Operations and competitiveness
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This document provides an overview of operations management. It discusses key concepts like the transformation process, integrated value chains, and the evolution of operations management over time. Globalization and e-business are changing how operations function by impacting areas like supply chains, logistics, and customer expectations. Maintaining competitiveness requires improving productivity through efficiency gains and breakthroughs.
Operations and competitiveness
- 2. Learnings…. Introduction Transformation process Evolution of operations management Integrated value chain Operations management and e–business Globalization and competitiveness conclusion
- 3. Introduction What is operations? a function or system that transforms inputs into outputs of greater value What is a transformation process? a series of activities along a value chain extending from supplier to customer activities that do not add value are superfluous and should be eliminated What is operations management? Systematic direction, control, and evaluation of the entire range of processes that transform inputs into finished goods or services.
- 5. All operations produce products and services by changing inputs into outputs. They do this by using the ‘input-transformation-output'‘input-transformation-output' process.process. There are two categories of inputs in any operation's processes: 1) Transformed and 2) Transforming resources Transformed resources are the resources that are treated, transformed or converted in the process, that include Materials Information Customers
- 6. The other set of inputs to any operations process are Transforming Resources. These are the resources which act on or carry out the transformation process. There are two main types of transforming resources: Facilities Staff Buildings, Equipment, Plant and Technology of the operation. All The People Involved In The Operations Process.
- 7. How is operations relevant to my major? Accounting Information Technology Management “As an auditor you must understand the fundamentals of operations management.” “IT is a tool, and there’s no better place to apply it than in operations.” “We use so many things you learn in an operations class— scheduling, lean production, theory of constraints, and tons of quality tools.”
- 8. How is operations relevant to my major? Economics Marketing Finance “It’s all about processes. It helps in analysis of investment plant.” “How can you do a good job marketing a product if you’re unsure of its quality or delivery status?” “Most of our capital budgeting requests are from operations, and most of our cost savings, too.”
- 9. Evolution of Operations Management Craft production process of handcrafting products or services for individual customers Division of labor dividing a job into a series of small tasks each performed by a different worker Interchangeable parts standardization of parts initially as replacement parts; enabled mass production
- 10. Evolution of Operations Management (cont.) Scientific management systematic analysis of work methods Mass production high-volume production of a standardized product for a mass market Lean production adaptation of mass production that prizes quality and flexibility
- 11. Industrial revolution Late 1700s Scientific management Early 1900s Hawthorne Effect 1930s Human relations movement 1930s Management science 1940s Computer age 1960s Environmental Issues 1970s JIT & TQM* 1980s *JIT= Just in Time, TQM= Total Quality Management Historical developement of OM
- 12. Reengineering 1990- Global competition 1980- Flexibility 1990- Time-Based Competition 1990- Supply chain Management 1990- Electronic Commerce 2000- Outsourcing & flattening of world 2000-
- 13. Operations Management and E-Business Categories of E-Commerce BusinessBusinessConsumerConsumer BusinessBusiness ConsumerConsumer B2B tradeindia.com B2C flipkart.com C2B Priceline.com C2C eBay.com
- 14. An Integrated Value Chain The concept comes from business management and was first described and popularized by Michael porter in 1985 A level model of how businesses receive raw materials through various processes, and sell finished products to customers.
- 15. Value chain: set of activities that create and deliver products to customer SupplierCustomer Flow of information (customer order)Flow of information (customer order) Flow of product (order fulfillment)Flow of product (order fulfillment) manufacture
- 16. product passes through activities of a chain in order, and each activity the product gain some value. Chain of activities gives the product more added value than sum of the independent activities values. The value chain concept has been extended beyond individual firm. It can apply to whole supply chain and distribution network.
- 17. Distinct stage in value chain may include Receiving raw material Converting raw material into finished product Identified customer and distributing the product Providing customer support
- 18. Impact of E-Business on Operations Management Comparison shopping by customers Direct contact with customers Business processes conducted online Customer expectations escalate; quality must be maintained and costs lowered No more guessing about demand is necessary; inventory costs go down; product and service design improves; build to-order products and services is made possible Transaction costs are lower; customer support costs decrease; e-procurement saves big bucks Benefits of E-Business Impact on Operations
- 19. Impact of E-Business on Operations Management (cont.) Access to customers worldwide Middlemen are eliminated Access to suppliers worldwide Demand increases; order fulfillment and logistics become major issues; production moves overseas Logistics change from delivering to a store or distribution center to delivering to individual homes; consumer demand is more erratic and unpredictable than business demand Outsourcing increases; more alliances and partnerships among firms are formed; supply is less certain; global supply chain issues arise Benefits of E-Business Impact on Operations
- 20. Impact of E-Business on Operations Management (cont.) Online auctions and e-marketplaces Better and faster decision making Competitive bidding lowers cost of materials; supply needs can be found in one location More timely information is available with immediate access by all stakeholders in decision-making process; customer orders and product designs can be clarified electronically; electronic meetings can be held; collaborative planning is facilitated Benefits of E-Business Impact on Operations
- 21. Globalization and Competitiveness Favorable cost Access to international markets Response to changes in demand Reliable sources of supply 14 major trade agreements in 1990s Peak: 26% in 2000 World Trade Compared to World GDP Source: “Real GDP and Trade Growth of OECD Countries, 2001– 03,” International Trade Statistics 2003, World Trade Organization, www.wto.org
- 22. Globalization and Competitiveness (cont.) Hourly Wage Rates for Selected Countries Source: “International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing,” Bureau of Labor Statistics, U.S. Department of Labor, Updated September 30, 2003. Germany: $26.18Germany: $26.18 USA: $21.33USA: $21.33 Taiwan: $5.41Taiwan: $5.41 Mexico: $2.38Mexico: $2.38 China: $0.50China: $0.50
- 23. Globalization and Competitiveness (cont.) Trade with China: Percent of each country‘s trade Source: “Share of China in Exports and Imports of Major Traders, 2000 and 2002,” International Trade Statistics 2003, World Trade Organization, www.wto.org
- 24. Risks of Globalization Cultural differences Supply chain issues Safety, security, and stability Quality problems Corporate image Loss of capabilities
- 25. Competitiveness and Productivity Competitiveness degree to which a nation can produce goods and services that meet the test of international markets Productivity ratio of output to input Output sales made, products produced, customers served, meals delivered, or calls answered Input labor hours, investment in equipment, material usage, or square footage
- 26. Measures of Productivity Competitiveness and Productivity (cont.)
- 27. Productivity Increase Become efficient output increases with little or no increase in input Expand both output and input grow with output growing more rapidly Achieve breakthroughs output increases while input decreases Downsize output remains the same and input is reduced Retrench both output and input decrease, with input decreasing at a faster rate
- 28. Global Competitiveness Ranking 1.1. FinlandFinland 2.2. United StatesUnited States 3.3. SwedenSweden 4.4. DenmarkDenmark 5.5. TaiwanTaiwan 6.6. SingaporeSingapore 7.7. SwitzerlandSwitzerland 8.8. IcelandIceland 9.9. NorwayNorway 10.10.AustraliaAustralia
- 29. conclusion Gain an appreciation of strategic importance of operations in a global business environment Understand how operations relates to other business functions Develop a working knowledge of concepts and methods related to designing and managing operations Develop a skill set for quality and process improvement