Chapter 1

Competing with
Operations
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc.
 What Is a Process?
• Process
– Activities that transform inputs, add value
and generate output(s)
• Example: Furniture Manufacturing
– Primary Process
• Cutting or staining wood
– Non-Manufacturing Process
• Controlling Inventory
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-2
 Processes & Operations
Internal and
external customers

Inputs
• Workers Processes and
• Managers operations
• Equipment Outputs
• Facilities 1 3 • Services
• Materials 5 • Goods
• Services
• Land 2 4
• Energy

Information on
Figure 1.1 performance

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-3
Nested Processes at a Large
Bank
BANK

Operations Retail Products Wholesale

Cash Management Distribution Auto Finance Trading

Loan operations Compliance Cards Loan administration
Trading operations Finance Mortgages Leasing
Others Human resources Others Others

ATM support Teller line transactions Credit applications Fund management

Customer transactions Track branch sales Manage retail products Market making spot
Service quality ATM hotline Originate lease portfolio Dealer support
Others Others Others Others

Maintain cards Process deposits Loan documentation Prepare reports

Research problems Cash checks Review credit standing Attend meetings
Site analysis Safe deposit boxes Obtain manager approval Input funds deals
Others Others Others Others

Figure 1.2
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-4
 What Is Operations
Management?
• Efficiently using processes to transform
inputs into valuable outputs
• Successful operations management
results from careful allocation of:
– Human Resources
– Capital
– Information
– Materials
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-5
Operations Management as a
Function

Figure 1.3

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-6
 Operations Management As
a Function
Skill Areas
• Quantitative methods
• Organizational
behavior
• General management
• Information systems
• Economics
• International business
• Business ethics
and law

Figure 1.3

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-7
 Trends & New Challenges in
Operations Management
• Growth of the Service Sector
• Intense Productivity pressures
• Global Competition
• Firms can no longer hide behind borders

• Ethics, Diversity & Environmental Issues

• Conflicting business protocol
• Cultural dilemmas

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-8
 Strategic Considerations
• Business Environment
– Continuous Environmental Scanning is necessary

• Flexibility
– Capacity to meet ever-changing client demands

• Core Competencies
– Using the firm’s unique strengths to seize
opportunities
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-9
 The Importance of Market
Analysis
• Market Segmentation
– identify groups or sub-groups of clients
• Needs Assessment
– identify the requirements of each group
• Product or service needs
• Delivery system needs
• Volume needs
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-10
 Selecting Competitive Priorities
Corporate strategy
• goals
• core competencies
• environmental responses
Competitive Priorities
•
•
new products/services
global strategies
Cost 1. Low-cost operations
Quality Market2.analysis
High-performance design
• segmentation
3.assessment
• needs Consistent quality
Time 4. Fast delivery
5. On-time delivery
6. Development speed
Flexibility 7. Customization
8. Volume flexibility

Figure 1.5
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-11
 Selecting Competitive Priorities
Corporate strategy
• goals
• core competencies
• environmental responses
• new products/services
• global strategies

Market analysis
• segmentation
• needs assessment

Competitive priorities Capabilities

Operations Marketing • current
• cost • needed
• quality Finance • plans
• time
• flexibility Others

Functional area strategies

• finance
• marketing
Figure 1.5
• operations
• others
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-12
 Strategy and Decisions
Corporate strategy

Market analysis

Competitive priorities

Operations strategy Figure 1.8

Services Manufacturing
• Standardized services • Make-to-stock
• Assemble-to-order • Assemble-to-order
• Customized services • Make-to-order

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-13
 Examples of Service
Strategies
• Standardized services
– Canada Post
• Assemble-to-order
– Cable companies (pre-arranged packages)
• Customized services
– Health clinics

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-14
 Health Clinic Process

D R P

T B

D: Doctor (examination rooms)

R: Radiology (X-ray)
T: Triage (assess severity of illness)
B: Blood (lab test)
Figure 1.6
P: Pharmacy (fill prescriptions)
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-15
 Health Clinic Process
Physical exam

Physical exam
D R P

T B

D: Doctor (examination rooms)

R: Radiology (X-ray)
T: Triage (assess severity of illness)
Figure 1.6 B: Blood (lab test)
P: Pharmacy (fill prescriptions)
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-16
 Health Clinic Process
Physical exam

Physical exam
D R P
Broken arm
Broken arm
T B

D: Doctor (examination rooms)

R: Radiology (X-ray)
T: Triage (assess severity of illness)
B: Blood (lab test)
Figure 1.6 P: Pharmacy (fill prescriptions)
Foundations of Operations Management, Canadian Edition
Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-17
 Health Clinic Process
Physical exam

Flu
Physical exam
D R P
Broken arm Broken arm
T B
Flu
D: Doctor (examination rooms)
R: Radiology (X-ray)
T: Triage (assess severity of illness)
Figure 1.6 B: Blood (lab test)
P: Pharmacy (fill prescriptions)

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-18
 Examples of
Manufacturing Strategies
• Make-to-stock
– Mass-produced automobiles
• Assemble-to-order
– Upscale Unique Furniture
• Make-to-order
– High-end homes

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-19
 Strategy and Decisions
Corporate strategy

Market analysis

Competitive priorities Capabilities

Operations strategy
Services Manufacturing
• Standardized services • Make-to-stock
• Assemble-to-order • Assemble-to-order
• Customized services • Make-to-order

• Process decisions
Figure 1.8
• Quality decisions
• Capacity, location, and layout decisions
• Operating decisions

Foundations of Operations Management, Canadian Edition 1-20

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc.
 Cross-Functional
Coordination
• Removing barriers between departments
• Moving from sequential decision-making to
coordination leads to:
– Improved communication
– More accurate market information
– More timely internal feedback

Foundations of Operations Management, Canadian Edition

Ritzman, Krajewski, Klassen © 2004 Pearson Education Canada Inc. 1-21