M2: Operations Strategy in a Global Environment

• ‘Globalization’ describes businesses’ deployment of facilities and operations around the world.
• Operations management is a discipline that applies to all industries, regardless of whether it is a restaurant, a manufacturing company, a hotel, a hospital, or a department store - the production of goods and services needs operation management
• Production


  The creation of goods and services. It turns inputs, such as natural resources, raw materials, human resources, and capital, into outputs, which are goods and services
• Characteristics of Goods


  • Tangible product
  • Consistent product definition
  • Production usually separate from consumption
  • Can be inventoried
  • Low customer interaction
• Characteristics of Services


  • Intangible product
  • Produced and consumed at same time
  • Often unique
  • High customer interaction
  • Inconsistent product definition
  • Often knowledge-based
  • Frequently dispersed
• Production management


  The process of planning and regulating the operations of that part of a business which is responsible for actual transformation of materials into finished products
• Three main types of operations management decisions

  • Production planning
  • Production control
  • Improving production and operations
• Operations management is one of three major functions (marketing, finance, and operations) of any organization
• Essential functions in organizing to produce goods and services

  • Marketing – generate demand
  • Production/Operations - creates the product
  • Finance/Accounting - tracks how well the organization is doing, pays bills, collects the money
• The Heritage of Operations Management

  • Division at tabor (Adam Smith 1776 and Charles Cabbage 1552)
  • Standardized parts (Whitiney 1800)
  • Scientific Management (Taylor 1881)
  • Coordinated assembly line (Ford/Sorenson/Avery 1913
  • Gantt charts (Gant 1916)
  • Motion study (Frank and Lillian Gilbreth 1922)
  • Quality control (Shewhart 1924; Deming 1950)
  • Computer (Atanasoff 1938)
  • CPM/PERT (DuPont 1957)
  • Material requirements planning (Orlicky 1960)
  • Computer aided design (CAD 1970)
  • Flexible manufacturing system (FMS 1975)
  • Baldrige Quality Awards (1980)
  • Computer integrated manufacturing (1900)
  • Globalization (1992)
  • Internet (1995)
• Productivity


  The ratio of outputs (goods and services) divided by the inputs (resources such as labor and capital)
• The objective is to improve productivity!
• Labor Productivity


  Productivity = Units produced/ Labor hours used
• Multi-Factor Productivity


  Productivity = Output/ Labor + Material + Energy + Capital + Miscellaneous
• Globalization describes businesses' deployment of facilities and operations around the world
• Reasons why domestic business operations decide to change to some form of global operations

  • Reduce Costs
  • Improve the Supply Chain
  • Provide Better Goods and Services
  • Understand Markets
  • Learn to improve operations
  • Attract and Retain Global Talent
• Mission


  States the purpose or rationale for organization's existence. This provide boundaries and focus for organizations and the concept around which the industry can rally
• Strategy


  An organization's action plan to achieve the mission
• Three strategic approaches to competitive advantage

  • Differentiation
  • Cost leadership
  • Response
• Ten Strategic Operation Management Decisions

  • Design of goods and services
  • Managing quality
  • Process and capacity design
  • Location strategy
  • Layout strategy
  • Human resources and job design
  • Supply-chain management
  • Inventory management
  • Scheduling
  • Maintenance
• Issues in Operations Strategy

  • Resources view
  • Value-chain analysis
  • Five forces method
• A firm with an international dimension is called international business or a multinational corporation
• Global Operations Strategy Options

  • Domestic
  • International
  • Multinational
  • Global
  • Transnational
• A project refers to a series of related tasks directed toward some major output that requires to be completed in a specified time considering costs and quality constraints
• Examples of Projects


  • Building Construction
  • Research Project
• Three organizational structures for projects

  • Pure project
  • Function project
  • Matrix project
• Pure Project


  A self-contained team that works full time on the project. It is a small project oriented team that is autonomous, an entrepreneurial center of opportunity and characterized by speed and flexibility
• Projects entail different levels of uncertainty and therefore carry risks
• Some projects can be repeated or transferred to other settings or products resulting in another output
• Examples of Projects


  • Building Construction
  • Research Project
• Before any project starts, management decides on how the project will be structured and looks at the characteristics of the project leader
• The three organizational structures

  • Pure project
  • Functional project
  • Matrix project
• Pure Project


  • Self-contained team that works full time on the project
  • Small project oriented team that is autonomous, an entrepreneurial center of opportunity and characterized by speed and flexibility
• Functional Project


  • The project is housed within a functional division
• Matrix Project


  • Each project utilizes people from different functional areas
  • The project manager decides what tasks and when they need to be performed but functional managers control which people and technologies are to be used
  • Different projects (rows of the matrix) borrow resources from functional areas (columns)
  • Senior management decides whether a weak, balanced or strong form of a matrix
• The project manager is the primary contact point with the customer no matter which organizational form is chosen
• Project management involves planning, directing and controlling resources (people, equipment and material) to meet the technical, cost and time constraints of the project
• The primary challenge of project management is to achieve all of the project goals within the given constraint
• Importance of Project Management

  • Strategic Alignment
  • Clear Focus and Objectives
  • Quality Control
  • Leadership
  • Risk Management
  • Orderly Process
  • Subject Matter Expertise
  • Continuous Oversight
  • Managing and Learning from Failure and Success
• Phases of Project Management

  • Planning
  • Scheduling
  • Controlling