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Internally, there is a hierarchy of strategic plans consisting of

(1) corporate planning, (2) strategic business unit (SBU) planning, and (3) functional planning.

A well-designed value proposition has four characteristics

1.It offers a combination of product features that customers find attractive and are willing to pay for.2.It differentiates the firm from its competition in a way that is difficult to imitate.3.It satisfies the financial and strategic objectives of the firm.4.It can be reliably delivered given the operational capabilities of the firm and its supporting supply chain.

When

?When should products be made, activities be carried out, services be delivered, or capacities/facilities come on line?

Stakeholders' demands often differ from the demands of customers or suppliers

For example, customers might care most about the price and quality of products, whereas some stakeholders might care most about environmental concerns. Like customers and suppliers, stakeholders can significantly affect how a firm operates. Customer management: is the management of the customer interface, including all aspects of order processing and fulfillment. Functional groups directly concerned with customer management have names such as distribution, sales, order fulfillment, and customer service. Managers in these functions are always thinking about ways to improve customer satisfaction in efficient ways.

g goods-manufacturing operations can use inventory to smooth out imbalances between production capacity and customer demand, a producer of services must maintain enough capacity to meet demand during peak periods; otherwise, it must postpone (backlog) the demand

For example, when you go into a restaurant during its busy time and the greeter asks you to wait in the lounge, you become part of a backlog of demand. Service operations managers often use reservation and appointment systems to help customers avoid long wait times. the customer may take part in producing and consuming the service at the same time: think of your roles as co-designer and quality inspector in getting a haircut

How?

How is the good or service to be designed, made, and delivered?How much should our transformation process be able to deliver (and under what conditions)?How should we measure and assess performance?

Processes can also transform information, or even people (customers), from one condition into another

In decision making, for example, managers transform data into actionable information and decisions. Think about how you are "transformed" by going to a movie—this is a process in which you are both an input and an output! Other processes transform things by transporting them from one location to another, or by storing them (e.g., a warehouse stores finished goods). design processes: to develop new goods and services

Order Losers

Poor performance on these product traits can cause the loss of either current or future business. For example, when an online retailer fails to deliver an order in a timely manner, a customer might cancel the order and refuse to place orders in the future.

Order Qualifiers

These are product traits such as availability, price, or conformance quality that must meet a certain level in order for the product to even be considered by customers. The firm must perform acceptably on these traits (i.e., the products must meet certain threshold values of performance), usually at least as well as competitors' offerings.

Order winners

These product traits cause customers to choose a product over a competitor's offering; for example, better performance or lower price. These are traits on which the operations management system must excel.

What?

What types of activities and what types of goods or services are to be delivered by the system?What product features do our intended customers care about?What activities and resources are needed, and how should they be developed, allocated, and controlled?

Where and Who?

Where should certain activities be done, and who should do them: suppliers, partners, or the firm?

Process

a system of activities that transforms inputs into valuable outputs. Processes use resources (workers, machines, money, and knowledge) to transform inputs (such as materials, energy, money, people, and data) into outputs (goods and services). For example, one uses a grill (a resource) and heat (an input) to convert a raw hamburger patty (an input) into a cooked hamburger (an output).

Planning systems

access and development of sources of information, and use of proprietary decision support systems and processes.

Infrastructural decisions

affect the workforce, production planning and control, process innovation, and organization. Decisions in these areas determine what is done, when it is done, and who does it. Decisions in all of these areas are interrelated

Lead time

amount of time that passes between the beginning and ending of a set of activities, is often an order winner, especially for nonstandardized products. There are two types of lead time that are typically important.

SWOT

analysis helps managers match strategies with strengths and opportunities while also reducing risks associated with weaknesses and threats. It can be used in various ways—to kick off strategic thinking or as a serious detailed strategic assessment/planning tool.

Triple bottom line

approach to performance measurement. Using this approach, managers prepare three different measures of profit and loss. The first is the traditional measure of performance—monetary profit; the second is an assessment of its "people account"—how socially responsible the firm has been throughout its operations; and the third is the company's "planet account"—how environmentally responsible the firm has been. Together, these three Ps (Profit-People-Planet) capture the total impact of a firm's business.

Capabilities

are operational activities that the firm can perform well; these define the types of problems and solutions that operations can address proficiently.

Core capabilities

are the skills, processes, and systems that are unique to the firm and that enable it to deliver products that are both valued by the customer and difficult for competitors to imitate. These are strategically critical, and often the source of a stream of new products and market opportunities. For example, over the years Honda has developed successful products in a wide range of very different markets—motorcycles, power generators, cars, marine engines, lawn mowers, snow blowers, and now jet airplanes. In each market, Honda moved from being an outsider to become one of the major players.

Capabilities

are unique and superior operational abilities that stem from the routines, skills, and processes that the firm develops and uses. As we stated earlier, it is difficult for an operations system to simultaneously deliver high levels of performance on many different dimensions. Thus, it is important to develop capabilities in the few areas that are of greatest strategic value for the firm.

. Quality control is more difficult for services

as it is not always easy to objectively measure a service product's attributes. Service operations managers often evaluate both methods of delivery and customer perceptions.

Inventory management

can make processes more or less efficient, depending on whether the inventory is used wisely or unwisely

Corporate strategy

communicates the overall mission of the firm and identifies the types of businesses that the firm wants to be in. For a large, multidivisional firm, key decisions in corporate strategy address what businesses to acquire and what businesses to divest. Corporate strategy typically covers a long time horizon, setting the overall values, direction, and goals of the firm as a whole.

a supply chain involves

connections and relationships among organizations that play various roles for a given set of products.

Operations managers answer questions by

defining both the structural and infrastructural aspects of the operations management system.

Other terms sometimes substituted for supply chain include

demand chain, extended enterprise, supply network, or supply web

Operations management is about

designing, executing, and improving business processes.

Downstream stages of the supply chain are made up of layers of partners and customers commonly referred to as

echelons A single echelon might contain partners in locations all over the world. For example, there are usually many distributors for a given movie. These distributors can be thought of as suppliers of distribution services to the movie production company. The downstream supply chain can also be broken into different channels of distribution; theaters, direct/home delivery, and retail DVD/Blu-Ray sales are three channels

Business unit strategy

essentially deals with the question, "How should our business unit compete?" To answer this question, managers make choices regarding what customers and market segments they will deem critical, what products they will offer, and specifically how they will create advantages over the business unit's competitors. These choices collectively form the business model that the unit will pursue. For example, long ago Gillette developed the "razor and blades" business model—give away the razor but make your money on the replacement blades.

Fit

exists when operational capabilities support the value proposition and the outcomes desired by key customers. If strategic planning processes are neglected, over time the dynamics of changing market trends, technologies, and competition can destroy the fit between customer-desired outcomes, value propositions, and capabilities. A company can find itself with capabilities and value propositions that no customers care about, either because it made improper investments, or because existing customers changed, or both. For example, a firm may find itself using technologies that have become obsolete. Under such conditions, management has three options: (1) live with the mismatch (which means reduced profits and potential opportunities for the competition); (2) change the key customers to those who value the solutions provided by the firm; or (3) change the operational capabilities. Each option requires top management involvement, resources, and time

SBU consists of

functional groups such as internal operations, marketing, accounting, engineering, supply management, logistics, and finance (to name a few). Each function has to generate a strategic plan—one that is coordinated with and supportive of the SBU plan.

Most businesses integrate a mix of

goods-producing and service-producing operations activities.

Key customers

have the greatest impact on product designs, sales, and future growth opportunities. Often, but not always, the consumer is the key customer. For example, you are the consumer of this book, yet another customer (your professor) has had greater impact on the product design, sales, and growth opportunities for this product.

The bottom three blocks represent the foundational principles that describe

how operational processes work, how product and process characteristics are intertwined, and how certain process structures are related to operational objectives. In order to make good decisions, operations managers need to understand the "physics" that govern processes, as well as understand how they relate to product design and development.

Operations management is mainly concerned with

how resources will be developed and used to accomplish business goals.

How operations management effects quality of life example

in an emergency, the speed and efficiency of a relief organization might even save your life

Operational activities exist

in order to produce both tangible goods and intangible services

Customers

include anyone (individuals or organizations) that uses or consumes the products of operations management processes. An organization cannot structure an effective or efficient operations management function unless it has clearly identified its customers.

Stakeholders

include employees and unions, the local community, social groups (such as animals' rights or environmental concerns), government, and financial investors

Operations management activities located throughout a supply chain create and enhance the value of goods and services by

increasing their economic value (e.g., lowering delivered cost), functional value (e.g., improving product quality or convenience), and psychosocial value (e.g., improving product aesthetics and desirability)

Operations management deals with processes that transform

inputs, including materials, information, energy, money, and even people, into goods and services.

Operations managers

interacts with managers in other business functions, both inside and outside the operations manager's own company

Types of customers include

internal customers, intermediate customers, and final customers. For example, consider a car manufacturer. A company-owned distribution center might be considered an internal customer of the manufacturing group; a dealership is an intermediate customer; and people who buy the car and drive it off the dealer's lot are the final customers, or consumers.

Operational planning

inventory and requirements planning activities address demands, materials, and capacities at the individual product level. Tactical planning usually spans months, whereas operational planning usually addresses weeks or days of activity.

Product quality

is a result of how people and technologies work together to execute processes

2 Operations strategy

is a set of competitive priorities coupled with supply chain structural and infrastructural design choices intended to create capabilities that support a set of value propositions targeted to address the needs of critical customers. Strategic decisions define the competitive objectives of an organization, establishing both the specific performance targets and the means by which the targets will be achieved.

The value proposition

is all of the tangible and intangible "benefits" that customers can expect to obtain by using the products offered by the firm.

Flexibility

is generally defined as an operation's ability to respond efficiently to changes in products, processes (including supply chain relationships), and competitive environments. The words respond efficiently mean that an operation can cope with a wider range of changes faster or with less cost than competitors can.

Quality

is its fitness for consumption by the customer who bought it. It is an assessment of how well the customer's expectations are met. Some dimensions of quality are often viewed by customers as minimum requirements (order qualifiers) for most products. For example, poor conformance quality (many defects) is not tolerated in most markets. At the same time, superiority in other dimensions of quality can significantly differentiate a product

The result of the core capabilities approach

is supply chains in which each of the partnering organizations focuses on what it does best. The overall effect is to produce greater product value through higher quality and greater efficiencies.

The key customer

is the customer or customer segment receiving priority because it is highly important to the firm's current or future success.

Supply chain management

is the design and execution of relationships and flows that connect the parties and processes across a supply chain.

A supply chain

is the global network of organizations and activities involved in (1) designing a set of goods and services and their related processes, (2) transforming inputs into goods and services, (3) consuming these goods and services, and (4) disposing of these goods and services

Operations Management

is the management of processes used to design, supply, produce, and deliver valuable goods and services to customers

Supply management

is the management of processes used to identify, acquire, and administer inputs to the firm. Related functional groups are called by names such as purchasing, sourcing, and procurement. Managers in these functions are always thinking about insourcing and outsourcing opportunities and ways to improve supply transactions and relationships.

Logistics management

is the management of the movement of materials and information within, into, and out of the firm. Logistics functions go by names including transportation/traffic management, warehousing, materials managers, and so on. Managers in these functions are always thinking about ways to optimize these flows through better scheduling and the use of alternative transportation, storage, and information technologies

Time to market

is the total time that a firm takes to conceive, design, test, produce, and deliver a new or revised product for the marketplace. This lead time is a once-in-product-life-cycle event. That is, a firm may spend 18 months designing a car and getting the supply chain ready for production, but once production has been ramped up and the cars begin rolling off the assembly line, there is no significant design product lead time needed to make subsequent copies of that car. Time to market can be an order winner if the new product offers features or performance that is not available in other products.

Contributor to apple's success

managing operations across supply chain

Operations management focuses on

managing processes (design, supply, production, delivery); supply chain management focuses on managing relationships and flows (flows of information, materials, energy, money, and people). Think of supply chain management as a way of viewing operations management. You can also think of the supply chain as a network of organizations in which operations activities are conducted. Operations managers interact with three important groups that are external to the firm: (1) customers, (2) suppliers, and (3) stakeholders

Structural decisions affect

physical resources such as capacity, facilities, technology, and the supply chain network. Once made, decisions in these areas determine what the operations management system can and cannot do well. Altering these decisions often requires significant investments and lots of time

Operations management is a ??? discipline

process-oriented

Lean operation

produces maximum levels of efficiency and effectiveness using a minimal amount of resources.

Technology

proprietary usage of hardware or software that enables the firm to do things differently and/or better than competitors

Resource and technology suppliers

provide equipment, labor, product and process designs, and other resources needed to support a firm's processes.

Aftermarket suppliers

provide product service and support such as maintenance, repair, disposal, or recycling.

Total product experiesnce

refers to all of the outputs of an operation, both goods and services, that are combined to define a customer's complete consumption experience. The experience includes all aspects of purchasing, consuming, and disposing of the product.

Innovation

refers to both radical and incremental changes in processes and products. Especially in highly industrialized countries, innovation is an important way to create new demand. Through the creation of new and improved products, firms can appeal to new market segments or take away business from competitors. Innovation may be a response to emerging customer needs, or it can even be a way to create new needs. For example, with the creation of the iPod, Apple combined existing technologies in a way that created a new business for selling online music and other content.

A "loyalty" business model

rewards customers for continuing to deal with the firm. This model has been widely implemented in the airline industry

Dell successfully applied the "direct sales" business model in computers

sell computers directly to the end consumer.

goods can be produced in advance and stored in inventory until a customer buys or consumes them

services are intangible, they cannot be stored. The production and consumption of a service usually occur at the same time

It is valuable to think about operations as

sets of processes and subprocesses with many interrelationships and linkages. Consider the operations of an airport. There are flight-scheduling processes, ticketing processes, facilities-management processes, security processes, vendor-management processes, and on and on

People and culture

skills, associated training programs, and cultural norms for the company that produce better motivation and performance. The impact of culture must be recognized at both a corporate and at a national level.

Processes

specialized routines, procedures, and performance measurement systems that guide operational activities.

Value proposition

statement of product and service features that the firm offers to its customers. A value proposition needs to be both attractive to customers and different from what is offered by the firm's competitors.For example, Walmart's value proposition has been to offer everyday low prices on a wide variety of products. The value proposition is critical because it not only defines how the firm competes, it also determines the types of products that the firm will (and will not) offer.

because products and markets differ across business divisions, a separate management team (usually headed by a president or vice president) is usually needed to run each of these semi-independent organizations

strategic business unit (SBU)

Tactical planing

such as sales and operations planning, seeks to identify and target customer demands for aggregate product families and to establish the inventory and capacity plans needed to satisfy these overall demands.

Book helps us study operations management from the perfective of

supply chain

A business unit's strategy and business model are both shaped by

the corporate strategy, by the specific requirements of the SBU's products and markets, and by the SBU's operating capabilities.

Timeliness

the degree to which the product is delivered or available when the customer wants it, are a primary indicator of customer service in many businesses. These dimensions can serve as order winners or qualifiers, depending on the situation. On-time delivery of a product is in many cases an order qualifier (or order loser, if the product is late). Similarly, availability of a good or service is usually a qualifier. For example, grocery store customers expect products to be on the shelf.

Within a supply chain context, operations management brings together four major sets of players

the firm, customers, suppliers, and stakeholders.

sustainability

the focus is on maintaining operations that are both profitable and nondamaging to society or the environment

"Supply chain management" represents

the latest technological shift in operations management. More and more nations have moved away from centrally controlled economies to pursue free market systems: Russia, India, and China represent a few important examples. These falling political barriers have opened up new opportunities to develop global supply chains. Core capability: is a unique set of skills that confers competitive advantages to a firm, because rival firms cannot easily duplicate them. For example, Honda was one of the first companies to outsource many non-core activities such as component manufacturing, logistics, and other services. This allowed Honda to concentrate on design and assembly of motors and engines, its core capabilities.

Operations management includes

the planning and execution of tasks that may be long-term (yearly) or short-term (daily) in nature

Order-to-delivery lead time

this encompasses the time interval starting at the moment that the customer places an order for a product, including the time required to place and fulfill an order, and ending at the moment that the customer takes delivery of the product. In services, customers often judge the value of a service largely on the operation's order-to-delivery performance. For example, a dining experience is marred by slow service, or it is irritating when a salesperson seems to have gotten lost in the back room. Order-to-delivery lead time is also important for highly customized, made-to-order products; a piece of customized jewelry, for example.

each upstream stage of supply is known as a

tier. tier number refers to how directly the supplier works with the firm. A first-tier supplier provides goods and services directly to the firm. For example, the stock film wholesaler is a first-tier supplier to the movie production company

Risk management

to build operations that anticipate and deal with problems resulting from natural events (e.g., earthquakes), social factors (e.g., strikes), economic issues (e.g., the bankruptcy of a critical supplier), or technological issues (e.g., finding a major flaw in software). In addition to these operational types of risks, safety and security are growing key concerns, especially as supply chain operations become more global and dispersed. A famous example is provided by Mattel in 2007. The company recalled over nine million toys because of concerns over lead in the paint that was introduced by the actions of a lower-tier supplier located in China. In a more recent example, Volkswagen was ordered in 2015 to recall nearly a half million cars because these cars had software intentionally designed to circumvent environmental standards for reducing smog.

strategic planning processes

to determine how the firm should compete

evaluation processes

to measure and report how well they are meeting their goals or using their resources.

production processes

to plan and execute the supply, manufacture, and delivery of goods and services to customers

Downstream product suppliers

typically provide enhancements to finished goods such as assembly, packaging, storage, and transportation services.

Upstream product suppliers

typically provide raw materials, components, and services directly related to manufacturing or service production processes.

Supply chain relationships

unique and exclusive relationships with customers and suppliers that are unmatched by competitors.

Costs

usually treats certain dimensions of quality and timeliness as givens and focuses on reducing cost.Different types of costs may be more or less important to customers, depending on the product type. Purchase cost (price) is usually most important for consumer goods. However, maintenance and operating costs are often much more important for customers buying long-life items such as industrial machinery. Disposal costs are becoming more important considerations for durable goods (cars, washing machines) due to environmental concerns.

Strategic planning

which includes high-level product and resource design decisions that define the overall operations objectives and capabilities for the firm and its partners. For example, strategic planning decisions would include what new products to develop, where to locate new plants, and what new technologies to buy. These types of decisions take a long time to implement, and the choices made put limits on the capacities and capabilities governing operational processes.