L1,2,3,4 - OM and Op. Strategy - Developing resources and processes for strategic impact, Process analysis - Analyzing operational capabilities

Improving bottleneck capacity

Add resources, balance, avoid rework, make batches

Apple vs Samsung

Apple has lower CCC, they are focused on customer needs, product design and development. The rest is outsourced. They also have retail stores to get closer to customers. Samsung is, besides that, focused on materials, components, but they also outsource a lot of things but they cover a much larger part of supply chain. Apple doesn't stock inventory, it is handled by their suppliers. Apple gets money immediately from their stores. Samsung is vertically integrated.

Operations management levers

Are used to influence indirectly the 4 competitive dimensions (cost, quality, flexibility and cost). They are capacity, material flows, information flows and quality/accuracy of process). Bottom up approach-build capabilities

Flow rate depends on

Available inputs, capacity and demand

Elan producing Bikes

Bottom up approach failed, obsolete capabilities not matching the production needs- they wanted to produce alu bikes with old rog equipment. Failed bottom-up approach

Servitization

Building service activities to support a firm's product offerings - fleet management

Business Functions

Marketing and Sales, Finance, and Operations Management

Inputs to be transformed

Materials, information, customers

Little's Law

I=R*T (works on average in unstable conditions)

Strategic positioning - Redesign process

If we are close to the frontier, why don't we push even further? Change the industry standard and try new technology. OM can help by planning - introducing novelties and forecasting consequences.

Managing flow rate

Improve BN capacity, improve BN utilization

Increasing process capacity

Increase bottleneck capacity, balance the work between resources, making batches of products

3 operational measures of process performance

Inventory (how many flow units are in the process), flow rate (rate at which flow units enter or leave the process), flow time ( time a unit spends in the process)

Paths to take to increase profitability

Low cost (low variability, low inventory, high utilization) High sales(high variability, high inventory, low utilization) In both cases we want short flow time

Horizontal perspective of operations strategy

Market requirements (what the customer wants) Operations capabilities (match operations capabilities with market requirements)

Theoretical Flow Time

Minimum amount of time required for processing a typical flow unit without any waiting - only value adding activities

Elan sailboats

No company should neglect any of 4 attributes in order to be competitive on the market, but there must be a strategic tradeoff. Also competitiveness analysis needs to be done in relative terms - compare ourselves to competitors. Mass customization - mix between mass production and customized products.

top-down perspective of operations strategy

Operations strategy should follow the business strategy (What the business wants operations to do)

Resource Utilization (how much time the resource is utilized)

Process capacity/Resource capacity

Order Qualifiers

characteristics that customers perceive as minimum standards of acceptability to be considered as a potential for purchase

Inventory Turnover (annual turns)

R/I = 1/T

Managing flow time

Reducing TFT (shorten the non-value-adding activities), work faster, do it right the first time, focus on product which take less time, do several activities at the same time, reduce the waiting time

Process

A sequence of activities linked to one another which result in valuable information for decision making. They are behind every function in a company. In processes, inputs are transformed into outputs.

Operations strategy - strategic trade-offs - Product-process attributes

A tradeoff between time, quality, flexibility and cost in order to reach competitive advantage

Effect of variability & capacity utilization on waiting

Variability has a major influence on waiting time. It means unexpected demand, customer-specific processing time and long waiting. The more variability, the less stable process. Working at capacity of 100% results in waiting times close to infinity. Extra capacity needs to be there in emergency call centers.

Bottom-up perspective of operations strategy

What day to day experience suggests operations should do (develop capabilities to make business strategy work)

Value Stream Mapping

a graphical way to analyze where value is or is not being added as material flows through a process

Constrained process

Capacity constrained (lack of input or capacity) Demand constrained (lack of demand)

Order Winners

Characteristics of an organization's goods or services that cause it to be perceived as better than the competition

Dell's revolution in the PC market.

Dell reduced its days inventory significantly and reduced the cash conversion cycle. They were turning sales into cash much faster. Dell took advantage of the Internet and came up with direct-to-customer business model. Dell eliminated the distribution channels. Dell gave the choice to customize your own computer and wait only a couple of days.

Resources - Inputs to enable transformation

Facilities, people, knowledge, machines

Performance Measures

Financial(CCC - very aggregated), customer satisfaction, operational

Actual Flow Time

Flow time including waiting - also non-value adding activities

Strategic positioning - Overcome inefficiencies

Follow what the competitors are doing and compare in terms of both attributes. How can we improve our inefficiencies and get closer to the industry frontier.

Outputs

Goods and services

Production

The creation of goods and services - transformation

Cash Conversion Cycle (CCC)

The length of time required for a company to convert cash invested in its operations to cash received as a result of its operations. First we have cash, then we invest it in in our acc. payable to pay our suppliers, we build products (inventory), then we sell and later our customers pay (acc. receivable). Negative - we pay our suppliers late and the customers pay us immediately or even pre-hand.

Capacity

The maximum rate at which the resource can process the units. It determines the flow rate. Equal to the bottleneck capacity.

Bottleneck

The slowest resource of the process. Determines the process capacity. Has to be fully utilized.

Strategic positioning - Making Operational Tradeoffs - Deustche

Tradeoff between responsiveness (time) and cost efficiency. How to balance product attributes? There will be a tradeoff.

Improve BN utilization

match supply and demand better (flatten the demand), take care of bottleneck (avoid starvation or blocking - keep inventories in front of BN station), reduce set-ups and set-up times (setting up, loading)

lead time

the time needed to respond to a customer order

Flow time efficiency

theoretical flow time/actual flow time