blinded by the light of successful past mental maps (Black & Gregerson,2008).
Feature articles: “strategy & the internet” “It is all start with ones” “How information gives you competitive advantages”LFC vs KFC
Trends & Challenges in managing operation
Environmental issues:Companies that persist in treating climate change solely as a corporate social responsibility issue, rather than a business problem, will risk the greatest consequences (Porter & Reinhardt, 2007).
Feature articles: “business climate and climate business” “Impact of Climate Changes on future business strategy adoption” “Virtual Matrix of Corporate Social Responsibility”
Trends & Challenges in managing operation
Business ethic:Raising the bar of rules or standards governing the conduct of doing business
Feature articles: http://en.wikipedia.org/wiki/Business_ethics
http://www.scu.edu/ethics/
Trends & Challenges in managing operation
Workplace diversity:Managing diversity is comprehensive process for creating work environment that includes everyoneThere is single recipe for success!
Feature articles: Harvard Business Review on “Managing Diversity”Harvard Business Review on “Culture Changes” Diversity as strategy – Harvard Business ReviewDiversity at workplace: benefits , challenges, and required material tools
Trends & Challenges in managing operation
Feature articles: “5 Competitive Forces that Shape Strategy”
Question…
?
Class activities
Objectives:To get deeper understand of business present & future trends & challengesIncrease level of competences in business researchTeam work in practicesBusiness presentation skill
Topics:1. Productivity improvement challenges2. Globalization – The competition for resources. Try to answer “why companies
are competing with everyone from everywhere for everything?3. Climate changes – threats and opportunities for business in the future (to
include case studies)4. Management of workplace diversity5. Using Service Management Model developed by Norman, compare service
offer by The Pizza Company, Lucky Burger, KFC, Pizza World, and Soksabby.
Class activities
TeamA – Lead by:
Member:
B – Lead by:Member:
C – Lead by:Member:
D – Lead by:Member:
E – Lead by:Member:
Requirements:Paper works > 14 pagesPresentation 20 – 30 minQ&A < 15 minEach team member must present
TO BE EFFECTIVEDEADLINE MUST BE SET
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