MGT C301 Operations Management

Chapter 1: Operations Management and Value Chain

 Operations Management
- science and art of ensuring that goods and services are created and delivered successfully to
customers.
- the design, operation, and control of the transformation processes that converts such
resources as labor and raw materials into goods and services that are sold to customers.
- INCLUDES: design of goods/services, the processes that created them, day-to-day
management of processes, and continual improvement of goods, services, and processes

IMPORTANCE OF OPERATIONS MANAGEMENT:

1. Encompasses both services and manufacturing.
2. For effective and efficient management of productivity.
3. Plays a strategic role in an organization’s competitive success.

 Manufacturing Organizations
- transformation process of turning raw materials into physical goods.

 Service Organizations
- creating nonphysical outputs in the form of services (the activities of employees interacting
with customers).

 Productivity
- the overall output of goods and services produced divided by the inputs needed to generate
that output.
- a composite of people and operations variables.

BENEFITS OF INCREASED PRODUCTIVITY:

1. Economic growth and development.
2. Higher wages and profits without inflation.
3. Increased competitive capability due to lower costs.

 Value
- the performance characteristics, features and attributes, and any other aspects of goods and
services for which customer are willing to give up resources.

 Value Chain
- the entire series of organizational work activities that add value at each step beginning with
the processing of raw materials and ending with the finished product in the hands of end
users.
 Value Chain Management
- the process of managing the entire sequence of integrated activities and information about
products flows along the entire value chain.
- GOAL: to create a value chain strategy that fully integrates all members into seamless chain
that meets and exceeds customer’s needs and creates the highest value for the customer.

REQUIREMENTS FOR VALUE CHAIN MANAGEMENT:

1. Coordination and collaboration
2. Investment in information technology
3. Changes in organization processes
4. Committed leadership
5. Flexible jobs and adaptable, capable employees
6. A supportive organizational culture and attitudes

OBSTACLES TO VALUE CHAIN MANAGEMENT:

1. Organizational Barriers
- refusal or reluctance to share information
- reluctance to shake up the status quo
- security issues
2. Cultural Attitudes
- lack of trust and too much trust
- fear of loss of decision-making power
3. Required Capabilities
- lacking or failing to develop the requisite value chain management skills
4. People
- lacking commitment to do whatever it takes
- refusing to be flexible in meeting the demands of a changing situation
- not being motivated to perform at a high level
- lack of trained managers to lead value chain initiatives

 Technology’s Role in Manufacturing

- increased automation and integration of production facilities with business systems to
control costs

 Quality
- the ability of a product or service to reliably do what it’s supposed to do and to satisfy
customer expectations

HOW IS QUALITY ACHIEVED

1. Planning for quality
2. Organizing and leading for quality
3. Controlling for quality

QUALITY GOALS
1. ISO900 certification
2. Six Sigma Standards

- Mass Customization
- a design-to-order concept that provides consumers with a product when, where, and how
they want it.
- makes heavy use of technology in developing flexible manufacturing techniques and
engaging in continual dialogue with customers.

BENEFITS OF MASS CUSTOMIZATION

1. Creates an important relationship between the firm and the customer in providing loyalty-
building value to the customer and in garnering valuable market information for the firm.

Chapter 1B: Value Analysis: An Applied Concept for Manufacturing and Service Industry

OBJECTIVES AND BENEFITS OF VALUE ANALYSIS:

1. Aims to simplify products and processes. Thereby increasing efficiency in managing projects,
resolve problems, encourage innovation, and improve communication across organization.
2. Enables people to contribute in the value addition process by continuous focus on product
design and services.
3. Provides a structure through cost saving initiatives, risk reduction and continuous improvement.

ACTIVITIES FOR VALUE ANALYSIS:

1. Product/Service – identify the product or service which is based on usage/demand, complexity
in development and future potential.
2. Cost Analysis – understands in detail cost structure in developing and manufacturing the
product.
3. Define product and function – define all the primary function of the product and service through
satisfying the basic need and then taking next step in delighting the customer.
4. Evaluation of alternatives – possible alternatives can be listed through brainstorming which
provides value to the primary function of the product.
5. Secondary Function evaluation – secondary functions of the product and services are studied
and evaluated.
6. Recommendation – value analysis done to communicate to the various level of the management
team as to get acceptance.
 Value Analysis Team
- carries out the process of value analysis.
- paramount that team selection for value analysis also followed a structured process.
- consists of trained and qualified team members who have background and knowledge
about the project
- Team Leader – selected by the project manager
- Team Size: 5-8 members.

 Value Analysis Process

- divided into three phases mainly: pre-analysis, analysis, and post analysis.

1. Pre-analysis – contains activities of project selection and team selection.

2. Analysis – investigation, speculation, evaluation, development, and presentation of the
report.
3. Post Analysis – activities’ implementation of the report and regular audit.
 Functional Analysis part of Value Analysis
- required to transform the project elements from design of product towards function of
product.
- Main Categories: Basic, Secondary, Required Secondary Aesthetic, Unwanted, Higher Order,
and Assumed.