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Operations Strategies & Change Management
Operations Management - Introduction Based on book Operations Management Nigel Slack et al FT Prentice Hall
What is Operations Management? Operations Management = way organisations produce and deliver goods and services. ENVIRONMENT Strategic Objectives
Input Transformed Resources Materials Information Customers Input Facilities Staff Input Transforming Resources Planning And Control
Design Improvemen t Output Customer s
ENVIRONMENT Effective Operations Management Understand market Organise production and delivery See IKEA page 6 and see Pret A Manger page 7
can provide help and guidance. Every piece of furniture carries a ticket which indicates its dimensions. Alternatively customers may also borrow pushchairs to allow them to take their children around the store. The excellent Informations Systems allows customers to check if the particular item is in stock before progressing the warehouse. For shoppers with young children. it has managed to develop its own special way of selling furniture. Customers then pass through the self-service warehouse where they pick up the items they viewed in the showroom. The IKEA philosophy is not to ‘hassle’ customers but rather allow them to make up their minds in their own time. country of origin and other colours in which it is available. all beds together. a parent and baby room and toilets. price. It also has a code number which indicates the location in the warehouse from where it can be collected. started in southern Sweden by Ingvar Kamprad in the 1950s. ordering and picking up goods should be simple.MBA Operations Strategies & Change Management Lecture 1 IKEA IKEA is a furniture retailer with a difference. there is a supervised children’s play area. If a customer does require advice. so parents can leave their children in the supervised play area for a time. It is usually designed to be stored and sold as a ‘flat pack’ but it is capable of easy assembly by yhe customer. What do you identify as the ‘operations function’ within IKEA? How is this different from the ‘sales function’? 2 . he built a showroom in Stockholm – not in the centre of the city where land was expensive but on the outskirts of town. Since customers wanted to see some of his furniture. customers pass into the ‘self-service’ area where smaller items are displayed on shelves. smooth and problem-free. each of which is constructed with a ramped conveyor belt which moves the customer’s purchases up to the checkout staff. a small cinema. How is the IKEA operations different from most furniture retail operations? 2. At that time Mr Kamprad was successfully selling furniture through a catalogue operation. IKEA’s philosophy for its stores goes back to the original business. Customers may also rent or buy a roof rack. IKEA’s furniture is ‘value for money’ with a wide range of choice. he simply set the furniture out as it would be in a domestic setting. After viewing the showroom. parking. Also. Questions 1. there are information points around the showroom where staff. At the entrance to each store are large notice-boards which proclaim IKEA’s philosophy and provide advice to shoppers who have not used the store previously. IKEA customers typically spend between one-and-a-half to two hours in the store – far longer than in rival furniture retailers. Finally. The stores are all designed around the same self-service concept – that finding the store. With around 100 giant stores operating in over 15 countries worldwide. materials used. Catalogues are available at this point showing illustrations. dimensions and the available range of the store’s products. At the exit area there are information and service points and often a ‘Swedish shop’ with Swedish footstuffs. Some parts of the showroom are set out in ‘room settings’ while others show. customers pay at the checkouts. This almost ‘anti-service’ approach to service is the foundation of IKEA’s stores today. A large loading area allows customers to bring their cars from the car park to load their purchases. instead of moving the furniture from the warehouse to the showroom area. Each child is attired in a yellow numbered top while in this area and parents are recalled via the loudspeaker system if any problems arise with the child. The tickets on larger items request customers to go to the information desks for assistance. so that customers can make comparisons. for example. provide measuring rules. Instead of buying expensive display stands. he asked customers to pick the furniture up themselves from the warehouse. moving through the store itself. This is because of the way it organises its stores – all of which are more or less the same all around the world. These can be picked directly off the display shelves by customers and put into yellow shoulder bags or trolleys. paper for sketching and so on. in bright red uniforms.
We take our reward schemes and career opportunities very seriously. ‘We are determined never to forget that our hardworking people make all the difference. If they cease to care. When we were just starting out a big supplier tried to sell us coleslaw that lasted sixteen days. our business is sound. we party!’ Customer feedback is regarded as being particularly important at Pret. salad that lasts sixteen days? There and then we decided Pret would stick to wholesome fresh food – natural stuff. Examining customers’ comments for improvement ideas is a key part of the weekly management meetings and of daily team briefs in each shop. We maintain our edge by selling food that simply cannot be beaten for freshness. They go to extraordinary lengths to avoid the chemicals and preservatives common in most ‘fast’ food say the company ‘Many food retailers focus on extending the shelf life of their food. Pret also owns and manage all their shops directly so that they can ensure consistently high standards in all their shops.MBA Operations Strategies & Change Management Design store layout – smooth & effective flow Lecture 1 Design elegant Products – flatpacked elegantly Ensure jobs of all staff encourage contribution to business success Continually examine & improve operations practice Site stores appropriate size / location IKEA Store Maintain cleanliness / safety storage area Arrange fast replenishment of products Monitor & enhance Quality of service to customers Pret a Manger Described by the press as having ‘revolutionised the concept of sandwich making and eating’. At the end of each day we give whatever we haven’t sold to charity to help feed those who would otherwise go hungry. but that is of no interest to us. we wear jeans. in London. We don’t work nights (generally). Now they have over 130 shops in the UK. They are our heart and soul. Question What do you see as the main reasons for Pret A Manger success? 3 . We have not changed that policy’ The first Pret A Manger shop had its own kitchen where fresh ingredients were delivered first thing each morning and food was prepared throughout the day. but in every respect of their operations practice. When they care. Hong Kong and Tokyo. we’re pleased to say our people are much more likely to stay around! We work hard at building great teams. They rejected the idea of a huge centralised sandwich factory even though it could significantly reduce costs. In a retail sector where high staff turnover is normal. our business goes down the drain. Pret a Manger opened their first shop in the mid-1980s. Can you imagine. The team members serving on the tills at lunchtime will have been making sandwiches in the kitchen that morning. Every Pret shop since has followed this model. New York. They say that their secret is to focus continually on quality – not just of their food.
MBA Operations Strategies & Change Management Lecture 1 These two examples demonstrate Operations management is important to all businesses Operations managers manage processes Processes in different operations can have different characteristics All operations managers have a similar set of responsibilities and activities Operations can contribute to success of organisation by result of these 1.output processes Information Customers THE TRANSFORMATION PROCESS Customers Facilities Staff Input transforming resources Output P & S 4 .not necessarily most important but one of 3 core functions Support Functions Accounting & Finance Human resources Administration IT Stores & Maintenance quality design creative improvement energetic planning and control Operations is central to an organisation Core Functions Marketing & Sales Development function Operations What are similarities between all operations? Operations = managing processes = changing inputs to outputs (see fig 1. reduce costs increase revenue reduce need for investment enhance innovation .3 All operations are input – transformation . 3. 2.3 page 12) ENVIRONMENT Input transformed resources Materials Figure 1. 4.
4 Physical Properties Materials Processors Information Processors Manufacturing Mining Extraction Different types of transformation processes Information properties Possession Retail Location Post Freight Ports Telecoms Storage / accommodation Warehouses Physiological State Psychological State Banks HQs Accountants Architects Analysts Market Research Universities Consultants Newsmen Library archives Customer processors Hairdressers Surgeons Public Transport Taxis Hotels Hospitals Dentists Health care Education Theatres Theme parks 5 . change location change possession.distinction is being blurred with increasing emphasis on customer satisfaction including design.g hotel.g CD and restaurant meal or haircut .tangibility products are tangible .4 page 14) Transforming resources Transforming process = facilities e.produces printed bank statements – uses materials but bank processes customers and information Most businesses can be classified by being dominant in one of the 3 categories (see Table 1.simultaneity concerns timing of production e. service high contact . quality and delivery All operations are service providers Outputs from transformation process can be classified as follows:. services are usually non-storability .g.customer contact physical products usually have low customer contact. factory staff = materials processing information processing customer processing change form.storability some products can be store for short or long term.quality customers judge quality of production of physical products by final product but many services by the service provided. change properties Services and products are merging .transportability physical goods can be transported but health treatment not so easy to transport . Table 1. Bank .MBA Operations Strategies & Change Management Lecture 1 Transformed resources (inputs) = materials Often one of these is dominant in a particular information operation customers e.
variation in demand for output . high variation in demand implies higher levels of inventory and higher costs high visibility has impact on process especially queueing and productivity. Macro operation = Sum of many Micro operations. recording. e. These 4 factors have significant impact on the operations performance. administration. technical.to build sets. high volume leads to specialisation. sound. lighting.8 page 25 Figure 1. e.workshops .volume of output .MBA Operations Strategies & Change Management Lecture 1 Process Hierarchy A total operation is made up of many small organisations. The major differences and important influences are as follows : . scenery and props .g Television programme many inputs – production. props etc Macro event to produce programme but within this many Micro operations .g.marketing . studios. test markets.production – organises and shoots the programme .maintain and repair equipment and provide technical equipment .visibility degree to which customers see the production process. cameras. A typology of operations based on these 4 factors in Fig 1.variety of product or service output .5 page 17 for useful diagram.engineering . repeatability and lower costs.accounts – estimates likely costs. high variety usually requires matching customer needs and higher costs. provide information and advice . How are operations different? Operations have similarities but also differences in how input resources are transformed.liaise with potential customers.8 Implications Low repetition Each staff member performs more of job Less systemisation High unit costs Flexible Complex Match customer needs High unit costs A typology of operations Implications High repeatability Specialisation Systemisation Capital intensive Low unit costs Well defined Routine Standardised Regular Low unit costs Low Volume High Low Variety High 6 . creates budgets and controls cash flow see fig 1.
g. Much of the IT infrastructure and systems relates to operations Globalisation Environmental Social Technological Knowledge management Indirect Broad 7 . services and processes planning and controlling the operational processes liaising with other areas to ensure operations in line with other objectives e.g.g. Recruitment and training by Human Resources impacts operations e. Marketing plans/ Marketing mix impacts operations e.MBA Operations Strategies & Change Management Lecture 1 Stable Routine Predictable High utilisation Low unit costs Time lag between production and consumption Standardisation Low contact skills High staff utilisation Centralisation Low unit costs Changing capacity Anticipation Flexibility In touch with demand High unit cost Short waiting tolerance Satisfaction governed by customer perception Received variety is high High unit cost Low Variation High Low Visibility High What responsibilities do operations manager have? Operations managers have some responsibility for all the activities in the organisation which contribute to the effective production of goods and services Direct Direct Indirect Broad understand the operation’s strategic objectives developing an operations strategy for the organisation designing the operations products.
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