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    Operat ions as a

    Compet i t iveWeapon

    Chapter 1 Year ExpectedDemand

    CashFlow

    0 80,000 ($150,000)

    1 90,000 $90,000

    2 100,000 $150,000

    3 110,000 $210,000

    4 120,000 $270,000

    5 130,000 $300,000

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    HowOperations As a Competitive Weaponf i ts the Operat ions Management

    Phi losophy

    Operations As a CompetitiveWeapon

    Operations StrategyProject Management Process StrategyProcess Analysis

    Process Performance and QualityConstraint Management

    Process LayoutLean Systems

    Supply Chain StrategyLocation

    Inventory ManagementForecasting

    Sales and Operations PlanningResource Planning

    Scheduling

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    FedEx

    What make the firm to be

    successful?

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    FedEx

    Fast

    On-time deliveries (reliable)

    Relatively low cost

    Technology in shipment tracking

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    From the case,

    What is the worldwide phenomenon thathas change the business operations?

    What impact does it have to business likeFedEx?

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    Inputs

    Transformation Processes

    (Adding value) Outputs

    Operations Management is

    The systematic design, direction and control

    of processes that transform inputs into

    services and products for internal, as well as

    external, customers.

    ? ?

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    INPUTMaterialMachinesLaborManagementCapital

    TRANSFORMATIONPROCESS

    OUTPUTGoodsServices

    Feedback

    Operat ions as a

    Transformat ion

    Process

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    Physical: as in manufacturing operations

    Locational: as in transportation operations

    Exchange: as in retail operations

    Physiological: as in health care

    Psychological: as in entertainment

    Informational: as in communication

    Transformat ion

    Process

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    Operat ions Management

    as a Func t ion

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    Processes

    Processes should add value.

    Processes can be broken down into

    sub-processes, which in turn can be brokendown further.

    Any process that is part of a larger process is

    considered a nested process.Each process and each nested process has

    inputs and outputs.

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    Nested Processes

    Advert isement Design and Planning Process

    Creative design pro cess

    Receive wo rk request As semb le team Prepare several design s Receive inputs fromAccoun t Execut ive

    Prepare f inal concept Revise con cept perclients inputs

    Media plannin g pro cess

    Receive work requ est Prepare several med iaplans

    Receive inpu ts fromAcc oun t Execut ive

    Prepare final plan Revise plan per clientsinputs

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    Process View

    of an Ad Agency

    Accou nt ing process

    Product ion process Prepare ad for pub lication

    and deliver to media

    outlets

    Advert isement

    design and

    p lann ing process Create the ad to the

    needs of the client

    and p repare a plan

    for media exposure

    Output interface

    process

    Commu nicate withclient, get needs, and

    coordinate progress

    Inpu

    tsOutputs

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    External vs . In ternal

    Customers

    External Customers are those who purchasethe goods and services.

    Internal Customers are those who receivethe output of others within the firm. They arepart of the transformation process.

    Inputs fromotherprocesses

    Transformation Processes(Adding value)

    Outputs toInternal orto Externalcustomers

    Example of external and internal customer in

    Manufacturing or service company?

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    Service Processes and

    Manu factu r ing Processes

    Manufacturing processes change materialsin one or more of the following dimensions:

    Physical properties

    Shape

    Fixed dimensions

    Surface finish

    Joining parts and materials

    If a process isnt doing at least one of these, then it is

    a service (non-manufacturing) process.

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    Manufactur ing

    and Service

    Goods Production Tangible

    Can be inventoried Low customer contact

    Capital Intensive

    Quality easily

    measured

    Service Production

    Intangible

    Cant be inventoried

    High customer contact

    Labor Intensive

    Quality hard to measure

    Most firms provide both goods and services.

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    Value Chains

    Value chains are an interrelated series ofprocesses that produce a service or product

    to the satisfaction of customers.Value chains may have core processes or support

    processes.

    Core processes deliver value to external

    customers.Support processes provide vital inputs for

    the core processes.

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    Core Processes

    1. Customer relationship processes Identify, attract, and build relationships with external

    customers and facilitate the placement of orders.

    2. New service/product development processes Design and develop new services or products from

    inputs received from external customer specifications.

    3. Order fulfillment processes The activities required to produce and deliver the service

    or product to the external customers.4. Supplier relationship processes

    Select suppliers of services, materials and informationand facilitate the timely and efficient flow of these itemsinto the firm.

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    Support Processes

    In ternal Value-Chain L inkages

    Firms have many processes that support the core processes.

    Ex

    terna

    lsupp

    liers E

    xtern

    alc

    ustom

    ers

    Suppor t proc esses

    Suppl ier

    re lat ionship

    process

    Order

    fu l f i l lment

    process

    New service/

    product

    development

    process

    Customer

    relat ionship

    process

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    Suppo rt processes

    Example:

    Capital acquisition

    Recruitment & Hiring

    Budgeting

    Information System

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    Prog ress ive Insurance

    Grew from $1.3 billion to $11 in 13 years.

    How did they do it?

    Operational Innovation (Designing new processes)

    Immediate Response Claims Handling (24 hours a day).

    Streamlined claims processing, from 7-10 days to 9 hours.

    Web site for agents only.

    Web site for customer information, inquiries and routine

    processing.

    Agents quickly go to scene of accident.

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    Operat ions as a Set o f

    Decis ions

    (1) Recognize and clearly define the problem.

    (2) Collect the information needed to analyze

    possible alternatives.

    (3) Choose the most attractive alternative.(4) Implement the chosen alternative.

    Basic Decision-making Steps

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    Operat ions as a Set o f

    Decis ions

    Strategic Decisions Tactical Decisions

    Development of new

    capabilities Maintenance of existingcapabilities

    Design of newprocesses

    Development andorganization of valuechains

    Key performancemeasures

    Process improvement

    and performancemeasures Management and

    planning of projects Generation of production

    and staffing plans Inventory management Resource scheduling

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    Product iv i ty

    Productivity is the value of outputs(services and products) produced,

    divided by the value of input resources(wages, costs of equipment, etc.)

    OutputProductivity = Input

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    Product iv i ty Calculat ion

    Examp le 1.1

    1. Single factorThree employees process 600 insurancepolicies in a week. They work 8 hours per day,

    5 days per week. Calculate the productivity inpolicies per hour.

    Labor productivity =Policies ProcessedEmployee Hours

    600 Policies(3 Employees) (40 hours/employee)= = 5 policies/hr

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