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    Lecture 2

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    Simran Karwa
    This document summarizes key concepts from a lecture on operations management, including: 1) Tradeoffs between reducing supply lead time vs increasing inventory cost, and reducing cycle time vs increasing quality costs. 2) Competitive priorities in operations such as competing on cost, quality, flexibility, and speed. 3) Relating corporate strategy to operations strategy and strategic decision areas in operations management. 4) Formulating strategies based on core competencies, environmental scanning, and order qualifiers/winners. 5) Evaluating strategies using productivity metrics like labor, machine, capital, and multi-factor productivity.

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    Lecture 2

    Uploaded by

    Simran Karwa
    22 views11 pages
    This document summarizes key concepts from a lecture on operations management, including: 1) Tradeoffs between reducing supply lead time vs increasing inventory cost, and reducing cycle time vs increasing quality costs. 2) Competitive priorities in operations such as competing on cost, quality, flexibility, and speed. 3) Relating corporate strategy to operations strategy and strategic decision areas in operations management. 4) Formulating strategies based on core competencies, environmental scanning, and order qualifiers/winners. 5) Evaluating strategies using productivity metrics like labor, machine, capital, and multi-factor productivity.

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    This document summarizes key concepts from a lecture on operations management, including: 1) Tradeoffs between reducing supply lead time vs increasing inventory cost, and reducing cycle time vs increasing quality costs. 2) Competitive priorities in operations such as competing on cost, quality, flexibility, and speed. 3) Relating corporate strategy to operations strategy and strategic decision areas in operations management. 4) Formulating strategies based on core competencies, environmental scanning, and order qualifiers/winners. 5) Evaluating strategies using productivity metrics like labor, machine, capital, and multi-factor productivity.

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    © All Rights Reserved
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    22 views11 pages

    Lecture 2

    Uploaded by

    Simran Karwa
    This document summarizes key concepts from a lecture on operations management, including: 1) Tradeoffs between reducing supply lead time vs increasing inventory cost, and reducing cycle time vs increasing quality costs. 2) Competitive priorities in operations such as competing on cost, quality, flexibility, and speed. 3) Relating corporate strategy to operations strategy and strategic decision areas in operations management. 4) Formulating strategies based on core competencies, environmental scanning, and order qualifiers/winners. 5) Evaluating strategies using productivity metrics like labor, machine, capital, and multi-factor productivity.

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    Lecture 2

    Operations Management
    Dr. D Jinil Persis
    Assistant Professor, IIM Kozhikode
    Cost and Time
    Stock raw materials • reduce supply lead time, increase inventory cost

    Increase production with • Reduce cycle time, increase quality cost (decrease
    existing resources quality)

    Stock finished goods • reduce delivery lead time, increase inventory cost

    Increase (workforce/machine)
    • Reduce cycle time, increase cost
    resource

    Toyota
    Process Lean Smart
    production Quality control Automation
    improvement manufacturing manufacturing
    system
    Competitive Priorities
    Competing on Cost
    • Standard products, large markets, Stable production process, tight standards, automation,
    streamline and simplify for efficiency, eliminate waste
    Competing on Quality
    • Voice of Customer, reduce returns and rework costs

    Competing on Flexibility
    • Adapt to changes in production mix, volume or design, delivery time

    Competing on Speed
    • Build to order production & efficient supply chains
    • Close contact with suppliers & clients
    Organization strategy Operations strategy

    Corporate strategy McDonald’s Time Processing time

    Corporate Domino’s Time Ontime delivery


    strategy

    Burger king Variety Flexibility


    Strategic
    choices
    Amazon Differentiation - Service Customer Satisfaction

    Super market Differentiation - Variety Volume


    Core
    Mission Environment
    competencies

    Shopping malls Differentiation - Location Convenience


    Operations strategy
    • In line with corporate strategy Apple Differentiation – New Innovation
    • Relates to products, processes, methods, products
    resources, scheduling, quality, cost, time Samsung Time Production time, volume

    Spicejet Low price Low cost


    Strategy to Decision Making Strategic decisions
    Operating decisions
    Control decisions
    Marketplace

    Corporate Strategy

    Finance Strategy Operations Strategy Marketing Strategy

    Operations Management

    People Plants Parts Processes


    Materials & Products &
    Customers Services
    Planning and Control
    Input Output
    Production System
    Formulating strategies
    • Core competencies
    • Environmental scanning using SWOT
    • Order qualifiers
    • Characteristics that customers perceive as minimum standards of acceptability for a
    product or service to be considered as a potential for purchase
    • Order winners
    • Characteristics of an organization’s goods or services that cause it to be perceived as
    better than the competition
    Strategic OM Decision Areas
    Decision Area What the Decisions Affect
    Product and service design Costs, quality, liability, and environmental issues
    Capacity Cost, structure, flexibility
    Process selection and Costs, flexibility, skill level needed, capacity
    layout
    Work design Quality of work life, employee safety, productivity
    Location Costs, visibility
    Quality Ability to meet or exceed customer expectations
    Inventory Costs, shortages
    Maintenance Costs, equipment reliability, productivity
    Scheduling Flexibility, efficiency
    Supply chains Costs, quality, agility, shortages, vendor relations
    Projects Costs, new products, services, or operating systems
    Strategic choices
    • Quality based strategies
    • Strategy that focuses on quality in all phases of an organization
    • Time based strategies
    • Strategies that focus on the reduction of time needed to accomplish tasks
    • Reducing planning time, design time, processing time, changeover time, time to
    market, delivery time, response time, time to recover
    • Agile strategies
    • A strategic approach for competitive advantage that emphasizes the use of
    flexibility to adapt and prosper in an environment of change
    • Involves the blending of several core competencies Cost, Quality, Reliability,
    Flexibility
    Evaluating strategies using Productivity
    • How efficiently the resources in the system are used in producing the desired output?
    • 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦= (𝑂𝑢𝑡𝑝𝑢𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑)/(𝑖𝑛𝑝𝑢𝑡 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠 𝑢𝑡𝑖𝑙𝑖𝑧𝑒𝑑)
    • Input resources: land, materials, labour, machines
    • 𝑇𝑜𝑡𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦=(𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑜𝑢𝑡𝑝𝑢𝑡 )/(𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑖𝑛𝑝𝑢𝑡)
    • 𝑃𝑎𝑟𝑡𝑖𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦=(𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑜𝑢𝑡𝑝𝑢𝑡 )/(𝑎𝑛𝑦 𝑠𝑖𝑛𝑔𝑙𝑒 𝑖𝑛𝑝𝑢𝑡)
    • Labour productivity = (𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑜𝑢𝑡𝑝𝑢𝑡 )/(𝑙𝑎𝑏𝑜𝑢𝑟 𝑖𝑛𝑝𝑢𝑡)
    Eg. output/man-hour
    • Machine productivity=(𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑜𝑢𝑡𝑝𝑢𝑡 )/(𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑖𝑛𝑝𝑢𝑡)
    Eg. Output/machine-hour
    • Capital productivity=(𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 𝑜𝑢𝑡𝑝𝑢𝑡 )/(𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑖𝑛𝑝𝑢𝑡)
    Eg. Output/Rs invested
    • Multi-factor productivity=Output/(capital+material+labour)
    • Productivity growth – relative to previous
    Examples
    A furniture shop makes 10 tables with 4 carpenters in a day
    (8-hour). What is labor productivity?
    10
    = 0.3125 𝑡𝑎𝑏𝑙𝑒 𝑝𝑒𝑟 𝑚𝑎𝑛 − ℎ𝑜𝑢𝑟
    4×8

    A furniture shop makes 10 tables with 4 carpenters in a day


    (8-hour) paid at the rate of Rs. 100 per hour. The material cost
    was Rs. 5000 and the overhead charges were Rs. 1500. What
    is multifactor productivity if it sells a table for Rs. 5000?
    10 × 5000
    = 5.15 𝑡𝑎𝑏𝑙𝑒 𝑝𝑒𝑟 𝑚𝑎𝑛 − ℎ𝑜𝑢𝑟
    (4 × 8 × 100) + 5000 + 1500
    Factors affecting productivity

    Output
    Methods Technology More output
    More output
    for same/less
    for more input • Output/input before and
    Automation input after must increase
    Robotics • Replacement of input
    Capital Quality IoT

    Same output
    for less input

    Management
    Business process improvement Input

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