OPERATION & QUALITY MANAGEMENT 2

MBALN-670 Operations and Quality Management

Title of the topic Introduction to Operations Management and Operations Strategy

Learning Objectives

1. Identify and critique the strategic frameworks of operations and quality

management within a global business environment. 2. Comprehensive knowledge of the main concept and methods related to

designing and managing operations and supply chains.

Introduction Operation Management is responsible for planning, coordinating, and controlling the

resources needed to produce products and services for a company. It’s the

organization’s core function

o OM (operations management) transforms inputs (inputs are resources such

as people, material, and money) to outputs (outputs are goods and services)

o It adds value to the business

o Increases product value at each stage

o Value added is the net increase between output product value and input

material value

o Provide an efficient transformation

o Efficiency – means performing activities well for least possible cost

o All organizations make decisions and follow a similar path

o First decisions very broad – Strategic decisions

o Strategic Decisions – set the direction for the entire company; they are broad

in scope and long-term in nature

o Following decisions focus on specifics - Tactical decision

o Tactical decisions: focus on specific day-to-day issues like resource needs,

schedules, & quantities to produce

o are frequent

o Strategic decisions less frequent

o Tactical and Strategic decisions must align

o Customers demand better quality, greater speed, and lower costs

o Companies implementing lean system concepts – a total systems approach to

efficient operations

o Recognized need to better manage information using ERP and CRM systems

o Increased cross-functional decision making

Lecture Material What is Operations Management?

Design, operation, and improvement of productive systems

What is Operations?

A function or system that transforms inputs into outputs of greater value

What is a Transformation Process?

A series of activities along a value chain extending from supplier to

customer

Activities that do not add value are superfluous and should be eliminated

The main functions of an organization are:

o Operations

o Marketing

o Finance and Accounting

o Human Resources

o Outside Suppliers

Marketing is not fully able to meet customer needs if they do not understand what

operations can produce

Finance cannot judge the need for capital investments if they do not understand

operations concepts and needs

Information systems enables the information flow throughout the organization

Human resources must understand job requirements and worker skills

Accounting needs to consider inventory management, capacity information, and

labour standards

Strategy and Operations

Strategy - provides direction for achieving a mission

There are 5key steps for Strategy Formulation

1. Defining a primary task - What is the firm in the business of doing?

2. Assessing core competencies - What does the firm do better than anyone

else?

3. Determining order winners and order qualifiers - What qualifies an item to

be considered for purchase? - What wins the order?

4. Positioning the firm - How will the firm compete?

5. Deploying the strategy

Operations strategy, along with financial strategy and marketing strategy all driven

from the organisations corporate strategy.

Operational Strategy –

 Provides a plan that makes best use of resources and:

 Specifies the policies and plans for using organizational resources

 Supports Business Strategy

Essential differences between operational efficiency and strategy:

 Operational efficiency is performing tasks well, or better than competitors

 Strategy is a plan for competing in the marketplace

 Operations strategy ensures all tasks performed are the right tasks

Consider these factors and strategic decisions:

1) What is the business goal? (mission)

2) Does company understand the market? (environmental scanning)

3) What are the company strengths? (core competencies)

Developing an Operations Strategy:

 Is a plan for the design and management of operations functions

 Is developed after the business strategy

 Focuses on specific capabilities which give it a competitive edge –

competitive priorities

Four Key Operations Questions:

Can company compete on –

Cost?

Quality?

Time?

Flexibility?

All of the above? Some? Tradeoffs?

Translating Competitive Priorities into Production Requirements

Specific Operation requirements include two general categories

Structure – decisions related to the production process: characteristics of facilities

used, selection of appropriate technology, and flow of goods and services

Infrastructure – decisions related to planning and control systems of operations:

organization of operation function, skill/pay of workers, and quality control

approaches

Videos You will find links to the videos on the VLE, alternatively, click on the hyperlink

below.

http://news.bbc.co.uk/2/hi/business/7788605.stm

Video interview with Professor Nigel Slack, author and tutor of Operations

Management and Strategy

http://www.youtube.com/watch?v=ZRcDVm6G50Y

Discussion Question Please participate in the discussion question within the VLE.

1. Find an article that relates to operations management in the Wall Street

Journal, Fortune, and Or Business Week. Share with others what you learned

in the article.

Finally, attempt the Think Theory.

Think Theory 1

(Take a pen and write down your answer. As soon as you finish thinking and writing,

check at the end of the topic overview for feedback)

1. Describe how a business strategy is developed.

2. Describe how an operations strategy is formulated from the business strategy.

Topic’s summary

 OM is the business function that is responsible for managing and coordinating

the resources needed to produce a company’s products and services.

 The role of OM is to transform organizational inputs into company’s products

or services outputs

 OM is responsible for a wide range of decisions, ranging from strategic to

tactical.

 Organizations can be divided into manufacturing and service organizations,

which differ in the tangibility of the product or service

 Many historical milestones have shaped OM. Some of these are the

Industrial Revolution, scientific management, the human relations movement,

management science, and the computer age

 OM is highly important function in today’s dynamic business environment.

Among the trends with significant impact are just-in-time, TQM, reengineering,

flexibility, time-based competition, SCM, global marketplace, and

environmental issues

 OM works closely with all other business functions

Operations Strategy

 Strategic decisions of firm drive tactical decisions

 Business strategy defines long-term plan

 Operations strategy support the business strategy

 Marketing strategy needs to fully understand operations capability

 Financial plans in effect support operations activities.

 Business Strategy is a long range plan and vision. Each individual business

function needs to support the business strategy.

 An organization develops its business strategy by doing environmental

scanning and considering its mission and its core competencies.

 The role of operations strategy is to provide a long-range plan for the use of

the company’s resources in producing the company’s primary goods and

services.

 The role of business strategy is to serve as an overall guide for the

development of the organization’s operations strategy.

 The operations strategy focuses on developing specific capabilities called

competitive priorities.

 There are four categories of competitive priorities: cost, quality, time, and

flexibility.

 Technology can be used by companies to gain a competitive advantage and

should be acquired to support the company’s chosen competitive priorities.

 Productivity is a measure that indicates how efficiently an organization is

using its resources.

 Productivity is computed as the ratio or organizational outputs divided by

inputs.

Material Sources 1. Reid R., Operations Management, 4

th Edition, 2011, Wiley Publishers

2. http://www.youtube.com/watch?v=ZRcDVm6G50Y accessed 17.09.2012

3. http://news.bbc.co.uk/2/hi/business/7788605.stm accessed 17.09.2012

Think Theory 1 Ideas Describe how a business strategy is developed.

A business strategy is developed after the company’s mission, an understanding of the market (environmental scanning), and the core competencies of the company have been identified. The mission involves the determination of what business to be in, who the customers will be, and how the company’s beliefs will define the business. Environmental scanning includes an examination of the current market trends in the market, economy, political environment, and in society, resulting in an identification of opportunities and threats. Finally, core competencies are the strengths of the company. The company should match its strengths to its business strategy.

Describe how an operations strategy is formulated from the business strategy.

The operations strategy is formulated by first determining the competitive priorities of the firm. Then, these priorities are translated into production requirements related to the structure and infrastructure of the firm. The structure involves the decisions related to the design of the production process, while the infrastructure involves decisions related to the planning and control of the operation.