Operations
center of gravity
('optimal' or verification) ⇒ min cost/transportation Min cost to make a decision. SEC #6 question. Cx=Edvx/Evx Cy=EdVy/vy Can end up in a mountain, gets you to a spot where you can make a different decitions. used to estimate customer demand. based on the physical analog that the gravitational attraction of two bodies is directly proportional to the product of their masses and inversely proportional to the square of distances that separates them.
huff model
(for retail outlets) ⇒ max potential financial benefit. objective is to maximize profit. e.g. supermarket would use this. a discrete number of alternative locations must be evaluated to find the most profitable site. this uses the gravity model to predict the benefit that a customer would have for a particular store size and location. the ratio P_ij measures the probability of a customer from a given statistical area i traveling to a shopping facility j. = A_ij/n(over Sumation)A_ij (under sumation j=1)
second
- in services, the ________ person to do the service usually does better than the first bc they improve their service.
servitization
- taking of general things and make it more of a service e.g. IBM used to make most money from tech and computers but now they mainly generate money through services like consulting, servicing, and LICENSING A PATENT
bullwhip effect
1. Demand forecast updating 2. Order batching 3. Price fluctuation 4. Rationing and shortage gaming these are the major causes of:
judgemental forecasting techniques
1. Intuition 2. Delphi 3. Surveys 4. Historical
creation of barriers to entry revenue generation data base asset productivity enhancement
4 strategic roles of information:
incremental
80% of services innovations tend to be very __________. This is bc: 1.customer acceptance 2. Competitors might use you to test it out first (second rat gets the cheese) also you cant patent services.
commodity
All supply chains at some point come back to the ________ level. When you start to differentiate that's when your supply chain becomes much more important
avoid multiple demand forecasts
Bullwhip effects are created when supply chain mem- bers process the demand input from their immediate downstream member in producing their own forecasts. Demand inputfix)mthe immediate downstream mem- ber, of course, resiJts fi-om that member's forecasting, with input from its own downstream member.
Each company has partners that affects how the companies do business. E.g. lead painted toys. Just as much the retailers fault as the manufacturer even though they didn't know. They are all working together as one entity. Could've been prevented easily. Its wasn't though bc over time (after checking out suppliers thoroughly) manufacturers look for ways to produce things cheaper. we mainly compete as supply chains.
Do we compete as supply chains today or as companies?
Rules of forecasting
Forecasts are always wrong, need to be able to see patterns. In season out of season
efficient supply chain
High demand, low cost, high volume = , must order in terms of long term and order A LOT. Which means more inventory. Must worry about shrinkage bc sitting inventory tends to disappear.
it affects dimensions like flexibility( measure of the degree to which the service can react to changing economic situations. this is long term commitment/capital intensive so its important to be responsive to future markets), competitive positioning (e.g. holding prime locations before market has developed), demand management, and focus (developed by offering the same narrowly defined service at many locations
How does location relate to strategy?
location
Like accessibility, type of offering, cost of rent, taxes, weather, infrastructure, transportation, surrounding area and businesses. Cost of living, housing, laws. Barely scratches the surface. these are all things to consider when deciding on...
innovation ties to strategy
Often when you implement tech, you have to change too. Benefits of implementing tech: become faster, save money, make you more money, can change delivery cycle/speed
operations
Structural processes, systems, and values of an individual firm integrated with other business functions within the firm in a multi-firm, competing value chain in the face of global competition. (managing day to day things like distribution, supply chain, processes, and the value in some form. How they do that is the operations function) operations is often called the back office's back bone. Money is made through operations. Operations takes inputs and turns them into outputs.
innovative product
Style, flexibility/responsive suppliers =
to coordinate the flow of materials, services, and information along the elements of the supply chain to maximize customer value
The basic purpose of a supply chain :
ii. Differentiation Point (point of penetration)
This is where it get penetrated enough that it becomes unique. If you can get your stuff ready and then add the finishing touches closer to when the demand is high. E.g. already made clothes without color, just have your company dye them just in time.
customers (customer-supplier duality)
____ can also act as suppliers in the service exchange. e.g. bring car to auto repair. this is called bidirectional relationships
strategic initiatives
_____ can lessen the impact of uncertainty in supply chain and improve customer service. e.g. total quality control techniques can improve manufacturing reliability. more dependable transportation modes can be invested . form postponement can also be used.
unreliable deliveries
______ either increase inventory investments in safety stocks or result in unsatisfied customers and lost sales.
information technology
_______ is helping to define the competitive strategy of successful firms.
competitive priorities
____________ develop a core competence, and then you hope a competitive advantage ensues.
network models
a. Location set ⇒ max service b. Transportation ⇒ min cost/transportation (involves linear programming) c. Equal Network ⇒ min response time (equal service)
service difficulties in economic environment
a. Low entry barriers- lots of opportunities. A lot easier to perform a service rather than produce a product. b. Minimal economies of scale- massive volumes c. Erratic demand- very heterogenous situation.erratic in the patterns of arrival as well. d. Low power opportunities (toward customers or suppliers) e. Product substitution- can service be substituted by product? The opposite happens a lot. f. Weak customer loyalty (differences between satisfaction & identification)- this is changing a lot recently. This is bc there are a lot of competitors. Very few services have limited options. Taste changes over time, especially for discrete services (can choose differently every time) g. High exit barriers- hard to get out bc the money you spent to will never be returned. E.g. a hair salon has chairs, tools, location etc h. Intense competition & Easy copying
service shift (clark fisher)
a. Primary - agriculture, fishing, forestry, and mining b. Secondary - manufacturing and construction c. Tertiary - services and support d. Service process matrix- based o 2 different dimensions. Lower the less the customer is involved.
goals of new service innovation
a. what to achieve b. relevant metrics & tie to goals (i.e., link to strategy)- are we measuring the right thing? What was our intended goal? What measurement will prove tht youre successful. Customers are eeratic though. E.g unsatisfied customers speak louder than satisfied customers. A lot of things we can concretely measure often don't matter. c. success vs. failure- how do u define customer satisfaction? d. NPD/NSD process (see below) e. Issues to address f. Tools/techniques - service blueprint & generic approaches
innovative commonalities of companies
ability to look bigger and see long term effects *-ability to learn (get something from failure) -vision (trying to beat other players, not keep up)
stabilize prices, eliminate gaming in shortage, break order batches, and avoid multiple demand forecasts
all ways to combat the bullwhip effect
experience
an _________ economy is emerging to satisfy rising expectations for services
service
an intangible, perishable, heterogeneous (unique for everyone), and simultaneous (produced and consumed at the same time) ( a repeatable activity that is intangible but creates value.)
service delivery system operating strategy service concept target market segments
basic categories of strategic service vision:
qualifiers
before a service can be taken seriously as a competitor in the market, it must attain a certain level for each service competitive dimension, as defined by the other market players. e.g. for airlines it could be safety
tradeoff
can you be both the leader in low cost provider and leader in provide quality? You have to have a _________
supply chain management
channel relationships, flow of goods/info upstream/downstream, business processes, demand management, inventory, production, distribution, product design, and pricing these are all impacted by ______________
layout
circulation free flow high end grid grocery standardized
overlap
competing supply chains tend to...
service winners
dimensions such as price, convenience, or reputation that are used by a customer to make a choice among competitors. this may vary depending on the needs of the customer at the time of purchase. this can also become a qualifier
location
expectations of services can depend on _________
service loser
failure to deliver at or above expected level for competitive dimension can result in a dissatisfied customer who is lost forever. the dimensions of dependability, personalization, and speed are particularly vulnerable to becoming this.
cocreation
for a service, the presence of the customer in the process allows for _________ of value. in a way, service managers adopt a style of marketing and operations functions.
inputs
for services, these are the customers themselves
resources
for services, these are the facilitating goods, employee labor, capital at the command of the service manager
supply chain
from point of nothing to point of consumption, and back. So many steps..so much inventory.. so much time! must work with all aspects of it to be successful.
location
good ____ decision will support your overall operations.
innovation
idea/invention + exploitation (must actually produce something. Must think first-
productivity quality
if a service firm is to remain competitive, continuous improvement in ____________ and ______ must be part of its strategy and corporate culture.
human element
in services, it is the ________ that is central to effective operations.
NPD process
innovation development model: design, analysis, development, and launch. this is the overarching view
inventory
its a liability. goal is to facilitate a transaction. cost based is controlling flow and optimizing levels.
performance
knowledge, experience, motivation, and honesty of the customer all directly affect the ________ of the service industry
service process matrix
labor intensity vs interaction and customability. Mass---> professional --- service factory --- service shop
services
large portion of GDP, 80% of population works in ________. there is a large migration from agriculture and manufacturing to this. it is largely global and driven by communications, tech growth, urbanization, and low cost labor.
innovation drivers
life cycle (or lack of e.g. fashion), market saturation, new regulations
load distance
location method (using either Euclidean or Rectilinear (metropolitan) distance) ⇒ min cost/transportation • Multiply demand by x and y components • Take total VDx and VDy and divide by total demand to find optimal location • Positive - minimizes totalcost of distribution • Negative - Can end up in the middle of nowhere, in a mountain, or in a lake (euclidian metric) :d_ij = [(x_i - x_j)^2 + (y_i - y_j)]^.5 d_ij= distance between pts i and j x_i, y_i= coordinates of ith pt. x_j,y_j= coordinates of nth pt. same formula for metropolitan metric except it uses absolute value where the parentheses are and no ^2
factor weighted
location method- Weighted (Preference Matrix) ⇒ max benefit Easiest way to pick location. List out what factors matter. Grade them from importance.. Compare.subjective because you chose weights on factors. • Positives - Makes you outline important pieces, makes you figure out which pieces are more important, gives you quantitive measure to qualitative issues • Negatives - It can change, subjective
break even
location method. balance costs/benefits (establish the threshold for various options)
regression
location method. causal relationship (note: need baseline information) (e.g., predicting store profitability or probability of failure). based on several independent variables like size, competition near by, and traffic. to forecast performance.
demand
matching service capacity with ______
capacity utlizizatin
measure of how much output is actually achieved relative to the process capacity when fully busy. For example, if your organization processes 22 loans, then the utilization would be 92% (22/24)
types of layouts
measure of percentage of time that workers contribute to value
direct labor util
measure of percentage of time that workers contribute to value = labor content/ cycle time * #workers
cycle time
month year week, what you use over a period of time
forecast errero
mse,mad,mape
NSD process
new service development process. involves design, analysis, development, and full launch. circular model.
competitive clustering (a reaction to observed consumer behavior when choosing among competitors), saturation marketing (grouping outlets of the same firm tightly in urban/high traffic areas. modest cannibalization can reduce cost of ads, easier supervision, customer awareness), marketing intermediaries, substitution of communication for travel(telecommunication), and separation of front and back office (creates barrier to entry of front office and back office achieves cost economies)
other strategic location considerations:
overall cost leadership differentiation focus
porter argued that 3 generic competitive strategies exist:
anticipation
ramp up inventory for a specific event (ex. football game)
order winner
refers to competitive dimensions that sell products, some of it could be called qualifiers bc the presence of these dimensions is necessary for a product to enter the market place. these can change over time.
core competence
result of focused resources
non-routine
service managers are faced with ________ operations in which only indirect control is possible
society
services arent peripheral activities but rather integral parts of _________. they are central to a functioning and healthy economy.
product life cycles globalization
shortened ________ and increasing ________ of markets require a total systems view of the entire supply chain.
clockspeed law
states that the closer to the final customer you are, the faster the rate of change in products and/or technology you face
bullwhip effect
states that variation in orders/information increases as you go upstream in the supply chain (i.e. towards the raw materials manufacturers)
overall cost leadership
strategy that requires efficient scale facilities, tight cost and overhead control, and often innovative tech. low cost position provides a defense against competition bc less efficient competitors will suffer first from competitive pressures. this strategy consists of seeking out low cost customers, standardizing a customer service, reducing the personal element in service delivery(only acceptable when it increases convenience), reducing network costs, and taking service operations offline. pg. 41-42
partnerships cooperation
success is achieved only with the formation of effective __________ and _______ among participants throughout entire supply chain. this is called the bullwhip effect. results in which small change in retail orders is magnified as we move back up the supply chain to the distributor and manufacturer
pushes pulls
technology _____ innovation, and a market _____ innovation
partners
the ________ you work with in a supply chain have a large effect on what you do operationally. E.g. Nike doesn't produce anything. All they do is sell their brand. Outsource everything. They created relationships with partners. Very strategically chosen. Now all they have to do is design.
reliable/prompt delivery manufacturing/inventory
the challenge of supply chain management is to balance requirements of _______ with _______ costs.
competitive advantage
the end goal of an operational organization
differentiation
the essence of this strategy lies in creating a service that is perceived as being unique. approaches include: brand image, tech, features, customer service, dealer network.. it doesn't ignore the costs but primarily creates customer loyalty. this is achieved by: making the intangible tangible, customizing the standard product, reducing perceived risk, giving attention to personnel training, and controlling quality.
process capacity
the relative output of the process (= 1/CT). For this process, the capacity would be equal to the capacity of the bottleneck which is 3 units/hour
bottleneck
the stage that take the longest (or has the smallest capacity). In this case, that would be Stage B as it takes 20 minutes to complete
throughput time
the time it takes a single unit to flow through the process along the longest path
process cycle time
the time it takes to complete successive output units once the process is operating in equilibrium
supplier delivery performance manufacturing reliability customer demand
the uncertainty in managing a supply chain stem from 3 main sources:
information sharing, channel alignment(the coordination of pricing, transporta- tion, inventory planning, and ownership between the upstream and downstream sites in a supply chain), and operational efficiency(refers to activities that improve performance, such as reduced costs and lead time.)
these all help control/mange the bullwhip effect
focus
this strategy is built around the idea of servicing a particular target market very well by addressing customer's specific needs. it is the application of differentiation and/or overall cost leadership to a particular market segment rather than the entire market. customer selection is key to achieving this strategy successfully.
reactive incremental
usually more _______ and _____ when it comes to innovation
development, analysis, design, and full launch
what're the steps to take when developing a new service?
customer demand variability
whats the hardest factor to determine in supply chain uncertainty?
key questions
when do you order, how much do you order. also where.
survival
why is innovation necessary for companies?
hawthorne effect
you implement change and measure it, they will perform well but as soon as things get weir/rough, you go back to what u know.
