OPM 3000

• Operations are defined as a collection of processes.
• A process is a transformation of inputs into outputs through a network of activities and buffers, utilizing resources, information and management.
• A business process is a network of activities performed by resources that transform inputs into outputs.
• Operations is what a company actually does in order to make money.
• Utility is a measurement of customer preference of a product/service.
• Utility is the value customers obtain from buying the product/service.
• Utility is composed of three components: Consumption utility, Price, and Inconvenience
• Consumption Utility is a measurement of how much you like a service, ignoring the effects of price and its inconvenience.
• Consumption utility consists of performance and fit.
• Performance: Features of product/service that most people agree are most desirable
• Fit: With some attributes, customers do not agree on what features are the best
• Inconvenience is the reduction in utility/value that results from the effort of obtaining the product or service.
• Inconvenience consists of location and timing.
• Location: All else equal you prefer your product/service to be delivered to you closer rather than farther.
• Timing: All else equal you prefer your product or service to be delivered sooner rather than later.
• Customers buy products or services that maximize their utility.
• Firm's capabilities: the dimensions of the customer's utility function a firm is able to satisfy
• Companies' capabilities allow them to do well on some(but not all) of the subcomponents of customers' utility function.
• The business strategy must be compatible with the operations structure
• Business Strategy: A plan designed to achieve competitive advantage through differentiation from competitors.
• Operations Strategy: The set of choices made by an organization regarding how it will produce its goods and services, including decisions about what technologies to use, where to locate facilities, which suppliers to work with, etc.
• Firms below the frontier are dominated firms
• Firms on the efficient frontier are world class firms
• The x axis of the graph is the low price and the y axis is the quality/responsiveness of the firm
• Roles for operations in executing strategy: Overcome inefficiency (move to the frontier), execute tradeoffs (move along the frontier), and innovate (push the frontier)
• The 3 sources of inefficiencies are: waste, variability, and inflexibility
• Waste: Consuming inputs or resources without adding value
• Variability: Changes in supply or demand over time
• Inflexibility: Inability of an operation to adapt to changes
• Process: A set of activities that take a collection of inputs, perform some work or activities with those inputs, and then yield a set of output
• Process scope: which activities are included
• Flow unit: who or what enters and leaves the process
• Resources: who or what is used to do the transformation
• Process flow diagram: A diagram that shows the steps in a process, from start to finish.
• Rectangle= Tasks/ Operations
• Triangle= Storage of goods/queues of people, orders
• Arrow= Unit flows
• Process Metrics include: Inventory, Flow Rate, and Flow Time
• Inventory: How many flow units are in process
• Flow Rate: How quickly do flow units arrive/leave