mkt
complete questions 1.1, 1.2, 1.7, and 1.8 from Chapter 1 and 2.1, 2.7, 2.8, and 2.10 from Chapter 2). Most of these are math-based problems, for which I would like you to show your work, which entails writing out the formula(s) and the process you took to get to the answer.
Operations Management: Sustainability and Supply Chain Management
Twelfth Edition
Chapter 1
Operations and Productivity
Copyright 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
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Outline (1 of 2)
Global Company Profile: Hard Rock Caf
What Is Operations Management?
Organizing to Produce Goods and Services
The Supply Chain
Why Study O M?
What Operations Managers Do
Outline (2 of 2)
The Heritage of Operations Management
Operations for Goods and Services
The Productivity Challenge
Current Challenges in Operations Management
Ethics, Social Responsibility, and Sustainability
Operations Management at Hard Rock Cafe
First opened in 1971
Now 150 restaurants in over 53 countries
Rock music memorabilia
Creates value in the form of good food and entertainment
3,500+ custom meals per day in Orlando
How does an item get on the menu?
Role of the Operations Manager
Learning Objectives (1 of 2)
1.1 Define operations management
1.2 Explain the distinction between goods and services
1.3 Explain the difference between production and productivity
Learning Objectives (2 of 2)
1.4 Compute single-factor productivity
1.5 Compute multifactor productivity
1.6 Identify the critical variables in enhancing productivity
What Is Operations Management?
Production is the creation of goods and services
Operations management (O M) is the set of activities that create value in the form of goods and services by transforming inputs into outputs
Organizing to Produce Goods and Services
Essential functions:
Marketing generates demand
Production/operations creates the product
Finance/accounting tracks how well the organization is doing, pays bills, collects the money
Organizational Charts (1 of 3)
Figure 1.1 Organization Charts for Two Service Organizations and One Manufacturing Organization
Organizational Charts (2 of 3)
Figure 1.1 [continued]
Organizational Charts (3 of 3)
Figure 1.1 [continued]
The Supply Chain
A global network of organizations and activities that supply a firm with goods and services
Members of the supply chain collaborate to achieve high levels of customer satisfaction, efficiency and competitive advantage
Figure 1.2 Soft Drink Supply Chain
Why Study O M?
O M is one of three major functions of any organization; we want to study how people organize themselves for productive enterprise
We want (and need) to know how goods and services are produced
We want to understand what operations managers do
O M is such a costly part of an organization
Table 1.1 Options for Increasing Contribution
What Operations Managers Do
Basic Management Functions
Planning
Organizing
Staffing
Leading
Controlling
Ten Strategic Decisions
Table 1.2 Ten Strategic Operations Management Decisions
Decision Chapter(s)
1. Design of goods and services 5, Supplement 5
2. Managing quality 6, Supplement 6
3. Process and capacity strategy 7, Supplement 7
4. Location strategy 8
5. Layout strategy 9
6. Human resources and job design 10
7. Supply-chain management 11, Supplement 11
8. Inventory management 12, 14, 16
9. Scheduling 13, 15
10. Maintenance 17
The Strategic Decisions (1 of 5)
Design of goods and services
Defines what is required of operations
Product design determines quality, sustainability and human resources
Managing quality
Determine the customers quality expectations
Establish policies and procedures to identify and achieve that quality
The Strategic Decisions (2 of 5)
Process and capacity design
How is a good or service produced?
Commits management to specific technology, quality, resources, and investment
Location strategy
Nearness to customers, suppliers, and talent
Considering costs, infrastructure, logistics, and government
The Strategic Decisions (3 of 5)
Layout strategy
Integrate capacity needs, personnel levels, technology, and inventory
Determine the efficient flow of materials, people, and information
Human resources and job design
Recruit, motivate, and retain personnel with the required talent and skills
Integral and expensive part of the total system design
Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.
The Strategic Decisions (4 of 5)
Supply chain management
Integrate supply chain into the firms strategy
Determine what is to be purchased, from whom, and under what conditions
Inventory management
Inventory ordering and holding decisions
Optimize considering customer satisfaction, supplier capability, and production schedules
The Strategic Decisions (5 of 5)
Scheduling
Determine and implement intermediate- and short-term schedules
Utilize personnel and facilities while meeting customer demands
Maintenance
Consider facility capacity, production demands, and personnel
Maintain a reliable and stable process
Where Are the O M Jobs?
Technology/methods
Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
Opportunities
Figure 1.3 Many Opportunities Exist for Operations Managers
Certifications
A P I C S, the Association for Operations Management
American Society for Quality (A S Q)
Institute for Supply Management (I S M)
Project Management Institute (P M I)
Council of Supply Chain Management Professionals
Charter Institute of Procurement and Supply (C I P S)
Significant Events in O M
Figure 1.4 Significant Events in Operations Management
The Heritage of O M (1 of 2)
Division of labor (Adam Smith 1776; Charles Babbage 1852)
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Coordinated assembly line (Ford/ Sorenson 1913)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian Gilbreth 1922)
Quality control (Shewhart 1924; Deming 1950)
The Heritage of O M (2 of 2)
Computer (Atanasoff 1938)
C P M/P E R T (DuPont 1957, Navy 1958)
Material requirements planning (Orlicky 1960)
Computer aided design (C A D 1970)
Flexible manufacturing system (F M S 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization (1992)
Internet (1995)
Eli Whitney
Born 1765; died 1825
In 1798, received government contract to make 10,000 muskets
Showed that machine tools could make standardized parts to exact specifications
Musket parts could be used in any musket
Frederick W. Taylor
Born 1856; died 1915
Known as father of scientific management
In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first motion and time studies
Created efficiency principles
Taylors Principles
Management Should Take More Responsibility for:
Matching employees to right job
Providing the proper training
Providing proper work methods and tools
Establishing legitimate incentives for work to be accomplished
Frank and Lillian Gilbreth
Frank (1868-1924); Lillian (1878-1972)
Husband and wife engineering team
Further developed work measurement methods
Applied efficiency methods to their home and 12 children!
Book and Movie: Cheaper by the Dozen, Bells on Their Toes
Henry Ford
Born 1863; died 1947
In 1903, created Ford Motor Company
In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor past work station
Paid workers very well for 1911
($5/day!)
W. Edwards Deming
Born 1900; died 1993
Engineer and physicist
Credited with teaching Japan quality control methods in post-W W2
Used statistics to analyze process
His methods involve workers in decisions
Contributions from
Industrial engineering
Statistics
Management
Economics
Physical sciences
Information technology
Operations for Goods and Services (1 of 2)
Services Economic activities that typically produce an intangible product (such as education, entertainment, lodging, government, financial, and health services)
Operations for Goods and Services (2 of 2)
Manufacturers produce tangible product, services often intangible
Operations activities often very similar
Distinction not always clear
Few pure services
Table 1.3 Differences between Goods and Services
Characteristics of Services Characteristics of Goods
Intangible: Ride in an airline seat Tangible: The seat itself
Produced and consumed simultaneously: Beauty salon produces a haircut that is consumed as it is produced Product can usually be kept in inventory (beauty care products)
Unique: Your investments and medical care are unique Similar products produced (iPods)
High customer interaction: Often what the customer is paying for (consulting, education) Limited customer involvement in production
Inconsistent product definition: Auto Insurance changes with age and type of car Product standardized (iPhone)
Often knowledge based: Legal, education, and medical services are hard to automate Standard tangible product tends to make automation feasible
Services dispersed: Service may occur at retail store, local office, house call, or via internet. Product typically produced at a fixed facility
Quality may be hard to evaluate: Consulting, education, and medical services Many aspects of quality for tangible products are easy to evaluate (strength of a bolt)
Reselling is unusual: Musical concert or medical care Product often has some residual value
U.S. Agriculture, Manufacturing, and Service Employment
Figure 1.5 U.S. Agriculture, Manufacturing, and Service Employment
Table 1.4 Organizations in Each Sector
Service Pay
Perception that services are low-paying
42% of service workers receive above average wages
14 of 33 service industries pay below average
Retail trade pays only 61% of national average
Overall average wage is 96% of the average
Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
The objective is to improve productivity!
Important Note!
Production is a measure of output only and not a measure of efficiency
The Economic System
Figure 1.6 The Economic System Adds Value by Transforming Inputs to Outputs
Improving Productivity at Starbucks (1 of 2)
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines
Saved 12 seconds per shot
Improving Productivity at Starbucks (2 of 2)
Operations improvements have helped Starbucks increase yearly revenue per outlet by $250,000 to $1,000,000.
Productivity has improved by 27%, or about 4.5% per year.
Productivity
Measure of process improvement
Represents output relative to input
Only through productivity increases can our standard of living improve
Productivity Calculations
Labor Productivity
One resource input single-factor productivity
Multi-Factor Productivity
Also known as total factor productivity
Output and inputs are often expressed in dollars
Multiple resource inputs multi-factor productivity
Collins Title Productivity (1 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
Collins Title Productivity (2 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Collins Title Productivity (3 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Collins Title Productivity (4 of 4)
Old System:
Staff of 4 works 8 hrs/day Payroll cost = $640/day
8 titles/day
Overhead = $400/day
New System:
14 titles/day
Overhead = $800/day
Measurement Problems
Quality may change while the quantity of inputs and outputs remains constant
External elements may cause an increase or decrease in productivity
Precise units of measure may be lacking
Productivity Variables
Labor – contributes about 10% of the annual increase
Capital – contributes about 38% of the annual increase
Management – contributes about 52% of the annual increase
Key Variables for Improved Labor Productivity
Basic education appropriate for the labor force
Diet of the labor force
Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
Labor Skills
Figure 1.7 About half of the 17-year-olds in the U.S. cannot correctly answer questions of this type
Capital
Management
Ensures labor and capital are effectively used to increase productivity
Use of knowledge
Application of technologies
Knowledge societies
Labor has migrated from manual work to technical and information-processing tasks
More effective use of technology, knowledge, and capital
Productivity in the Service Sector
Productivity improvement in services is difficult because:
Typically labor intensive
Frequently focused on unique individual attributes or desires
Often an intellectual task performed by professionals
Often difficult to mechanize and automate
Often difficult to evaluate for quality
Productivity at Taco Bell (1 of 2)
Improvements:
Revised the menu
Designed meals for easy preparation
Shifted some preparation to suppliers
Efficient layout and automation
Training and employee empowerment
New water and energy saving grills
Productivity at Taco Bell (2 of 2)
Results:
Preparation time cut to 8 seconds
Management span of control increased from 5 to 30
In-store labor cut by 15 hours/day
Floor space reduced by more than 50%
Stores average 164 seconds/customer from drive-up to pull-out
Water- and energy-savings grills conserve 300 million gallons of water and 200 million KwH of electricity each year
Green-inspired cooking method saves 5,800 restaurants $17 million per year
Current Challenges in O M
Globalization
Supply-chain partnering
Sustainability
Rapid product development
Mass customization
Lean operations
Ethics, Social Responsibility, and Sustainability (1 of 2)
Challenges facing operations managers:
Develop and produce safe, high-quality green products
Train, retrain, and motivate employees in a safe workplace
Honor stakeholder commitments
Ethics, Social Responsibility, and Sustainability (2 of 2)
Stakeholders
Those with a vested interest in an organization, including customers, distributors, suppliers, owners, lenders, employees, and community members.
Copyright
Units produced
Productivity=
Input used
Units produced
Productivity=
Labor-hours used
1,000
==4 units/labor-hour
250
Output
Multifactor =
Labor + Material + Energy + Capital + Mi
scellaneous
8 titles/day
Oldlaborproductivity==.25 titles/labor-h
r
32labor-hrs
14 titles/day
Newlaborproductivity==.4375 titles/labor
-hr
32labor-hrs
8 titles/day
Old multifactor productivity==.0077 titl
es/dollar
$640 + 400
14 titles/day
New multifactor productivity==.0097 titl
es/dollar
$640 + 800 Operations Management: Sustainability and Supply Chain Management
Twelfth Edition
Chapter 2
Operations Strategy in a Global Environment
Copyright 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
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Outline (1 of 2)
Global Company Profile: Boeing
A Global View of Operations and Supply Chains
Developing Missions and Strategies
Achieving Competitive Advantage Through Operations
Issues in Operations Strategy
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Outline (2 of 2)
Strategy Development and Implementation
Strategic Planning, Core Competencies, and Outsourcing
Global Operations Strategy Options
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Boeings Global Supply-Chain Strategy (1 of 3)
Some of the International Suppliers of Boeing 787 Components
Supplier Headquarters Country Component
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and P L M software
Messier-Bugatti France Electric brakes
Thales France Electrical power conversion system
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
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Boeings Global Supply-Chain Strategy (2 of 3)
Supplier Headquarters Country Component
Cobham UK Fuel pumps and valves
Rolls-Royce UK Engines
Smiths Aerospace UK Central computer systems
B A E Systems UK Electronics
Alenia Aeronautica Italy Upper center fuselage
Toray Industries Japan Carbon fiber for wing and tail units
Fuji Heavy Industries Japan Center wing box
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Boeings Global Supply-Chain Strategy (3 of 3)
Supplier Headquarters Country Component
Kawasaki Heavy Industries Japan Forward fuselage, fixed sections of wing
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Industries Japan Wing box
Chengdu Aircraft China Rudder
Hafei Aviation China Parts
Korean Airlines South Korea Wingtips
Saab Sweden Cargo and access doors
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Learning Objectives (1 of 2)
2.1 Define mission and strategy
2.2 Identify and explain three strategic approaches to competitive advantage
2.3 Understand the significant key success factors and core competencies
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Learning Objectives (2 of 2)
When you complete this chapter you should be able to:
2.4 Use factor rating to evaluate both country and provider outsources
2.5 Identify and explain four global operations strategy options
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Global Strategies (1 of 2)
Boeing sales and supply chain are worldwide
Benetton moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution
Sony purchases components from suppliers in Thailand, Malaysia, and around the world
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Global Strategies (2 of 2)
Volvo considered a Swedish company, purchased by a Chinese company, Geely. The current Volvo S40 is assembled in Belgium, South Africa, Malaysia and China on a platform shared with the Mazda 3 (built in Japan) and the Ford Focus (built in Europe).
Haier A Chinese company, produces compact refrigerators (it has one-third of the U . S. market) and wine cabinets (it has half of the U . S. market) in South Carolina
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Growth of World Trade
Figure 2.1 Growth of World Trade as a Percent of World G D P
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Reasons to Globalize
Improve the supply chain
Reduce costs and exchange rate risks
Improve operations
Understand markets
Improve products
Attract and retain global talent
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Improve the Supply Chain
Locating facilities closer to unique resources
Auto design to California
Athletic shoe production to China
Perfume manufacturing in France
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Reduce Costs
Risks associated with currency exchange rates
Reduce direct and indirect costs
Trade agreements can lower tariffs
Maquiladoras
World Trade Organization (W T O)
North American Free Trade Agreement (N A F T A)
A P E C, S E A T O, M E R C O S U R, C A F T A
European Union (E U)
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Improve Operations
Understand differences between how business is handled in other countries
Japanese inventory management
Germans robots
Scandinavians ergonomics
International operations can improve response time and customer service
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Understand Markets
Interacting with foreign customers, suppliers, competition can lead to new opportunities
Cell phone design moved from Europe to Japan
Extend the product life cycle
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Improve Products
Remain open to free flow of ideas
Toyota and B M W manage joint research and development
Reduced risk, state-of-the-art design, lower costs
Samsung and Bosch jointly produce batteries
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Attract and Retain Global Talent
Offer better employment opportunities
Better growth opportunities and insulation against unemployment
Relocate unneeded personnel to more prosperous locations
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Cultural and Ethical Issues
Social and cultural behavior differs
International laws, agreements, codes of conduct for ethical behaviors
Mobility of capital, information, goods, and people
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Companies Want To Consider
National literacy rate
Rate of innovation
Rate of technology change
Number of skilled workers
Political stability
Product liability laws
Export restrictions
Variations in language
Work ethic
Tax rates
Inflation
Availability of raw materials
Interest rates
Population
Transportation infrastructure
Communication system
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Match Product and Parent
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Match Product and Country
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Developing Missions and Strategies
Mission statements tell an organization where it is going
The Strategy tells the organization how to get there
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Mission
Mission – where is the organization going?
Organizations purpose for being
Answers What do we contribute to society?
Provides boundaries and focus
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Figure 2.2 Mission Statements for Three Organizations (1 of 3)
Merck
The mission of Merck is to provide society with superior products and servicesinnovations and solutions that improve the quality of life and satisfy customer needsto provide employees with meaningful work and advancement opportunities and investors with a superior rate of return.
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Figure 2.2 Mission Statements for Three Organizations (2 of 3)
PepsiCo
Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.
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Figure 2.2 Mission Statements for Three Organizations (3 of 3)
Arnold Palmer Hospital
Arnold Palmer Hospital for Children provides state of the art, family-centered healthcare focused on restoring the joy of childhood in an environment of compassion, healing, and hope.
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Factors Affecting Mission
Mission
Philosophy and Values
Profitability and Growth
Environment
Customers
Public Image
Benefit to Society
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Strategic Process
Organizations Mission
Functional Area Missions
Marketing
Operations
Finance/Accounting
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Figure 2.3 Sample Missions for a Company, the Operations Function, and Major O M Departments (1 of 4)
Sample Company Mission
To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers expectations.
Sample Operations Management Mission
To produce products consistent with the companys mission as the worldwide low-cost manufacturer.
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Figure 2.3 Sample Missions for a Company, the Operations Function, and Major O M Departments (2 of 4)
Sample O M Department Missions
Product design To design and produce products and services with outstanding quality and inherent customer value.
Quality management To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations
Process design To determine, design, and produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost.
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Figure 2.3 Sample Missions for a Company, the Operations Function, and Major O M Departments (3 of 4)
Location To locate, design, and build efficient and economical facilities that will yield high value to the company, its employees, and the community.
Layout design To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life.
Human resources To provide a good quality of work life, with well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange for outstanding individual contribution from employees at all levels.
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Figure 2.3 Sample Missions for a Company, the Operations Function, and Major O M Departments (4 of 4)
Supply-chain management To collaborate with suppliers to develop innovative products from stable, effective, and efficient sources of supply.
Inventory To achieve low investment in inventory consistent with high customer service levels and high facility utilization.
Scheduling To achieve high levels of throughput and timely customer delivery through effective scheduling.
Maintenance To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment.
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Strategy
Action plan to achieve mission
Functional areas have strategies
Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses
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Strategies for Competitive Advantage
Differentiation better, or at least different
Cost leadership cheaper
Response more responsive
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Competing on Differentiation
Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value
Safeskin gloves leading edge products
Walt Disney Magic Kingdom experience differentiation
Hard Rock Cafe dining experience
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Experience Differentiation
Engaging a customer with a product through imaginative use of the five senses, so the customer experiences the product
Theme parks use sight, sound, smell, and participation
Movie theatres use sight, sound, moving seats, smells, and mists of rain
Restaurants use music, smell, and open kitchens
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Competing on Cost
Provide the maximum value as perceived by customer. Does not imply low quality.
Southwest Airlines secondary airports, no frills service, efficient utilization of equipment
Walmart small overhead, shrinkage, and distribution costs
Franz Colruyt no bags, no bright lights, no music, and doors on freezers
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Competing on Response
Flexibility is matching market changes in design innovation and volumes
A way of life at Hewlett-Packard
Reliability is meeting schedules
German machine industry
Quickness in design, production, and delivery
Johnson Electric, Pizza Hut
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O Ms Contribution to Strategy
Figure 2.4 Achieving Competitive Advantage Through Operations
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Issues in Operations Strategy
Resources view
Value-chain analysis
Porters Five Forces model
Operating in a system with many external factors
Constant change
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Figure 2.5 Product Life Cycle (1 of 2)
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Figure 2.5 Product Life Cycle (2 of 2)
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S W O T Analysis
Analysis
Internal Weaknesses
Internal Strengths
Mission
External Opportunities
External Threats
Strategy
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Figure 2.6 Strategy Development Process
Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors.
Determine the Corporate Mission
State the reason for the firms existence and identify the value it wishes to create.
Form a Strategy
Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines.
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Strategy Development and Implementation
Identify key success factors
Integrate O M with other activities
Build and staff the organization
The operations managers job is to implement an O M strategy, provide competitive advantage, and increase productivity
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Key Success Factors
Figure 2.7 Implement Strategy by Identifying and Executing Key Success Factors That Support Core Competencies
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Activity Mapping at Southwest Airlines (1 of 7)
Figure 2.8 Activity Mapping at Southwest Airlines Low-Cost Competitive Advantage
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Activity Mapping at Southwest Airlines (2 of 7)
Figure 2.8 [continued]
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Activity Mapping at Southwest Airlines (3 of 7)
Figure 2.8 [continued]
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Activity Mapping at Southwest Airlines (4 of 7)
Figure 2.8 [continued]
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Activity Mapping at Southwest Airlines (5 of 7)
Figure 2.8 [continued]
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Activity Mapping at Southwest Airlines (6 of 7)
Figure 2.8 [continued]
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Activity Mapping at Southwest Airlines (7 of 7)
Figure 2.8 [continued]
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Implementing Strategic Decisions (1 of 2)
Table 2.1 Operations Strategies of Two Drug Companies
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Implementing Strategic Decisions (2 of 2)
Table 2.1 [continued]
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Strategic Planning, Core Competencies, and Outsourcing (1