Operation Management: administration of business practices to create the highest level of efficiency possible within an organization a.
Concerned with converting materials and labor into goods/services as efficiently as possible to maximize profit of organization 2.
Why Study OM?
One of he three major functions -> marketing/finance/operations b.
Want & Need to know how goods/services are produced
Understand what operations managers do
Costly part of organization
Characteristics of Service
Intangible/produced & consumed at same time/often unique/high customer interaction/inconsistent product definition 4.
Goods vs. Services
Can be resold -> reselling unusual
Can be inventoried -> difficult to inventory
Some aspects of quality measureable -> difficult to measure d.
Selling is distinct from production -> selling is part of services e.
Product is transportable -> provide, cannot be transportable f.
Site of facility important for cost -> site is important for customer contact g.
Often easy to automate -> difficult to automate
Revenue generated from tangible product -> revenue generated from intangible product i.
Maintain their value for a longer time -> value declines quickly j.
Produced by manufacturers -> provided by service oriented organizations 5.
Quality may change while the quantity of inputs/outputs remains constant b.
External elements may cause an increase/decrease in productivity c.
Precise units of measure may be lacking
Labor: contributes to 10% of annual increase
Capital: continues to 32% of annual increase
Management: contributes about 52% of annual increase
Defining Global Operations
International Business: engages in cross-border transactions b.
Multinational Corporation: has extensive involvement in international business, owning or controlling facilities in more than one country c.
Global company: integrates operations from different countries and views world as a single marketplace d.
Transnational Company: seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness 2.
Reasons to Globalize Operations
Tangible -> Intangible
Reduces costs (labor/taxes/tariffs)
Improve the supply chain
Provide better goods/services
Attract new markets
Learn to improve operations
Attract/retain global talent
Definition: Where you are going
Purpose for being
Provides boundaries and focus
Answers: what do we provide society
Strategy: how you are going to get there, an action plan
Strategies for Competitive Advantage
Differentiation: uniqueness can go beyond both physical characteristics/service attributes to encompass everything that impacts customer’s perception of value b.
Cost Leadership: Provide maximum value as perceived by customer; does not imply low value/low quality c.
Quick Response: Flexibility/Reliability/Timeliness; requires institutionalization within the firm of the ability to respond d.
Competing regardless of the basis: requires the institutionalization within the firm of the ability to change/adapt 5.
Strategies/Issues during Production Life
Company strategy/issues: period to increase market share, R&D engineering is critical ii.
OM strategy/issues: product design/development critical, frequent product/process design changes, overcapacity, short production runs, high-skilled labor contents, high production cost, limited number of models, utmost attention to quality, quick elimination of market-revealed design defects b.
Company strategies/issues: practical to change prices or quality image, marketing is critical, strengthen niche ii.
OM strategy/issue: forecasting is critical, product/process reliability, competitive product improvements/options, shift toward product oriented, enhance distribution c.
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