Operations Management

Marko Jaki
Marko.Jaksic@ef.uni-lj.si

Slide 1
Marko Jaksic, 2016

Note: some slide material David Simchi Levi, Ravi Anupindi et al., Borut Rusjan, Heizer&Render

Course Info

Slide 2

Contact:
Marko.Jaksic@ef.uni-lj.si,
Monday at 13.30, RZ-305

Lectures & Exercises program

Course material
Lecture slides and exercises sheets online
Book is optional:
English: Robert F. Jacobs, Richard B. Chase and Nicholas J. Aquilano,
Operations and Supply Management, The McGraw-Hill/Irwin Series,
International Student Edition, 12th Edition), ISBN: 978-0-07-128804-0
Slovene: Borut Rusjan, Management proizvodnih in storitvenih procesov
or basically any other Operations Management book you can find in the
library/bookstore or online will help.

Course Info

Slide 3

Grading (more info on the web page)

Written test (40%)
When? Last week in November (28.11.- 4.12.exact date to be
revealed)
Minimum score: 50%

Final exam
Remaining 60%, if written test was successful (remaining course
content)
100%, as a full exam (full course content)

Homework (2 exercises)
count as a bonus = add up to 10% to your exam score, however
you are still required to attain the minimum exam score of 50%
Grading: 50 - 100 %: 50 - 59 (grade 6), 60 - 69 (grade 7), 70 - 79 (grade 8), 80 89 (grade 9), 90 - 100 (grade 10). 0 - 49 %: Failed

Introduction:
Process Management and
Strategy

Slide 4

What are operations?

At Go-Opti, Taxissimo, Uber

Slide 5

https://www.goopti.com/
https://www.facebook.com/Taxissimo/
https://www.uber.com/

The operations function is fashionable!

The consultancy services market
% of world revenues of 40 largest firms
Financial
6%
Organizational
design
11%

Marketing/sales
2%

Operations and process

management
31%

Benefits/Actuarial
16%

IT strategy
17%

Corporate strategy
17%

Slide 6

Operations
The Process View of an Organization

Slide 7

Processes
Slide 8

Physical (Manufacturing)
Locational Services (Transportation)
Exchange Services (Retailing)
Storage Services (Warehousing)
Other Private Services (Insurance)
Government Services (Federal, State, Local)

Outputs: Goods or Services?

Slide 9

Goods or Services?
or is it Goods AND Services?

Slide 10

Goods or Services?
or is it Goods AND Services?

Slide 11

Goods or Services?
or is it Goods AND Services?

Slide 12

Two Aspects of OM:

(1) Process Effectiveness

Slide 13

Performance measures
Financial:
Absolute measures (revenues, costs, net income)
Relative measures (ROI, ROE, ROA, inventory turnover)
Survival measure (cash flow)

Customer satisfaction (Customer Service Level)

Operational
Use them as levers to achieve the expected external
metrics

Two Aspects of OM
(2) Operations Based Strategy
Product / Process Attributes

Strategic positioning
Sustainable Competitive Advantage

Slide 14

Strategic Positioning
(1) Making Operational Trade-Offs

Slide 15

Responsiveness
High

Very short waiting times,

comes at the expense of
frequent operator idle time

Tradeoff

Long waiting times,

yet operators are almost
fully utilized

Low
Low labor
productivity

High labor
productivity

Cost efficiency
(e.g. $/call)

Example: Call center of Deutsche Bundesbahn

http://www.deutschebahn.com/de/geschaefte/Weitere_Serviceleistungen/11877908/call_center_services.html

- possible objective: 80% of incoming calls wait less than 20 seconds

OM helps: Provides tools to balance responsiveness with efficiency

Strategic Positioning
(2) Overcome Inefficiencies

Slide 16

Responsiveness
High

Current frontier
In the industry
Competitor A
Eliminate
inefficiencies
Competitor C

Low

Competitor B
Low labor
productivity

High labor
productivity

Cost Efficiency
(e.g. $/call)

Example:
Benchmarking shows the pattern above
Dont just manage the current system Change it!
OM helps: Provides tools to identify and eliminate inefficiencies

Strategic Positioning
(3) Redesign Processes / New
Technologies
Responsiveness
High
Redesign
process

New frontier
Current frontier
In the industry

Low
Low labor
productivity

High labor
productivity

Cost Efficiency
(e.g. $/call)

Example:
What will happen if we develop / purchase better technology?
Better technologies are always nice to have, but will they pay?
OM helps: Evaluates system designs before they occur

Slide 17

Competitive Dimensions and

OM levers that influence them
Competitive Dimensions:
Cost
Quality
Design quality
Process quality

Flexibility
Delivery
Speed
Reliability

Order qualifiers
Order winners

OM levers:
Capacity
Material flows
Information flows
Quality / accuracy of
process

The Strategic Hierarchy

Corporate Strategy
What business are you in?
Allocation of corporate resources

Business Unit Strategy

Scope of business which segments do you target?
Strategic positioning

Operations Strategy
What must Operations do particularly well?
What capabilities must Operations develop?
How should Operations processes and resources be
structured?

Slide 19

The Planning Hierarchy

Slide 20

Example: Wal-Mart

Slide 21

Corporate Strategy
Gain competitive advantage by providing customers access to
medium quality goods, when and where needed at low prices

Operations Structure
Operational Capabilities
Short flow times
Low inventory levels

Cross docking
EDI
Fast transportation system
Information system

Example: Wal-Mart Cross docking

Slide 22

Cross docking video: http://youtu.be/Xr9z1NoXr8M

Example: Wal-Mart

Slide 23

Inventory at retail stores turned over twice a week

(Industry average once every two weeks)
Improved targeting of products to markets
Sales per square foot increased (resulting in $379 per
square foot twice that of Kmart)
How do all these factors affect the performance?

The Goal of OM:

Achieving Strategic Fit

Slide 24

OM focuses on structuring the processes and

effectively managing the resources and inputs
to produce and deliver the goods and services
of a business with the goal of establishing a
sustainable competitive advantage.